Getting IPO-Ready: What Compensation Committees Need to Know

As companies prepare to go public, compensation becomes a high-stakes issue—critical for attracting and retaining talent, meeting investor and governance expectations, and navigating new legal and regulatory terrain.

Attendees heard from experts from Cooley and Semler Brossy as they shared what board members responsible for compensation need to know ahead of an IPO.

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KEY TAKEAWAYS

IPO Background

• After a trough in initial public offering (IPO) activity, 2025 is heating up (approximately 200 IPOs so far). Unlike 2020–21’s special-purpose acquisition company / overvaluation wave, today’s issuers are more prepared and better filtered by a long backlog and secondary-market liquidity.
• Expect more private equity (PE) exits as the PE operating infrastructure (reporting, controls, comp hygiene) translates well to public-company discipline.

Compensation Strategy Through the IPO

• Build a pay architecture that is designed for durability and can survive volatility for at least 24 months post-listing; avoid structures that fluctuate with first-year price action.
• Three inflection points for stakeholders:
  1. Filing/IPO—team retention and lock-up expectations
  2. Years 3 to 4—broader institutional ownership and proxy attention
  3. Evergreen plan renewal
• Grant thoughtfully pre-IPO (don’t fully vest top talent before lock-up expiry); use equity to lock in critical leaders for the next leg, and don’t forget the people who got you to this stage.
• IPO is a window to land “out-of-reach” executives and directors; use targeted grants to clear the bar, but make sure to document the business rationale for future questions.
• Keep director pay simple and avoid complexity that distracts from the business, but pay up in equity when you want to get a big-name or seasoned director on board.
• Tech has shifted toward restricted stock units (RSUs) to control dilution, but double-trigger vesting at IPO can create a large stock-based compensation charge and cash income tax withholding needs—model this in the S-1.
• Don’t force performance stock units until the plan, metrics, and disclosure cadence have stabilized.
• Founder awards can be successful but make sure not to overreach and to avoid outsized bets; ensure the decision is made with independence in mind (preferably once an independent director is on the board) to avoid questions later.

Governance & Committee Mechanics

• Staff the compensation committee early. Aim for a former CEO as chair if you can; add “athletes” who understand the business over narrow specialists or “sprinters.”
• Target at least one seasoned public “operator” director approximately 12 months pre-IPO to bridge investors and employees and to road-test governance.
• Secure a compensation consultant and legal advice pre-IPO to consider all the compensation strategies and the scenarios that may come.
• Choose peer groups carefully. Build sets, such as a recent IPO cohort plus size/sector peers plus private comparators for talent.
• Develop a pay philosophy to keep the narrative consistent throughout.

Investors, Proxy Advisors & Optics

• In the first years post-IPO, Institutional Shareholder Services (ISS) / Glass Lewis are less involved because around 90% of the float will still be owned by “friendly” investors, but be aware that poor governance will still cost you in the long term.
• Dual-class structures are a trade. They can preserve founder control, but they can also cause increased investor and proxy advisor security as well as valuation discounts at IPO.

Questions for the Boardroom

• What’s our pay philosophy?
• Who is included in our compensation peer set?
• When should we bring in an independent director and what should the pay structure for them look like?
• Have we scenario-planned founder or CEO awards (hit/miss cases, disclosure, independence)?
• Does our compensation structure work post-IPO? Where are the risks?
• Do our RSU triggers create a problem at IPO and are we ready for that?
• Do we have the right advisory bench (compensation consultant, legal counsel) in place before listing?

SPEAKERS

Managing Director, Semler Brossy

Steve Charlebois

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Steve Charlebois has 20 years of executive- and international-compensation consulting experience gained through external consulting and in-house roles. He has extensive experience working in technology and across a broad spectrum of domestic and international executive- and director-pay issues...

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Board Director, AsteraLabs Inc., Box Inc., GlobalFoundries Inc., Resideo Technologies, Inc., Tonal Systems Inc., NACD Northern California Chapter

Jack Lazar

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Jack has over 30 years of Silicon Valley experience with a focus on finance and operations. He has served in executive leadership roles at GoPro, Qualcomm, Atheros, NetRatings, Apptitude, and Electronics for Imaging...

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Partner, Cooley LLP

Alessandra Murata

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Alessandra Murata, currently partner at Cooley LLP, is a trusted advisor to companies, management teams, venture capital, boards of directors, and compensation committees on executive compensation and benefits issues arising in every stage of the corporate life cycle, ranging from emerging growth to blue-chip public. She also...

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MODERATOR

Senior Consultant, Semler Brossy

Eric King

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Eric King joined Semler Brossy in 2012 and has more than 10 years of experience in executive compensation consulting. He is a trusted advisor to senior management and boards of public and private companies, including pre–initial public offering growth...

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