Five Simple Rules for Post-IPO Pay

By Todd Sirras and Austin Vanbastelaer


IPO Compensation Online Article

You’re chair of the compensation committee for the most recent successful initial public offering (IPO). Pre-IPO shareholders and employees are sitting on large unrealized gains. Your visionary leaders, the team that carries the company’s DNA, have just realized wealth beyond all expectations. That’s great!

But now you have a problem: with less financial incentive—plus the added visibility, accountability, and responsibility of a public company—leaders might begin looking for new challenges elsewhere post-IPO.

How does the board keep the magic alive as the company matures? How does the organization keep talent engaged when financial incentives become less effective? How do you keep competitors—whether established or upstarts—from coming for your now-proven talent?

The principle is simple, yet nuanced in practice: Retaining and engaging critical talent is equally important before and after a public listing. It’s just that the forces at play are different.

Here are five “levers” that can facilitate continued engagement and promote retention after public company liftoff:

1. Change the Rules

Paying competitively and fairly but not trying to replicate prior pay levels will mitigate many stress points and is reasonable for pre- and post-listing employees. A company’s pay strategy should reflect the organization’s needs; pay levels, cash-versus-equity mix, goal-setting, performance measures, and upside opportunity all must be calibrated to each business and talent strategy.

2. Play Offense

A public listing is a major turning point in the talent equation. Employees can realize plenty of value from previously granted equity awards and are extremely likely to do so. Sudden financial freedom flips the talent playing field in favor of employees.

This is the time to play offense, not defense. Companies should identify their most irreplaceable talent and lock these workers in with large awards that vest over five years or more. Organizations should be mindful that not everyone can or should receive these and assess ruthlessly. Let “B+” and even “A” players make career decisions within the bounds of the new pay strategy, but find and go heavy on the “A+” talent.

3. Shoot for the Moon and Pay Up When You Get It

Crystallizing the business strategy before going public and engaging individuals’ competitive spirits through incentives is a winning combination. Establishing the strategy before listing ensures that all individuals understand their roles in the growth, development, and future of the company and allows meaningful and tangible goals to be set. These metrics or milestones can be incorporated into incentive plans that explicitly link financial and strategic achievement with the company’s strategic vision.

Clear roles and goals engage employees on a level that compensation cannot. Emotional engagement paired with market-leading pay for achievement can keep the competitive spirit alive. The best talent wants to win. Be aggressive and make it worth their while.

4. Go Beyond Pay

Public market valuation can lead to windfalls that meaningfully reduce the motivational value of compensation. People are more likely to stay if they find their work engaging and their growth opportunities “positively interesting.”

Increasing responsibilities, expanding strategic opportunities, and promoting visibility and engagement with senior executives and board members are more likely to engage the most critical employees and maintain a robust succession pipeline for critical positions.

5. Let Leaders Lead

A successful listing will make “haves” and “have-nots” out of employees working side by side. The board can help management create a talent elevation process and pair it with a compensation budget that empowers leaders to recognize top performers with new responsibilities, visibility, and rewards. Equipping leaders with the right tools supports culture-building and talent development, and it leads to a more energized and higher-performing organization.

A successful listing generates new culture, leadership, and talent challenges, not to mention related issues surrounding compensation. Supporting a vibrant workforce with the tools above can make your newly public company not a target for talent but a magnet.

Todd Sirras is managing director and Austin Vanbastelaer is a senior consultant and a founding member of the New York office at Semler Brossy Consulting Group.

Semler Brossy is a NACD partner, providing directors with critical and timely information, and perspectives. Semler Brossy is a financial supporter of the NACD.

Todd Sirras
Todd Sirras is the managing director of the New York Office at Semler Brossy Consulting Group.

Austin Vanbastelaer
Austin Vanbastelaer is a senior consultant and a founding member of the New York Office at Semler Brossy Consulting Group.