While the U.S. IPO market has slowed down in recent months, Davis Polk’s pipeline of deals in progress is strong, leading us to believe that there will be an uptick in IPO transactions as the market stabilizes. Considering that there continues to be growing pressure on larger companies to update their corporate governance provisions in response to both government regulations and pressure from shareholders and advisory groups, we thought this would be a good time to review the corporate governance practices at the time of the IPO to see if any of these practices had trickled down to IPO companies. Our survey is an update of our October 2009 survey and focuses on corporate governance at the time of the IPO for the largest 50 U.S. company IPOs from January 2009 through August 2011. The results are presented separately excluding controlled companies in recognition of their different governance characteristics.
Click here to access the survey results excluding controlled companies.
Click here for the survey results for controlled companies only.
Our survey shows that the pressure to update corporate governance practices at the larger companies has had only limited effect on companies at the IPO stage and that IPO companies still have much latitude when designing their governance structures. For instance, in our survey (excluding controlled companies):
- 78% of the companies had classified board structures
- 94% of the companies had plurality standards for director elections
- 34% of the companies separated the role of Chairman and CEO
- while no companies had rights plans at the times of the IPO, 98% authorized blank check preferred stock, 74% required supermajority votes for amending charters and bylaws and 90% prohibited shareholders from acting without written consent.
Based on our experience, we believe that the corporate governance structure of IPO companies has not had a material impact on the success of the IPO or the willingness of investors to participate and that IPO companies can continue to be able to tailor their governance practices to fit their specific needs.