Yearly Archives: 2018

An initial public offering is a key inflection point for a company, not least because it often triggers the opportunity to review and replace the company’s corporate governance structure. In place of complex contractual shareholder arrangements that are subject only to the constraints of corporate law, upon an IPO, a company adopts a more simplified governance structure that is subject to SEC and stock exchange listing standards. As the burden of obtaining shareholder approval to amend governance arrangements in the future is much higher for a public company, companies planning for an IPO often seek to establish a corporate governance structure which is as flexible as possible.

In the last few years, we have witnessed a sea-change in corporate governance among the largest U.S. public companies, e.g., those in the S&P 500, due largely to pressure imposed through shareholder proposals and proxy voting guidelines. Through increased pressure by shareholder activists and proxy advisory firms, these companies have been forced to abandon governance structures that are perceived to entrench control among a small group of holders and/or management, or which create barriers to more direct shareholder engagement. In recent years some of these same players have also put pressure on IPO companies and enacted policies meant to bring the governance of IPO companies in line with that of more mature public companies.

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