Vistria Group Turns to Portfolio Companies in the Fight for Racial Equality

WE’RE CREATING VALUE. LET’S MAKE IMPROVEMENT OF THE DIVERSITY OF THE FIRM A COMPONENT OF IT.

By Preeti Singh The Wall Street Journal

Vistria Group is turning to its own portfolio in the quest to address racial inequality after the killing of George Floyd while in police custody and the coronavirus pandemic reignited national debate around racial equality. The Chicago-based firm has introduced new measures aimed at promoting racial diversity among its portfolio company boards, portfolio company employee ranks and their outside vendors. The firm also has encouraged companies it backs to support government efforts to improve racial economic equality in cities where they operate. Vistria is part of a small but growing number of firms looking to narrow the racial wealth gap by targeting racial diversity among their own portfolio companies. Black stone Group recently announced two new initiatives aimed at creating more diverse boards at companies it backs and improving racial diversity among portfolio company employees. Although Vistria is much smaller than Blackstone, the firm owns stakes in 18 U.S. companies across sectors that span healthcare, education and financial services, according to its website. “In the post-Covid world, we wanted to be more intentional,” said Marty Nesbitt, co-chief executive at Vistria. “The more degrees of separation from the epicenter of our firm we get, the less direct focus there may be on some of these issues.” Vistria is taking other steps to help reduce inequities, according to Mr. Nesbitt. Going forward, any newly acquired companies must ensure that their boards include at least one woman or person of color within six months after Vistria closes the transaction. The firm has also set up a new management incentive plan for future investments that includes diversity metrics for rewarding management teams at its portfolio companies. “We’re creating value,” Mr. Nesbitt said. “Let’s make improvement of the diversity of the firm a component of it.” The metric would track improvement during the period of Vistria’s ownership of a company and the company’s management will be compensated if they increase diversity during that time frame, he said. The management incentives related to diversity are not designed to punish Vistria’s portfolio companies but to encourage action plans toward creating more diversity, Mr. Nesbitt said. Measures for increasing diversity also include modifying hiring processes for internal staff and external vendors at portfolio companies, he added. For example, the firm expects each hiring process to include a racially diverse slate of candidates and a diverse bench of interviewers to review those candidates, and the companies would be urged to re-examine and reconsider capital deployment to close the racial wealth gap by evaluating minority-owned or -operated vendors, suppliers and law firms, among others, he said. Finally, Vistria has also encouraged its portfolio companies to reach out to the municipalities where they operate to contribute capital toward programs focused on reducing in equalities. “We wanted to send the message that this is sue is re ally important to us,” Mr. Nesbitt said. In one example, Vistria portfolio company Behavioral Health Group made a donation to the city of Dallas to support initiatives that would help reduce racial inequities in accessing quality health-care services. The money was routed to Communities Foundation of Texas, a charitable organization focused on key initiatives in Texas, including ones aimed at promoting racial equality in areas such as health-care access and education. “I know that they’re expecting us to take an even more proactive approach in the future as we continue to build on our team and have kind of efficient policies and think about how to lift up everybody in this country,” said Jay Higham, chief executive officer of Dallas-based Behavioral Health, which provides outpatient opioid addiction treatment services.