NEW YORK--(BUSINESS WIRE)--As issuers complete their IPOs and begin life as public companies, their shareholder bases will naturally shift from “insider-controlled” to institutional, particularly as venture and private equity investors gain liquidity through secondary offerings or block sales. In an effort to manage this transition, ICR, a leading strategic communications and advisory firm, has added Governance Advisory to its suite of IPO services.
“The giant passive asset managers, namely Vanguard, BlackRock, and State Street, increasingly constitute a significant voting block for almost all public companies,” said Lyndon Park, head of ICR’s Governance Solutions practice. “Therefore, it’s more important than ever to look at how issuer governance structures will be viewed by these investors, and that starts with the decisions they make prior to going public.”
According to a 2018 Davis Polk survey of IPOs1, companies continue to deploy various takeover defenses in advance of their IPOs, despite widespread opposition to these practices by governance advocates, proxy advisors, and most importantly, shareholders.
“An overwhelming majority of companies are going public with defensive governance structures such as staggered boards and supermajority provisions,” said Park. “What these companies eventually realize, often too late, is that the portfolio managers buying their shares at the IPO are different from the individuals voting those shares during proxy season. Whereas these fund managers typically do not concern themselves with 'anti-takeover devices' or governance structures during the IPO, their colleagues who are later charged with stewardship and proxy voting duties do.”
Many boards and management teams are often surprised when their companies receive negative recommendations from influential proxy advisory firms, such as ISS and Glass Lewis, for “shareholder-unfriendly” governance provisions, as these firms will recommend against election of their directors at annual meetings if such provisions are not phased out over time. By the time these companies lose the “emerging growth company” status and face their first Say-on-Pay vote by shareholders, boards and management of these companies, if unprepared, may face reputational damage, unwanted activist attention, and sometimes a poor governance discount to their share prices.
ICR’s IPO Governance Advisory service will help boards and management teams create a path, and gradually, implement best-practice governance processes and structures to align with investor and market expectations in their nascent years as public companies, implement a shareholder engagement strategy to build a productive long-term relationship with their shareholders, and provide guidance on board-related responsibilities.
“The most effective way to address governance-related risk and vulnerability is to prepare early for these initial years as a public company,” said Park. “The board members and management teams of newly public companies that control their corporate governance and ESG narrative from the start will stand a far greater likelihood of earning shareholder support over the long term.”
To learn more about ICR’s IPO Governance Review service please click here.
About ICR
Established in 1998, ICR partners with companies to execute strategic communications and advisory programs that achieve business goals, build awareness and credibility, and enhance long-term enterprise value. The firm’s highly-differentiated service model, which pairs capital markets veterans with senior communications professionals, brings deep sector knowledge and relationships to more than 650 clients in approximately 20 industries. ICR’s healthcare practice operates under the Westwicke brand (www.westwicke.com). Today, ICR is one of the largest and most experienced independent communications and advisory firms in North America, maintaining offices in New York, Norwalk, Boston, Baltimore, San Francisco, San Diego and Beijing. ICR also advises on capital markets transactions through ICR Capital, LLC. Learn more at www.icrinc.com. Follow us on Twitter at @ICRPR.
1 Governance Practices for IPO Companies: A Davis Polk Survey, July 2018
