Corporate Governance and IPOS

In the debate on corporate governance, its nice to know the facts.  Thus, when someone claims that the preferred system of regulation is one that involves private ordering, its nice to dispel the approach by noting that in practice it doesn't seem to work. 

Davis Polk has produced some intriguing empirical work with respect to the governance practice of companies that undertake IPOs.  The data is for companies with controlling shareholders and without.  The study of all companies (including the controlling ones) looked at 50 IPOs in 2007 and 2008, with the amounts ranging from $136.5 million to $17.86 billion. 

These companies, like most large public companies, have staggered boards and combine the positions of CEO/Chairman.  Here are some of the stats.

• 28 (56%) companies on NYSE; 21 (42%) on NASDAQ; and one (2%) on AMEX
• 32 companies (64%) had classified boards
• 20 companies (40%) had a separate chairman and CEO (Of those 20 companies with a separate chairman, 4 (20%) had an independent chairman)
• 44 (88%) required a plurality standard for board elections, with only 6 (12%) requiring a majority standard for board elections
• 3 (6%) companies had shareholders’ rights plans.  Of the remaining 47 (94%) of the companies, 43 (91%) had the authority to issue “blank check” preferred stock

Add in that a high percentage (80% in one study) of most IPOs are companies incorporated (or, more acurately, reincorporated) in Delaware.