How Adaptive Governance Is Reshaping Leadership in Private Equity

July 21, 2026 – Private equity firms have transformed how they create value, placing greater emphasis on operational execution, leadership effectiveness, and strategic oversight throughout the investment lifecycle. As a result, executive search firms are increasingly being called upon not only to recruit high-impact leaders and board directors, but also to identify executives capable of operating within governance models that differ significantly from those of publicly traded companies.

Unlike public companies, where governance is shaped by regulatory oversight and shareholder transparency, PE-backed organizations operate within a more integrated framework that closely aligns investors, boards, and management around value creation. This adaptive approach gives firms greater flexibility to respond to changing market conditions, deploy operating resources quickly, and accelerate performance during the investment hold period, while placing unique demands on the executives selected to lead portfolio companies.

Governance for PE funded companies is quite different than for public companies since they are owned by the PE firm as investors to produce a return for themselves, LPs and the employees of their portcos (usually a three to seven year hold period), according to Keith Giarman, managing partner, global PE practice at DHR Global. “The ultimate determinant on value is the price and therefore IRR they can command when the asset is sold to a strategic or another financial buyer versus quarterly results tied to earnings and increased stock price,” he said. “They utilize a collective governance approach driven by the firm to deal with changing issues inside their portcos that support individual boards and the management teams of the portco.”

“This distinction needs to be understood before delving into how adaptive governance plays in their environment versus public firms,” Mr. Giarman explained. “PE-owned companies, being privately held, face little scrutiny. Governance happens through private board meetings, lender covenants, and LP reporting rather than public filings. On the other hand, they fundamentally need to deal with the same rapidly changing environments in very different ways.”

Mr. Giarman also noted that adaptive governance is quite different in practice because public companies require transparency that PE funded companies do not based on their ownership structure. Requirements are numerous (SEC reporting, proxy statements, say-on-pay votes, independence rules for boards/committees under exchange listing standards, etc.).

“Public companies are also much more concerned about managing their perception (affecting stock price) because of quarterly earnings calls,” Mr. Giarman said. “Their governance must account for ownership by public equity holders and is therefore less intermingled with management except in situations where the executive chair and CEO role are combined with oversight from an outside lead director (about 45-50 percent of the S&P 500 over past 10 years). Even then the governance line separating the board from management — from governing versus doing at a management team level — is much brighter.”

Keith Giarman serves as managing partner of the private equity practice at DHR Global, based out of the San Francisco and New York offices. He is also a member of the firm’s North American executive committee driving overall strategy for the organization. Mr. Giarman has led the launch and successful expansion of the private equity practice over the past 10 years. Under his leadership, the practice manages approximately 100 board, C-level and senior search assignments per year working with management teams and top-tier investors. He is also a core member of the board & CEO and CFO practice groups.

PE firms apply a wide range of resources in pursuit of value creation objectives based on their structure and value creation mandate which allow them to govern adaptively in a more efficient and meaningful manner with less constraint and friction, according to Mr. Giarman. Public companies tend to be more defensive in approach focused on risk management whereas PE firms are paid fees to operate more with an “offensive” approach to create value.

PE Governance Structure

“In the PE governance structure, the board is typically smaller with few independent directors (sometimes none when smaller),” Mr. Giarman said. “Boards tend to be larger and more complex as companies increase in size and often have some sort of committee structure. The board usually consists of deal partners and principals or other PE staff, operating partners and often independent directors that are part of a bench of executive talent where the PE firm has built relationships that include monetary and equity compensation for their board service. In other words, all are part of the ownership structure in some sense.”

Related: Recruiting for Private Equity & Venture Capital: Driving Growth Through Talent

Mr. Giarman also said that the governance line between the board and management is blurred at best and often non- existent depending on the philosophy of the PE firm. “All firms develop a value creation thesis that the CEO and management team embrace,” he said. “Sometimes these playbooks are very prescriptive and in other situations the CEO and the management team have more latitude. In all cases, from a governance standpoint, there is very active support for management including resources from a portfolio support group and supporting consultants that are chartered with performance improvement working with those in governance board roles and the CEO, CFO and management team.”

“This collective approach to governance, where the company has access and takes direction from resources that are part of ownership, theoretically yields much greater strategic and tactical alignment with best practices that produce optimum financial results during the defined hold period,” Mr. Giarman added.

Adaptive governance therefore applies to the entire group surrounding the value creation efforts of a PE funded company, according to Mr. Giarman. For example, he says that if AI can have a significant impact on the financial results all portfolio companies (which of course it does), the collective kicks in from the top of the fund down to those working the CEO and their team.

“The goal is to align with each company on where value can be derived with proper ROI and other thinking applied,” Mr. Giarman said. “You see efforts from the portfolio support groups to govern either by bringing in outside consultants or using their own staff to gauge and monitor where efforts are producing desired results holistically across their companies. Ultimately, the CEO and the management are in charge of producing the results (or move on), but there is constant check in (monitoring and governing) of progress by the board to include the entire PE firm and those assisting from portfolio support.”

Related: Private Equity Recruiting – Return on Investment: Creating Value with Talent

Contributed by Scott A. Scanlon, Editor-in-Chief and Dale M. Zupsansky, Executive Editor  – Hunt Scanlon Media