EQT’s Corporate Governance Model for its portfolio companies creates clear roles and responsibilities for management of the company, its Board of Directors and EQT. We believe the TROIKA concept is pivotal in driving growth and development in the portfolio companies.
The board defines and monitors strategic plans in the portfolio company. It ensures that management is able to run the company in a responsible and accountable manner.
When a portfolio company has been acquired, EQT appoints a new board of directors with a Chairman, who is generally an Industrial Advisor with management background sourced from the EQT Industrial Network.
The Chairman is supported by other board members, who are sector specialists and professionals with relevant experience, and by the EQT Partners team member responsible for monitoring the investment. The board is carefully structured for each portfolio company and its specific needs and is usually kept small to ensure strong commitment and swift decision-making. The board of directors appoints the CEO.
The Expansion Capital funds differ from the other EQT funds in that they invest as a lender through the acquisition companies, often in combination with a minority equity position. Nevertheless, in the majority of cases, its co-control rights as well as representation on the board of directors enables the Expansion Capital funds to be a responsible stakeholder.
The Credit Fund invests in debt, which means that the EQT Corporate Governance Model is not applicable.
THE TROIKA FORUM
The CEO, the Chairman of the board of directors and the EQT Partners representative on the board of directors form the TROIKA forum. This team consitutes an important pillar of EQT's Corporate Governance Model. The members of the TROIKA work closely together and conduct regular follow-ups between board meetings. However, the TROIKA does not have decision making powers and is not in any way a substitute for the board of directors.
The forum enables an active dialogue with, and is a sparring partner to, the CEO on a continuous and informal basis.
EVALUATION AND MONITORING
Continuous performance evaluation is a crucial part of the EQT Corporate Governance Model. The performance of the CEO, Chairman, the overall board of directors and the EQT Partners representative is assessed once a year in a comprehensive appraisal process. This process ensures that relevant competencies are present on the board and that governance works in accordance with EQT's principles. This evaluation can lead to changes in the board composition.
EQT also monitors the companies' overall development compared with the original plan. This is done on the basis of briefings to the general partner of the relevant EQT fund. In addition, EQT seeks advice on the exit process and supports in financing and M&A issues.
COMMON MINDSET
An important requirement for the governance to work well is that management, the board of directors and EQT share the same interest. This is achieved by requiring that EQT representatives, the board and senior management all invest in the portfolio company.
A common mindset and shared agenda is also established through a joint business plan and maximum transparency.