Pre-Filing Matters – Should a company review its compensation policies and principles prior to the IPO? – (19)

A company must also address other corporate governance matters, including:
board structure;
recruiting directors;
board and management committees and member criteria;
whether to retain additional senior management;
identifying, disclosing and/or terminating related party transactions; and
directors’ and officers’ liability insurance.
Should a company review its compensation policies and
principles prior to the IPO?
A company should undertake a thorough review of its compensation scheme for its directors and officers, particularly its use of equity compensation.
Systematizing compensation practices. Compensation decisions should be made moresystematically—doing so may require:
establishing an independent compensation committee of the board of directors, as required by Dodd- Frank and the exchanges;
using formal market information to set compensation; and
establishing a regular equity compensation grant cycle.
Confirming accounting and tax treatment. A company should be sure that the Internal
Revenue Code (“Code”) Section 409A valuation used to establish stock value for

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