The following article is an excerpt from Partners Group’s white paper The rise of “Governance Correctness”: How public markets have lost entrepreneurial ground to private equity.

Academics and other industry observers typically attribute the outperformance of private equity over public equity to a combination of capital structure, illiquidity and operational effectiveness. However, this analysis misses the most pertinent point of all, which is superior corporate governance.

The original public corporations were a tremendous leap forward in the history of capitalism. Dotted throughout history before they became a mainstay in the early 20th century, corporations had the ability to spread risk and empower entrepreneurs to build corporate empires, railroads and canals.

However, with the development of the public corporation came a question that has not been satisfactorily resolved, even to this day: how can a diffuse and diverse group of owners overse