Ready, Set, IPO: The IPO Equity Compensation Checklist


A company’s success depends on its people — especially when it’s transitioning from private to public. As part of the IPO process, many startups use equity compensation as one way to attract and retain early talent. But it’s crucial to create a comprehensive, detailed plan covering everything from regulatory compliance and employee communications to ensure your equity compensation plans are ready to get you to, through, and beyond IPO.

Long before IPO, companies need to take an inventory of what stock plans they have in place, what changes they may need to make to existing plans and what new plans they want to have in place for use as a public company, said Emily Cervino, head of industry relationships and thought leadership at Fidelity.

For business leaders starting on that path, here’s a checklist and timeline of what to consider when creating a compensation strategy.

18 Months to IPO: Compensation Philosophy and Peer Group Selection

Start with a compensation philosophy, which is a formal document outlining a framework and rationale for employee compensation. Keep these considerations in mind:

  • If an equity philosophy does not exist, work with the compensation committee, executive team and outside counsel to establish a plan for granting equity-based awards.

  • Provide flexibility with respect to award types, taxation and defining the eligible population. “Flexibility is key,” Cervino said. Just because the plan allows something doesn’t mean a company must do it.

  • Establish processes to ensure that the proper requirements, documentation, and approvals are in place for individual equity grants.

During this stage, company leaders should also establish a peer group of publicly traded companies to understand the competitive landscape.

  • Target 15-20 companies — considering factors such as industry, revenue, market capitalization, profitability, risk profile, debt leverage and time since IPO.

  • Understand typical pay mix by level in relevant sectors.

  • Assess how broadly equity may be used by publicly traded peers.

15 Months to IPO: Executive Compensation

At this stage, assess equity grants for executives and ensure they’re appropriate. Use the following approach as a starting point:

  • Establish equity design and eligibility for post-IPO grants

  • Understand how the IPO will affect current employment agreements. Verify that employment agreements do not create obstacles with change-in-control or acceleration payments as the company goes public.

  • Create a framework for how board members will be compensated, including equity, typically in the form of time-based RSUs.

12-18 Months to IPO: Administration and Employee Services

Ensure you have a robust system to record and track grants, keeping regulatory compliance in mind. The system should include a wide array of capabilities — such as financial reporting solutions and employee services.

6 Months to IPO: Prepare to Launch

As the big day nears, it’s crucial to establish processes to ensure access to resources and support employee communications and readiness. When working through these logistics, keep in mind key factors such as payroll, taxation and financial reporting.

3 Months to IPO: Focus on Employees

This is the home stretch. Now it’s time to create an IPO readiness team to help employees understand how the IPO process will affect their wealth and how to incorporate it into their overall financial plan.

Beyond the IPO: Public Equity Plan Management

Once the company has gone public, it’s crucial to remember that the needs and regulatory obligations are drastically different. Working with a provider who can advise and help the company grow through the transition can be valuable.


Paid advertisement by Fidelity Stock Plan Services, LLC. The statements and opinions expressed in this article are based on insights provided by Fidelity but modified by the author, Rosa Harris, Media Analytics Group. Fidelity Stock Plan Services, LLC cannot guarantee the accuracy or completeness of those modifications. Information is provided for educational purposes only.

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