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Venture capital investors, private equity firms, and family offices may have different expectations of their portfolio companies, but these investors鈥� ability to assess strategy and operations鈥攁nd monitor the progress of their investment鈥攊s in large measure dependent upon the effectiveness of their portfolio company boards.

To better understand the challenges facing portfolio company boards today鈥攚hat works, what doesn鈥檛, and the opportunities for improvement鈥攚e surveyed more than 250 portfolio company directors, falling into three categories: portfolio company executives, investment professionals, and outside directors. We asked the directors to supplement their survey responses with write-in comments to expand on their views.听

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Taken together, the survey responses and write-ins provide meaningful insights into the state of portfolio company board governance. Key takeaways include the following:

• Agenda setting.听Given the complexity of the business and risk environment, it comes as no surprise that a critical challenge for portfolio company boards is to devote adequate agenda time to strategy, risk, and long-term value creation. In fact,听seventy-two听percent of directors surveyed said that building forward-looking board agendas was one of the areas needing the most improvement鈥攎ore than for any other category.听鈥淎lignment of controlling shareholders, company management, and independent directors on strategic direction and value creation is critical, and a continuing challenge.鈥�

• Composition.听A related challenge is portfolio company board composition鈥攑articularly linking board composition with company strategy, both for the short term and the long term.听Portfolio company executives give their boards significantly lower scores on 鈥渁ligning board composition with the company鈥檚 future needs鈥� than investment professionals and outside directors.

• Communication.听In many aspects of portfolio company governance, those surveyed said the board-management relationship is generally good, but听nearly half of outside directors and company executives surveyed see a need for portfolio company shareholders to be more transparent in their communications with the board and management. Conversely, in their write-in comments, investment professionals emphasized the need for management to be more transparent and provide important information on a more timely basis鈥攁nd between board meetings. 鈥淢anagement teams don鈥檛 like to deliver bad news and are afraid of the consequences.鈥�

• Independent leadership.听Lastly, portfolio company directors surveyed have differing views regarding independent board leadership.听Nearly three-quarters of outside directors and a majority of company executives see the role of lead independent director/non-executive chair as 鈥渉ighly important,鈥� compared to only听 forty-percent of investment professionals. 鈥淧assive representatives of shareholders are dangerous to the survival of a company. Most investors only have a couple of 鈥楢 Team鈥� board members whom they carefully deploy.鈥�

While there is no secret formula for board effectiveness and improvement鈥攑articularly for boards of privately held companies with different ownership structures and stages of maturity鈥攚e believe that these survey findings can be used to help boards assess their own performance and identify opportunities for advancement.听