Compensation Strategies for Emerging Public Companies

Chapter 42 of the New York Stock Exchange: The Entrepreneur’s Roadmap from Concept to IPO

How does an emerging public company establish a compensation and rewards strategy that satisfies its organizational needs and its obligations to shareholders while also serving to support one of its most valuable assets—its people? How does a newly public company establish a fair and equitable strategy that optimizes the execution and people-spend associated with a new public company opportunity? The answer is by positioning the company for growth and predictability, which are attributes most valued by capital markets.

For any growing company, especially one on the verge of going public, there is a fine balance between the structure of overhead and expenses (selling, general, and administrative, SG&A), which can limit the scale, speed, or agility of operations, and the demands of a frequent driver of value—the employees. Almost every public company comes out of its initial public offering wanting to be perfect in its delivery of predictable people costs. But in fact it’s not easy, nor does anyone ever do it perfectly.

It is in this striving for perfection that we gain insights into cost drivers and learn and improve on pay delivery, as well as challenge operating business models to deliver
the next disruptor in an industry. For most new companies, the buildup of staff in the first three to five years, along with balancing growth to align with and anticipate the market demand and operational performance of the company, is a critical deliverable for any executive team. This chapter will outline how newly public companies can best approach aligning and optimizing the people costs within a new public entity with respect to the pressures and demands associated with delivering value to shareholders.

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