The Advisors' Blog

– Liz Dunshee

There are unique challenges to working with companies preparing for an IPO – especially if management and/or the board don’t have much public company experience. In this blog, Jim Heim (now of Meridian) outlines some common missteps that advisors make. And while Jim’s advice is directed to comp consultants, lawyers and other advisors can apply the same lessons. Here’s an excerpt:

1. Focusing a market check “at the time of the IPO” without encouraging a long-term compensation strategy and succession plan: this can lead to overly-generous pay that post-IPO awards won’t be able to match, or pay that’s inadequate to retain the best talent.

2. Perpetuating the view that compensation is an “event” tied to the IPO, rather than an ongoing process: this causes a disconnect between management’s pay expectations and the company’s ongoing ability to demonstrate pay-for-performance.

3. Failing to educate the compensation committee & management on the executive pay landscape, regulatory environment and shareholder views: this puts the company in a defensive posture – having to react to demands without enough time to deliberate – and past decisions could limit future alternatives.

Don’t go there! From the outset, work with the committee, management & other advisors to understand their perspectives and to develop priorities and a regular calendar of events. Regularly brief your clients on shifting shareholder perspectives and regulations (our blog makes that easy) – and keep an open dialogue. Lastly, speak up if you’re not getting the information or access you need – you can cite these missteps to make your case.