Welcome to the second part of our blog series based on The Chartered Governance Institute UK & Ireland podcast Kerry Round took part in earlier this year. This blog will consider if it’s necessary to change the structure of a board following an Initial Public Offering (IPO).
In Kerry's opinion, changing the structure of the board is inevitable: 'There’s no getting away from it. When a company embarks on an IPO, the governance landscape within an organisation will change. The UK Corporate Governance Code 2018 (which is the governance standard to which all companies admitted to the LSE must comply to), is extremely clear on what it expects from a board of directors and its committees.
All companies aiming for admission will have to flip the spotlight and look inward at its board structure and ensure that it’s ready to meet the high standards.
Things to consider when changing board structure following an IPO
There are so many things to consider at this point including:
- The balance of executive and non-executive directors. The Code tells us that at least half the board, excluding the chair, should be non-executive directors and that they’re considered independent by the board. Ask yourself—what’s the status of your current board? It’s likely that you’ll have to recruit independent non-executive directors—do you know how you’ll approach this recruitment?
- Roles and responsibilities. When looking at the board structure we also need to consider the specific roles and responsibilities and the division of those responsibilities. To be compliant with the Code for example, the chair must be independent on appointment and there must be a clear division of the Chair and CEO roles and responsibilities. Will you have to make any changes to your current composition and if so, do you know how you’re going to decide and communicate those changes?
- Diversity and inclusion. We all know that diversity is a BIG issue at the moment, as it should be. Boards are having to scrutinise its composition and ask difficult questions as to gender and ethnic minority representation. At RGS we link the diversity of boards with knowledge and understanding of their company’s stakeholders. Only through knowing and understanding these stakeholders can a company confidently say that the board reflects all stakeholder interests.
About Kerry Round and Round Governance Services
With 15 years of experience as a governance practitioner in listed, quoted and large private organisational structures under her belt, Kerry recognised a better way of doing things. She established Round Governance Services to make governance more accessible and easier to understand. She also wanted to move the role of governance into the 21st century and create a business that supports flexible and agile working. Here's their company purpose: ‘as a socially-minded business, our purpose is to practise good governance for ourselves, our clients who trust and depend on us, and the communities who rely on us all. Our tailored and proactive approach to work is fundamental in achieving this.’
Find out more about Round Governance Services.
Connect with Kerry on LinkedIn.
Join the Round Governance Services LinkedIn conversation.
Kerry discusses this subject in more detail in our episode of the Engage Governance podcast ‘Understanding IPO governance'.
