I just received an interesting new survey from Richard Cameron Blake of Wilson Sonsini Goodrich & Rosati in which the firm examined the 45 U.S. venture-backed companies involved in the largest IPOs measured by deal size from July 2011 through June 2012, and reviewed practices and trends in the following areas:
• Directors and independence
• Board committees
• Board policies
• Stock plans
• Key metrics and non-GAAP measures
• Defensive measures
We noted the following key findings in our survey:
• Directors and Independence
- Even though newly public companies have phase-in periods within which to comply with stock exchange requirements regarding majority board independence, each company surveyed had a majority of independent directors on its board, and most companies were substantially independent at the time of the IPO, which was consistent with last year’s findings.
- Of the companies surveyed, more companies separated the chairman and CEO roles than combined them, representing an increase from last year.
• Board Committees
- Even though newly public companies have phase-in periods within which to comply with stock exchange requirements regarding fully independent board committees, almost all of the companies surveyed had board committees that were substantially comprised of independent members at the time of the IPO, which was consistent with last year’s findings.
- Frequently, board committees of the companies surveyed included members who were venture capitalists affiliated with venture funds that had invested in the companies, and, frequently, the venture capitalists were determined to be independent directors, notwithstanding their share ownership, which was consistent with last year’s findings.
• Board Policies
- Nearly all the companies surveyed had adopted, or planned to adopt, key corporate governance board policies in connection with the IPO, such as corporate governance guidelines, codes of business conduct, and related party transactions policies or procedures.
• Stock Plans
- Most of the companies surveyed adopted a new equity compensation plan in connection with the IPO, frequently with “evergreen” provisions, which allow shares automatically to be added to the available pool annually.
- Slightly less than a majority of the companies surveyed adopted an employee stock purchase plan in connection with the IPO, but those that adopted one frequently included an evergreen provision.
• Key Metrics and Non-GAAP Financial Measures
- Almost half of companies surveyed disclosed key metrics (e.g., subscribers or number of users for Internet companies) in addition to financial metrics, which is an increase over last year’s findings.
- More than half of the companies surveyed disclosed non-GAAP financial measures (frequently, adjusted EBITDA), which is an increase over last year’s findings.
• Defensive Measures
- None of the companies surveyed adopted a shareholder rights plan, or “poison pill,” in connection with the IPO, although other defensive measures were liberally adopted, which was consistent with last year’s findings. A growing number of companies included exclusive forum provisions in their governing documents.
Click here for the complete WSGR publication.