When a business holds an IPO and goes public, so many issues change, and one of the most important is pay and remuneration. Of course, the prospect of IPOs – and the lure of offering key staff shares – is an important part of how firms incentivise staff.
Ken Charman FRSA, a regular writer on executive compensation
trends, comments here on issues surrounding initial public
offerings and the spin-outs of companies. These developments
bring their own complexities when it comes to pay and
compensation packages. Charman is chief executive of
uFlexReward (more details on that business below).
Going public can be a huge deal for any company. It represents a
degree of maturity and acceptance into a global market. However,
the issues surrounding this change are notable, especially when
it comes to remuneration for employees in light of the
restructuring. Employers need to be able to strategically
navigate this shift, all while communicating and coordinating
with employees. Having comprehensive rewards monitoring systems
don’t just stand to make the process much easier, they may be
essential. Fortunately, products already available today are able
to facilitate just this type of functionality.
Remuneration headaches around going public
Many successful new ventures have ambitions to accelerate their
growth by gaining access to more capital. A well-understood way
for a private company to facilitate this is to begin selling
shares of their company to the public in an Initial Public
Offering (IPO). Another option, if a business is growing faster
in one department than the wider business as a whole, could be to
“spin-out” that area as its own – now independent – public
company.
In either event, it is this creation of a public entity out of a
previously private one that can have a variety of complications
for the businesses trying to make the transition. None the least
of these concerns involves the increased scrutiny and regulatory
oversight that is applied to public companies. Staying in line
with relevant legislation is essential if the CEOs don’t want to
run afoul of the government, and this means employees at all
levels need to be aware of and enforcing proper company
policies.
The issue of remuneration during and after the transition is an
area where many private company executives are unfamiliar with
regulations and guidelines. Often their business has grown in an
organic way in which highly personalised reward packages have
been expeditiously agreed upon. These deals have the
potential for trouble when viewed under the microscope of gender
and ethnicity pay-gap analysis and reporting. The adaptation to
being answerable to a Remuneration Committee that is interested
in this data can prove difficult. Anomalies, bias, variation from
fair and equal pay rhetoric will suddenly become accountable. But
the naughty step should not be avoided just to satisfy the
regulators. The coming of age of being a public company is also
an occasion to tidy up rewards that may have, unintentionally,
failed to fully consider the well-being and motivation of
employees in the rush and excitement of rapid growth. If
compensation for workers (at all levels) isn’t handled carefully,
companies risk demotivating and losing their greatest asset — the
employees whose efforts were so important in their success.
Fixing these issues once going public, can be costly and could
lead to unexpected reputational liabilities. It’s far better to
introduce a system beforehand that can analyse and identify any
problems in reward across all forms of reward for all employees.
It is not just taking account of how senior executives are
compensated before and after the IPO or spin-out. It is also
vital to ensure the company is paying in line with its stated
policies at all levels and providing compensation that is fair
and transparent to keep the best talent on board and aligned with
a shared company vision.
Modern Rewards Tracking Is Becoming
Essential
Considering all of these potential issues and the enormous
complexity of reward that is administered in separate systems for
salaries, incentives, pensions, benefits and shares. It is
essential to digitise and automate the consolidation of data so
that the true values can be seen for every form of reward and
every employee.
These all-inclusive platforms are finally becoming available in a
form that is fast to implement and economical to operate (as low
as $10 per employee per year) and they provide a means for
employees to see the full value of the investment that company is
making in their personal reward in real-time. This leads to
greater fairness as well as satisfaction, and as mentioned having
a system like this in place before the move to public offering is
preferable than trying to fix things later.
Fortunately, uFlexReward is able to help. uFlexReward is itself a
spin-out company based on Unilever’s global digital reward
system. The goal is to offer flexibility to employees by
personalising rewards to their individual life needs, meanwhile
providing employers with insight and clarity through digitisation
and consolidation of all rewards into a single, real-time,
integrated global environment.
By deploying just such a platform, employers can have a high
degree of visibility and control over their whole organization,
which is essential for navigating an IPO or spin-out endeavor.
Thanks to uFlexRewards, they also don’t need to build this system
from the ground up, merely integrate the work that has already
been done. Even for private companies, the benefits to efficiency
and employee loyalty stand to be massive. However for companies
going public, these tools may prove invaluable.
About The Author
Ken Charman FRSA, CEO – uFlexReward; Visiting
fellow, Institute of Ageing, Department of Medicine, Newcastle
University.
uFlexReward is a consolidated HR and rewards data platform
providing organisations with a granular view of their total
labour costs and a technology framework for managing the
workforce of the future.
