Governance may not sound as intuitive as… say, Environment. But it is a door that leads to all others in ESG.

It is our core investment strategy. If we improve governance, we can make great returns from our investment, better than just trading shares.

When we hear of great companies or ones that fail, we often ascribe such performance to CEO’s capabilities. That is only half correct. A company’s performance gets influenced by not only the CEO’s capability, but also the incentive system that directs the CEO’s behavior. Therefore, the right governance requires the best manager “and” aligned incentive.

We often expect outcome of A without knowing we incentivized managers to do B. If we find ourselves in this situation, it’s time to overhaul the incentive system, before finding faults with the management team.

Sanghyun Lee is the Managing Partner of Flashlight Capital Partners, and possesses two decades of private equity experience in Korea.

What has private equity to do with governance improvement? For all buyout deals, private equity ensures there is the right management team, and they are properly incentivized to work towards the common goal. It is from these live experience Sanghyun developed the idea of bringing governance improvement to listed companies.

“The secret of great returns from buyout transactions is the aligned incentive between the shareholders and management team.” Sanghyun says, “I have looked at many investment targets in Korea, and KT&G stands to be the single most attractive investment opportunity. This absurdly low valuation should not exist in Korea, or anywhere else in the world.”

Sanghyun’s profile is as follows.

Head of Korea at The Carlyle Group
Managing Director at Affinity Equity Partners
GIC (Government of Singapore Investment Corporation)
Management consultant at McKinsey & Company

Sanghyun is a graduate of Seoul National University and Harvard Business School.