Considering remuneration on IPO - Getting it right from the first time

Early 2021 has seen a wave of activity across the global IPO market. This trend has been replicated in the UK, despite previous concerns regarding London’s ability to attract new IPOs post-Brexit. Early 2021 saw the biggest listing in London since 2011. As economies emerge from lockdowns, many experts have forecast a period of strong economic growth, which bodes well for this wave continuing for a while longer.

Potential regulatory reform is hot on the agenda as markets seek to evolve and remain globally competitive to a wider range of companies, particularly those in digital and tech industries. This is particularly relevant for the London equity market which has traditionally been dominated by finance, mining and energy sectors.

As companies transition from private to public ownership it is important to consider how senior executives are paid both in the lead up to and post-IPO. There is a stark contrast in how pay is structured in private and public markets, and companies need to be prepared for the transition to a world of greater transparency and external scrutiny from a wider set of investors and stakeholders. Despite this change, the commercial challenges of ensuring that pay arrangements attract the right talent and support the execution of the corporate strategy remains unchanged.

Spending time considering key remuneration issues before the IPO can often save companies time and money in the long-run and ensure that the remuneration structures in place effectively support the company’s strategy at this critical stage. For many companies the focus is not just on executive pay arrangements but also on how employees across the organisation can share in the future success of the business.

The governance framework for pay in listed companies is made up of a combination of legal, regulatory and best practice rules. Navigating this complexity can often be daunting for companies looking to make the transition for private to public. This report is intended to provide a brief overview of both market practice and the key factors to consider as companies approach IPO.

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