In On the 2024 Board Agenda: Private Company Considerations, KPMG offers insight on the issues that will challenge private company boards in 2024 and beyond. The issues zeroed in on are:
- Challenging financial environment
- Regulatory developments
- Tapping into the board’s value
- Related-party transactions
Challenging Financial Environment
According to the report, the uncertain atmosphere around finance will force the boards and management teams of private companies to focus on cash conversation, capital adequacy and operating effectiveness. It’s a situation that will also have family owners, founders and institutional investors thinking closely about debt and equity financing and the timing of possible mergers and acquisitions.
Regulatory Developments
The report finds that private companies will be affected by a variety of regulations in 2024 with possible areas of focus including cybersecurity, AI and climate. Regulations to watch include the SEC’s rules on cybersecurity, and climate-related regulations stemming from both the state of California and the European Union.
Tapping Into the Board’s Value
Compared to their public company counterparts, private companies are lagging in their efforts to bring more independent and diverse views onto the board. The report cites a 2022 study from Him for Her and Crunchbase that found that just one-fifth of venture capital-backed private companies had an independent director. The same study found that just 16% of board seats were held by women. Staying abreast on the issues challenging private company boards will require a continued effort to add independent, diverse voices to their number.
Related-Party Transactions
KPMG’s report finds that conflicts of interest pose major challenges for private company boards, which frequently include directors from the world of private equity and venture capital firms. Directors from such firms are advised to be aware of potential conflicts and work with legal counsel to surface and resolve such matters as early as possible.