Further, nearly all the companies surveyed
had adopted, or planned to adopt, key corporate governance board policies in
connection with the IPO, such as corporate governance guidelines, codes of
business conduct, and related party transactions policies or procedures.
Almost all of the companies surveyed had board
committees that were substantially comprised of independent members at the time
of the IPO Frequently, board committees of the companies surveyed included
members who were venture capitalists affiliated with venture funds that had invested in the
companies, and, frequently, the venture capitalists were determined to be
independent directors, notwithstanding their share
ownership.
Under the listing standards of both the NYSE
and Nasdaq, stock ownership is one factor to be considered in determining independence,
noted the report, but even significant stock ownership, by itself, is not a bar
to a finding of independence. However, stricter SEC audit committee independence
rules preclude affiliated persons of the company from serving on the audit
committee. Affiliate status is measured by control, including stock ownership,
and the SEC rules provide a safe harbor from affiliate status for audit
committee membership at and below 10% stock ownership, while not specifying at
what level of ownership such affiliated person status would necessarily obtain.
The report examined whether directors affiliated with venture capital funds that
had invested in the IPO companies were members of audit committees, and if so,
whether they were determined to be independent. Of the companies that included venture
capitalists who had invested in the company on the audit committee, 93.5
percent of the venture capitalists were found to be independent.
None of the companies surveyed adopted a
shareholder rights plan, or poison pill, in connection with the IPO, although
other defensive measures were liberally adopted. A growing number of companies
included exclusive forum provisions in their governing documents. These
provisions require that certain types of litigation, such as derivative suits, claims
of breach of fiduciary duty, and claims arising pursuant to any provision of
the Delaware General Corporation Law, be brought solely and exclusively in the
Court
of Chancery of the State of Delaware , or another specified forum. Of the
companies surveyed in the report, 93.3 percent are incorporated in Delaware .