“Good business really cares about good metrics”, according to Steve Klinsky, Chairman of the American Investment Council and Founder and Chief Executive Officer at New York-based New Mountain Capital, the growth oriented mid-market private equity firm. Indeed it is something that New Mountain is very focused on, he told guests at the recent Stonehage Fleming Family Investment Conference in London.
Since 2008, New Mountain has released an annual ‘Social Dashboard’. “This is something we take very seriously, independent of what the investors ask us to do”, said Steve, a pioneer in the private equity field having been co-founder of the Goldman Sachs Leveraged Buyout Group from 1981-1984 and Partner of Forstmann Little from 1984-1999. “I wanted to go on record for our own firm about what we do for a living.” This ethos runs through their management approach at New Mountain, explained Steve. Three or four years ago the team picked 24 Environmental, Social and Governance (ESG) metrics. Since then, they select three of those metrics to improve each time they buy a company, the same way they would track earnings. Progress is tested and reviewed at monitoring meetings and is featured in a formal ESG report.
Steve’s view of social value and social good is that they should be a self-fulfilling product of building good businesses. “If you are fundamentally building businesses in the right way, you will inherently have good social metrics”, he said. Though it is important to remember, he warned, that you are dealing with real lives: “You are going into business with people - these are not poker hands, where you win one and fold the other. These are organisations of humans that you are partnering up with.”
According to Steve, private equity has much in common with running a family business. “Effectively, we have all the benefits of a family business. We are the owner, we are very close to what happens every day,” he said. “Private equity has evolved into the most effective form of governance and a very effective way to own businesses.”
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