Heather Hammond, Noah Schwarz, and Emily Taylor are Managing Directors at Russell Reynolds Associates. This post is based on a Russell Reynolds memorandum by Ms. Hammond, Mr. Schwarz, Ms. Taylor, and Courtney Byrne.
Since Russell Reynolds Associates originally reported on board restructuring five years ago, pressures on businesses have only increased. New geopolitical tensions, macroeconomic challenges, elevated interest rates, and technological change are further straining organizations, resulting in a growing number of businesses finding themselves in a stressed or distressed financial position. Bankruptcy filings are at a new high since the GFC, resulting in a surge of company restructurings.1
Notable in the current environment is the increasing prominence of alternative capital, including private credit. Private credit providers are distributing more flexible and creative capital to struggling companies. Private lending and debt-for-equity transactions have enabled countless organizations to avoid Chapter 11 filings and supported restructurings. Debt-for-equity swaps result in investors managing companies that emerge with a clean balance sheet, but have other complex challenges to address. And unlike private equity or buyout investors, who scope strategic and operational value creation plans during due diligence, these lenders generally have less active management experience.
These combined challenges highlight a pressing need: building an effective corporate board post-restructuring. Yet this is not an easy task. The normal complexity of director recruitment and onboarding, not to mention the effective implementation of corporate governance practices, is only increased as a result of the company’s legal and financial challenges.
Combining insights from our latest work supporting clients who are reestablishing their organizations, as well as recommendations shared by experienced board members, investors and industry professionals, this paper intends to provide a best practice road map for investors and companies looking to build a strong, highly effective board post-restructuring.
READ MORE »
