Establishing an Effective Equity Strategy as a Newly Public Company

Establishing an Effective Equity Strategy as a Newly Public CompanyZoom inDownload PDF

Following an IPO, the outlook for employee equity programs changes overnight. The company instantly goes from a handful of investors to a diverse shareholder base. Governance requirements kick in. Regulators require significant disclosure of compensation and equity practices. Employee expectations shift. And as the company evolves, what worked at one stage doesn’t necessarily work at the next.

With the heightened pressure on business results and the distraction of the myriad of new regulatory and governance requirements, long-term strategic planning around the employee equity program can take a back seat. As a result, many newly public companies take a reactive approach to managing their equity programs focused on current needs, without consideration to the long-term implications.

This ad hoc approach to managing employee equity awards runs some real risks. Dilution levels can swell and become an issue with shareholders, creating challenges for future shareholder votes (e.g., Say-on-Pay votes or director elections). Gaps versus competitive market levels can create problems with talent retention. Most importantly, perceived inequities and lack of transparency can distract employees from their primary mission— executing the new growth and business strategies.

Read the full report by Seamus O’Toole, Rami Glatt and Haleigh Stopa by downloading the PDF.