Corporate Governance

Shearman & Sterling LLP Corporate Governance Practices of IPO Companies | 39 Director Independence – Board Under both the NYSE and NASDAQ listing standards, a majority of a non-controlled company's board must be independent within one year from the date of its initial listing. More than half of the IPO Companies had a majority of independent directors at the time of their IPO. Director Independence – Key Committees The NYSE and NASDAQ listing standards require that, subject to certain exemptions afforded to "controlled companies," a company's audit, compensation and nominating/governance committees must each have one independent member at the time of its initial listing. There is a 90-day transition period for these key committees to be composed of a majority of independent directors and a one-year transition period for these committees to be composed entirely of independent directors. Approximately three-quarters of the IPO Companies had an audit, compensation and nominating/ governance committee composed entirely of independent members at the time of their IPO. Separation of the Offices of CEO and Chair of the Board The offices of CEO and chair of the board were separated at approximately half of the IPO Companies. When these offices were separated, the chair was independent approximately half of the time. Structural Defenses The organizational documents of a number of IPO Companies provided for one or more structural defenses. Approximately half of the IPO Companies had blank check preferred stock authorized, and a smaller, but still significant, number had organizational documents requiring that certain actions be approved by a supermajority vote. Poison pills, on the other hand, were in place at only a very small percentage of the IPO Companies. Very few of the IPO Companies had a poison pill at the time of their IPO. This is consistent with the practices of the Top 100 Companies, of which only eight had a poison pill.

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