The IPO Journey: Corporate Governance is Crucial

​You’ve made the decision to go public – a monumental landmark in your company’s journey. It’s an undeniably exciting prospect. However, it’s enormously important that those in charge understand that the dynamics of a public company differ vastly from that of a private one – and for good reasons.

To be properly ready for the inevitable changes to your company’s fundamental operations, processes and culture is paramount. And the sooner a company is prepared the sooner an organisation, as well as the employees and shareholders, will benefit. 

The transition to publicly listed company also brings increased market scrutiny and compliance obligations. It’ll sometimes feel like the company can’t take a breath. But these rules and regulations are vital. And they are there to protect the organisation – and again, the employees, directors and shareholders.

A newly listed company will be held to the same standards as their long-established peers. Quite right too. Attaining listed status means joining an exclusive club.

Top of the list for any company looking to list should be a sound governance framework. Some newly listed firms may see governance as a bit of a distraction, but in truth a good governance framework is a vital business enabler. It will reduce the likelihood of errors, strengthen investor confidence and will ultimately save time, money and effort by being in the best position to hit the ground running on day one as a publicly traded company. Getting your governance framework worked out in advance will keep you on the front foot to tackle early challenges after listing.

Your governance framework, which may outwardly look similar to others in terms of the ground it covers, will nevertheless be unique to you. Getting the right advice, and moving away from a box-ticking approach, will deliver early and ongoing benefits to your business. You’ll set behavioural expectations and have a framework to support the delivery of your strategy, as well as keeping other stakeholders happy.

Creating the proper governance framework might seem arduous to begin with but getting it right will bring consistency and ensure you are doing the right things in the right way, across your business from the outset. It will provide transparency and comfort to investors that things are not only under control, but well run. It will also provide the backbone to instilling and maintaining the same understanding by the workforce.

Aside from the regulatory and compliance angles, what are the things that a good governance framework can include? The following are some ideas: 

• how the Board and Management work together, defining the boundaries for decision making (for example Matters Reserved for the Board and Delegation of Authority frameworks) 
• how the Board provides the right ‘tone from the top’ with expected standards and behaviours flowing down the executive line to demonstrate alignment with stated purpose and values 
• outlined levels of risk the company is willing to undertake and how the Board’s risk appetite is managed across the business 
• a reporting framework enabling shareholders and stakeholders to have a fair and balanced understanding of the Company’s performance 
• a clearly defined approach to board and management composition and succession, to ensure the right talent is in place to drive long-term success 
• procedures to manage how the employee and other stakeholder voices are heard, particularly around wider environmental and social practices 

You’ve done it, you’ve listed! But don’t forget year one.

Crucially, just because a company operated in a particular way prior to listing and was effective in doing so, it does not mean that an organisation can shift seamlessly into the new world order of listed status.

Therefore, it is imperative that those looking to list consider year one as just as important to the run-up to a float. 

In a company’s pre-listed days, certain strategic acquisitions or disposals of assets could have been settled with a quick call between executives and the target or purchaser. 

Now a CEO of a listed entity must consider whether an acquisition is in line with the strategy approved by the Board, the role the non-executive directors play, what impact it may have on the company’s environmental and social commitments, any regulatory requirements and what approval processes from the Board and shareholders may be necessary. The added checks and balances in a listed environment can add extra time to get these transactions over the line, and management must anticipate this and accept that the additional funds available from the IPO entail greater responsibility and a duty of care to a much larger group of individuals. 

Corporate governance frameworks generally change over time as your company evolves. But with a robust framework in place from the start, you will be able to seize opportunities and manage risks better.

At Computershare, we have experienced teams dedicated solely to corporate governance. Our professionals have a long history of working with companies to determine, develop and implement the right frameworks, specific to their needs and circumstances, to help them succeed in the public sector.