Why ethics is private equity's strongest currency

Ahead of SuperReturn CFO/COO Asia, Puneet Chadha, Managing Director and CFO, ChrysCapital, explores the critical role of leadership in driving ethical practices and sustainable growth in private equity. In the world of private equity, numbers often take centre stage. Investors look for returns, portfolio companies look for growth, and lenders look for repayment. Yet, behind every deal, every investment, and every decision, there is something far more important than numbers — ethics. Private equity is built on trust.

Investors trust fund managers with their capital. Promoters trust private equity partners with their businesses. Lenders trust financial discipline. Regulators trust compliance. Communities trust responsible behaviour. At the heart of all this trust is fiduciary responsibility — the duty to safeguard the interests of all stakeholders.

Understanding fiduciary responsibility

A fiduciary is someone who has the legal and ethical duty to act in the best interest of another. In private equity, fiduciary responsibility is not limited to just investors — though investors are naturally the primary stakeholders. The responsibility extends to several others:

• Investors: Protecting and growing the capital entrusted to the fund.
• Promoters / Portfolio Companies: Guiding them toward good governance, financial discipline, and sustainable growth.
• Lenders: Maintaining trust through timely communication and transparency.
• Regulators: Ensuring full compliance with financial and legal standards.
• Communities: Recognizing the social and environmental impact of investments.
• Employees and other stakeholders: Building and maintaining relationships based on honesty and fairness.

Being a fiduciary means more than managing money. It means managing trust — something fragile, hard-earned, and easily lost.

Why ethics matters more than compliance

Too often, ethics is confused with compliance. Compliance means following the law, ticking boxes, and staying within regulations. Ethics, however, goes deeper. It is about doing the right thing even when no one is watching.

Warren Buffett once said:

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

In private equity, this is especially true. Decisions made behind closed doors — whether about valuations, disclosures, or negotiations — can define the culture of an organization and its reputation in the market.

Ethics is not about choosing the easy path. In fact, it often requires courage to say no to shortcuts, to resist personal gain, and to put long-term trust above short-term profits.

The everyday nature of ethics

Ethics is not a one-time choice. It is a daily practice. Every decision — whether to disclose a risk fully, whether to treat a partner fairly, or whether to stand up against unethical behaviour — shapes the culture of an organization.

Ethics does not only show up in big, dramatic moments. More often, it lives in small, everyday decisions:

• How we treat colleagues.
• How we negotiate with promoters.
• How transparent we are with investors.
• How fair we are to lenders, employees, and other stakeholders.

Choosing integrity in these daily actions builds a habit. Over time, that habit creates a culture. And culture, once established, becomes the strongest safeguard against unethical behaviour.

Remaining silent in the face of wrongdoing is itself unethical. As professionals, we must remember that not speaking up makes us a party to the behaviour we ignore.

The true measure of success

In private equity, skills open doors. Financial acumen, strategic thinking, and execution ability help close deals. Results bring recognition, headlines, and rewards. But in the long run, it is ethics that brings respect.

Reputation, once damaged, is difficult to repair. Investors and stakeholders remember not just the returns delivered but also the manner in which those returns were achieved. An honest, transparent, and fair approach builds relationships that endure cycles, downturns, and crises.

Ultimately, ethics is not a cost — it is an investment. It builds credibility, attracts long-term partners, and ensures that success is sustainable.

Conclusion: Putting ethics at the centre

As the private equity industry continues to grow in scale and complexity, the pressure to deliver results will only increase. In such an environment, the temptation to cut corners will also grow stronger. That is why it is critical to remind ourselves — we always have a choice.

Every investor, promoter, lender, regulator, employee, and stakeholder must remember that skills may win opportunities, and results may win recognition. But it is ethics — lived daily, practiced consistently, and upheld courageously — that will win respect. In private equity, as in life, that respect is the highest return of all.