Private equity firm TPG saw a flurry of bad press in 2019 when an executive heading its prominent Rise Fund was arrested and then fired for his alleged role in a college-admission cheating scandal. But the $119 billion in assets firm overseen by co-CEOs Jim Coulter and Jon Winkelried pressed on with Rise, a $4 billion platform dedicated to social and environmentally-driven investments, and TPG quietly ended the year setting a new standard in the $2 trillion private equity industry when it comes to diversity.
Over the past 24 months, TPG has added 64 new female directors to the boards of 53 companies in its sprawling investment portfolio. When TPG started the initiative only over 25% of its North American portfolio company boards had gender diversity. Now more than three-quarters of its boards in North America have female board members, with the firm targeting 100% representation in short order. Working with executive search firm Spencer Stuart and other outside partnerships, TPG has also built a database of over 1,100 female and minority professionals who have been referred to the firm, and are now candidates to be added to the boards of current or future investments.
“As active investors in over 200 companies, we have an almost unique opportunity and responsibility to influence diversity and governance” says co-CEO Jim Coulter, a billionaire who helped cofound the firm in 1992. “We believe adding diversity to boards increases board performance. But beyond that we are driven by a conviction that it is just the right thing to do.”Today In: Money
“Great people self-select,” adds Jon Winkelried, TPG’s other co-CEO, who views the diversity effort as critical to maintaining and attracting talent at the firm. “Our own people have a sense of pride about what we’re doing. They believe it is the right thing.”
The results, provided by TPG to Forbes, are the culmination of an effort implemented by top brass like Coulter and Winkelried, and partners Anilu Vazquez-Ubarri, chief people officer, and Ben Holzemer, head of human capital, which began in mid-2017.
At the time, TPG had decided gender diversity was a priority. First it studied where it stood on diversity, finding low-single-digit female board representation. Then it began building the infrastructure to chip away at the deficit, striking partnerships with organizations such as the 30% Coalition, Latino Corporate Directors and Women Corporate Directors to unearth skilled female board candidates.
By mid-2018 TPG’s leadership decided the foundation was laid and set a goal of having 20% gender diversity by 2020. Then it began reconfiguring or expanding the directorships of dozens of current investments, and harnessing its growing network of candidates when forming new boards.
Recent prominent director appointments include Ceci Kurzman, a talent strategist who advises performers such as Shakira and Alicia Keys, who was added to the board of Cirque du Soleil, an entertainment company TPG acquired in 2015 at a $1.5 billion valuation. Llamasoft, another large TPG investment, added Haiyan Song, a well-regarded software executive who oversees security at Splunk, to its board this year. A year after carving out internet-of-things software pioneer Wind River from Intel, TPG added Karen Francis, ranked as a top 100 director by the National Association of Corporate Directors, to its board.
These appointments have yielded results for TPG.
Like many tech firms, Llamasoft, a software provider to companies managing their supply chains, is prioritizing cloud services for its clients in sectors spanning aerospace, life sciences and logistics, and relies on Song’s expertise in keeping pace on product expansions and industry change. “Haiyan has the deepest systems and product technology background on our board, and she has the deepest experience in running product engineering teams,” says CEO Razat Guarav.
At Cirque de Soleil, CEO Daniel Lamarre says female representation at the management and board level is critical because women are the main buyers of entertainment in most households. Under TPG’s ownership, Cirque de Soleil has added Fidji Simo, a Facebook executive and a first-time director, in addition to Ceci Kurzman. Both have played major roles in monitoring user experiences and the taste of shows. “They can foresee how the industry is going to evolve and make sure we remain more than relevant, to be edgy and avant-garde,” says Lamarre.
In private equity, money also talks. Public pension funds, endowments and other pools of capital that fuel private equity increasingly are emphasizing diversity and sustainability when making investment decisions. “We have recognized that TPG shares these principles and practices as it relates to its own board, and that its influence is projecting successes as it seeks more inclusive governance of the companies within its investment network,” says Janice Murphy, vice president of investments at Kaiser Permanente, a TPG client.
To compel TPG’s staff to take its diversity commitment seriously, Winkelried decided to add the endeavor to the annual performance reviews of its investing staff. Deal partners are now judged not only on investment performance and other criteria, but also on their dedication to diversity and inclusion in their own teams and investments. Winkelried wouldn’t share exactly how diversity plays into performance reviews other than to say, “It’s very prominently displayed in the key metrics that we look at here, and in terms of productivity.”
TPG has looked at such endeavors not only as a cultural strength, but also as something to broaden potential investment opportunities and bolster performance. “By virtue of people participating in this sourcing activities engaging with this organization, they are exposed to networks that they were not exposed before,” says Winkelried.
This year, another signature move by TPG was investing in Harlem Capital and becoming a limited partner in its first flagship fund, which recently closed at $40 million in assets. Broadening the diversity of the organization and pushing dealmakers to achieve new standards in their work, Winkelried believes, will increase the aperture of potential investments that come the way of the firm.
“We want CEOs to choose us as an organization to engage with and interact with. These kinds of efforts absolutely matter with them.”