Skip to content

Private equity Board diversity – why are we still minding the gap?

Private equity firms are failing to make the most of the competitive advantage of diverse boards. They are missing out on innovation, efficiency and higher performance. Here’s how to change that. 

The connection between diversity on boards and improved performance has long been established.  Almost 20 years ago academics Carter, Simkins & Simpson examined the link between board diversity and market value for Fortune 1000 firms. And since then the evidence has only continued to mount.

McKinsey highlighted how diverse boards are more successful. Boston Consulting Group demonstrated their increased capacity for innovation. ScienceDirect found they have more efficient approaches to risk as well as better customer insight. Ocorian discovered they foster stronger company reputations. 

So, one might expect companies and their investors would not need much encouragement to ensure their boards are diverse enough to take advantage of this range of value creators.

Publicly listed companies have responded positively to the topic. In the UK, the Financial Conduct Authority launched a policy statement in April focused on diversity and inclusion of listed boards, implementing a “comply or explain” basis for reaching minimum diversity targets. This policy requires 40% of board members to be women and for at least one of the most senior board positions  – Chair, CEO, CFO or Senior Independent Director - to be held by a woman. The policy also stated that at least one board member should come from a minority ethnic background. 

Privately owned businesses are not under the same level of scrutiny, but the same potential benefits of a diverse board apply. So it continues to be a surprise that private equity firms do not pull on this lever of value more often.  

There is, unsurprisingly given that private companies are “private”, a low level of board diversity data available compared to their public peers. Studies, such as Crunchbase’s 2019 study of gender diversity in private company boardrooms, suggest there is a long way to go. That study, taken from a sample of 200 private companies, each receiving over $100m of private equity funding, found that 60% of companies didn’t have even one woman on their board and that only 7% of board seats were held by women.  

Our experience at Equality Group suggests that not much has changed over the past three years.

We regularly speak with a broad range of private equity investors and are always surprised by the gap between the appetite for more diversity on their portfolio boards and the amount of positive action taken to achieve this. Quite often we hear, despite their best efforts to make a diverse appointment to a board, that no “backable” diverse candidates existed (not even one!). This isn’t surprising given that the criteria for backability is usually based on having prior PE-backed company board experience with a company that has gone through a similar growth journey to the portfolio business in question. As a result the pool of candidates for these critical roles tends not to be hugely diverse.

Equality Group wants to change this and is calling on private equity firms to do two things:


  1. Increase the disclosure of board diversity statistics within their portfolios. We sense there is nervousness around doing this but there are distinct benefits to being an early leader, particularly when fundraising given that LPs are increasingly asking GPs for more positive action on diversity
  2. Commit to creating a number of non-executive board seats in the portfolio that are earmarked for diverse candidates. Even if it's just one, this can make a huge difference. It could even be in the form of a Board Observer, which would give diverse candidates boardroom exposure, therefore deepening the pool of ‘backable’ candidates in the future.

These are simple steps, but the industry needs to take action.

If you’d like to discuss how you can embed these recommendations then please email or visit our website.

In order to address the lack of data available, Equality Group is currently undertaking some research into boardroom diversity of PE portfolio companies which will form the basis of a White Paper. If you are in an investment, HR/talent or portfolio improvement role in a PE fund we would love your input. Please do get in touch ( if you would like to contribute - your view is very important. 

Back to Blog