The Advisors' Blog

– Liz Dunshee

I blogged a couple of weeks ago about pre-IPO equity incentive plan practices. Recent research from ISS Governance Solutions (available for download) reinforces the finding that evergreen features are on the upswing. Here are a couple of the findings:

– With the repeal of Section 162(m) of the Internal Revenue Code, mandatory approval votes on equity plans reverted from once every five years to the exchange listing’s rules, which is generally once every ten years.

– The two-year trend from 2019 to 2020 of equity plans authorized at newly listed IPOs reveals the practice of including evergreen provisions does not appear to be declining, which points to the need for increased monitoring by investors.

It’s hard to tell from this summary whether ISS is suggesting the possible return of once-in-a-decade equity plan votes. That would be pretty shocking to me, absent a “controlled company” situation, and I’d think that – at most – a company could get away with that exactly one time post-IPO. But, I also never expected to be so excited to have a needle jabbed into my arm, which goes to show that you never know what this wild world will bring.