For a private company that wants to go public, putting best governance practices into action will make the process go smoother and prepare the board of directors for the rules and regulations to come.
1. Set up a talented, experienced, and diverse board
The board is crucial to ensuring that a talented, experienced, and diverse board is in place. Unbiased interviews should be conducted from the start. Additionally, board members should be knowledgeable about the organisation and bring in a unique set of talents that complement fellow board members and moves the process forward in a timely, efficient, and effective manner.
2. Hire experts to write proxy statements
The right board members should be able to perform the duties required of a public company, such hiring members of management with public company experience who can guide the proxy statement process. A good proxy statement allows shareholders to make well-informed votes, so learning to write a good proxy statement as part of the best practices is a must. The proxy statement should include information about the board composition and compensation, as well as anything that relates directly to shareholder rights. It should be concise and accessible, with full disclosure on corporate business.
3. Say enough, but not too much
It can be difficult to write a good proxy statement that provides enough details to make shareholders happy but that doesn’t reveal too much sensitive information. As the board of directors prepares for the transition to a public IPO, members should have a firm grasp of matters of substance to the company and how corporate executives work with the board.
4. Adopt a board portal
Board portals make it easier for board members to communicate with each other, while providing a high level of security in those communications. However, board members often come from different technological backgrounds and experiences. Older board members may prefer face-to-face and paper communications, while younger board members may be accustomed to doing everything on a computer. Again, it comes down to finding the right balance of technology and training to efficiently use the portal.
5. Regularly review risk management systems
A board of directors is responsible for a company’s risk management, which includes financial concerns, operations, reputation, legal issues, and environment regulations, as well as following industry and SEC regulations and compliances. As a firm prepares to go public, board members “should regularly review the adequacy of the systems and controls management puts in place to identify, assess, mitigate and monitor risk and the sufficiency of its reporting,” according to McInnes Cooper.
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