Overview from Chris Ward, Head of Corporate Finance Advisory

2004 saw a substantial increase in the numbers of companies floating on UK markets, many of which were private equity-backed businesses. The trend seems set to continue in 2005.

During the busy flotation period it is easy to overlook remuneration strategy but this is crucial to recruiting and retaining key individuals. It is also important to look at the remuneration package in the contest of what might happen over the next two or three years. It is easy to miss something at this stage that may prove very costly at some future point.

Investors will look for stability and continuity in the senior management team during the period up to and after flotation. The reward package can undoubtedly help to create layalty and commitment during this period of change. The structure of the compensation, if designed to align the interests of individuals and shareholders and encourage outstanding performance, will inspire confidence in potential investors.

But it is also important to ensure that there is nothing that is likely to attract negative media comment and affect the market perception of the company. Companies may be unprepared for the level of scrutiny that will now be given to the remuneration of their directors.

We last produced a report on remuneration arrangements in newly floated companies four years ago. There have been some significant changes in some of the remuneration arrangements since then and this report provides an in-depth review of current market practice.

For more information download our brochure on 'The importance of executive reward at flotation'. (pdf)