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Private Equity's Governance Advantage: A Requiem, Elisabeth De Fontenay

Faculty Scholarship

Private equity’s original purpose was to optimize companies’ governance and operations. Reuniting ownership and control in corporate America, the leveraged buyout (or the mere threat thereof) undoubtedly helped reform management practices in a broad swath of U.S. companies. Due to mounting competitive pressures, however, private equity is finding relatively fewer underperforming companies to fix. This is particularly true of U.S. public companies, which are continuously dogged by activist hedge funds and other empowered shareholders looking for any sign of slack.

In response, private equity is shifting its center of gravity away from governance reform, towards a dizzying array of new …