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Our Board and CEO Services team partners with CEOs and boards to understand issues, assess opportunities, and strategically advise to ensure sustainable growth strategies are optimized.
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The CEO’s Playbook: Building an IPO-Ready Board

In a striking rebound, the IPO landscape in the Americas has surged this year by over 20% compared to the same timeframe in 2023, with the proceeds from these offerings more than doubling due to the larger size of the deals[1]. This resurgence is led by the healthcare and technology sectors, particularly biotechnology, which alone launched nine deals raising a collective US$1.5 billion. Artificial intelligence (AI) continues to capture the market’s imagination, but investors are increasingly demanding tangible proof of its potential impact. Despite the looming challenges of global geopolitical tensions and the upcoming U.S. presidential election, the robust start to the market and growing investor confidence suggests a promising horizon for public listings, extending beyond large-cap entities to a broader spectrum of companies into 2024-2025.

Drawing on three decades of experience  advising boards and CEOs through complex leadership challenges, we have observed the speed bumps investor-led boards face when transitioning to become more independent. A critical juncture often arrives when financial sponsors perceive a viable route to an IPO. The significance of a board’s capabilities and composition in maximizing a public listing cannot be overstated, yet one of the greatest barriers is often the reluctance of directors to relinquish their positions when it becomes clear that change is necessary. While some boards hesitantly skirt around these issues, the most successful ones embrace a proven pathway to prepare their governance structures for the public markets.

To navigate this transition and effectively prepare for a future IPO, chief executive officers and boards should consider three governance best practices:

1. Board Architecture

The axiom in real estate that “the taller the building, the stronger the foundation needs to be” equally applies to board structure. Recent shifts in corporate governance have redefined board construction to better weather potential challenges. In advance of any public listing, it is essential for boards to address these fundamental governance tenets.

  • Vision, Purpose, Strategy: Boards must align their governance framework with the company’s long-term vision.
  • Stakeholder Interests Analysis (SIA): Understanding the influence and impact of various stakeholders is now essential for board members.
  • Capabilities: It is crucial to identify the skills and experiences needed for directors to effectively govern and guide management.
  • Committee Structure: Expanding beyond traditional committees, modern boards might include dedicated groups for risk, finance, climate, digital, or cybersecurity, which in turn demands new directors with this expertise.
  • Board Size and Composition: Decisions about the number of directors and the balance between independent and executive members should be made early in the board’s formation.
  • Governance Guidelines and By-laws: These should be established early to embed best practices and operational guidelines for board function.

2. Board Leadership

Determining the leadership structure of the board is perhaps the most critical decision post-architecture finalization, influencing the board’s capabilities, effectiveness, and culture:

  • Board Chair: Financial sponsored boards typically have the Chair position occupied by an individual connected to the lead ownership group. However, once a path to IPO is in sight, selecting the right Non-Executive or Executive Chairman is paramount to unlocking the full potential of the board and its impact on the company.  
  • Committee Chairs: Once a Chairman is identified, selecting committee chairs with the necessary experience and capacity is vital for advancing board objectives and helping the company and board get ready for any pre- and post-IPO governance challenges.

3. Board Recruiting

The current environment for board recruitment is fiercely competitive, with a pressing need for directors who bring diversity of thought, background, and expertise. When adding additional independent directors to the board, we have found it is important to keep the following concepts forefront when building out the rest of the board.

  • Value Talent Over Titles: Prioritizing current capabilities over past titles often leads to more effective board compositions, with non-CEO members making substantial contributions.
  • Focus on Needs, Not Replacements: It’s important to seek directors who add the needed capabilities for executing the strategy rather than trying to replicate any outgoing director’s contributions.
  • Look to the Horizon: Boards need to balance the short term “open seats” on the board with their longer-term director succession needs. Any director added to the board must have the potential to take on additional leadership responsibilities in the future. This is especially true with smaller sized boards with less options for committee chair positions.

By adhering to these best practices, companies who are on the path to an IPO can assemble a board that not only meets today’s challenges but also positions the company for sustained success in the public domain.

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Brett Stephens is the CEO of RSR Partners and helps lead the firm’s Board & CEO Services

RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1993 by industry icon Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity-backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.

[1] Data provided by EY Private.