2013 was the strongest year for venture-backed initial public offerings (IPOs) in almost a decade: 82 deals (the most since 2007) generated aggregate proceeds of over $11.2 billion, an average offering amount of $137.2 million. At least one venture-backed company went public each month in 2013, and the pace of IPOs has accelerated in the first three months of 2014.
Posts Tagged ‘Surveys’
Much corporate finance research is concerned with causation—does a change in some input cause a change in some output? Does corporate governance affect firm performance? Does capital structure affect firm investments? How do corporate acquisitions affect the value of the acquirer, or the acquirer and target together? Without a causal link, we lack a strong basis for recommending that firms change their behavior or that governments adopt specific reforms. Consider, for example, corporate governance research. Decisionmakers—corporate boards, investors, and regulators—need to know whether governance causes value, before they decide to change the governance of a firm (or all firms in a country) with the goal of increasing firm value or improving other firm or market outcomes. If researchers provide evidence only on association between governance and outcomes, decisionmakers may adopt changes based on flawed data that may lead to adverse consequences for particular firms.
The Conference Board, NASDAQ OMX and NYSE Euronext announced last week the renewal of their research collaboration to document the state of corporate governance practices among publicly listed corporations in the United States.
The centerpiece of the collaboration is The 2014 Board Practice Survey, which the three organizations are disseminating to their respective memberships. Findings will constitute the basis for a benchmarking tool searchable by market index, company size (measured by revenue and asset value) and industry sectors. In addition, they will be described in Director Compensation and Board Practices: 2014 Edition, scheduled to be released jointly in the fall.
It is hard to gainsay the observation that business law practice has evolved significantly over the last three decades. Fields as distinct as corporate, securities and mergers and acquisitions law have substantially merged with a host of traditional “business school” topics, such as accounting, finance, strategy, project management and risk analysis. Although some law schools have endeavored to keep up with these changes in business law practice, their reaction has been somewhat sluggish. Indeed, many major law firms with sophisticated business law practices have expended significant resources on training their junior associates (or retraining their experienced attorneys) through “mini-MBA” courses, business boot camps, and similar programs offered either through third parties, partnerships or in-house expertise. Nevertheless, it is our view that law schools can and should continue to work to provide this type of training to students in partnership with efforts already under way at law firms. Such efforts are certainly key components to creating sophisticated lawyers for the next century.
Amid the recent uptick in U.S. IPO transactions to levels not seen since the heady days of 1999 and 2000, Davis Polk’s pipeline of deals remains robust, leading us to believe that strength in the U.S. IPO market will continue in the near future. With ongoing pressure on companies that are past the IPO stage to update or modify their corporate governance practices to align with the views of some shareholders and proxy advisory groups, we thought this would be a good time to review corporate governance practices of newly public companies to see if they have also shifted in recent years. Our survey is an update of our October 2011 survey and focuses on corporate governance at the time of the IPO for the 100 largest U.S. IPOs from September 2011 through October 2013. Results are presented separately for controlled companies and non-controlled companies in recognition of their different governance profiles.
In our recent NBER working paper, The Value of Corporate Culture, we study which dimensions of corporate culture are related to a firm’s performance and why. Resigning from Goldman Sachs, vice president Greg Smith wrote in a very controversial New York Times op-ed: “Culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years.” He then adds “I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years.” In his follow-up book, Greg Smith seems to blame the demise of Goldman Sachs’s culture to its transformation from a partnership to a publicly traded company.
While highly disputed by the company, Greg Smith’s remarks raise several important questions. What constitutes a firm’s culture? How can we measure it? Does this culture—however defined and measured—impact a firm’s success? If so, why? And how can different governance structures enable or curtail the formation and preservation of a value-enhancing culture? In this paper we try to answer these questions.
Significantly expanding on the data in the Fenwick Corporate Governance Survey (discussed on the Forum here), Fenwick has published the first survey to analyze gender diversity on boards and executive management teams of companies in the technology and life science companies included in the Silicon Valley 150 Index (SV 150) compared to the very large public companies included in the Standard & Poor’s 100 Index (S&P 100).  The Fenwick Gender Diversity Survey analyzes eighteen years of public filings regarding boards and management teams—beginning with the 1996 proxy season and ending with the 2013 proxy season—to better understand changes in the leadership of some of our most important companies, and the gradual gender diversity improvements taking place. The 70-page report includes detailed analysis of:
We analyzed the terms of venture financings for 128 companies headquartered in Silicon Valley that reported raising money in the third quarter of 2013.
Overview of Fenwick & West Results
Valuation results in 3Q13 showed a noticeable increase over 2Q13, including the greatest difference between up and down rounds in over six years. The software industry was especially strong, not only valuation-wise, but also in the number of deals.
Here are the more detailed results:
Since 2003, Fenwick has collected a unique body of information on the corporate governance practices of publicly traded companies that is useful for Silicon Valley companies and publicly-traded technology and life science companies across the U.S. as well as public companies and their advisors generally. Fenwick’s annual survey covers a variety of corporate governance practices and data for the companies included in the Standard & Poor’s 100 Index (S&P 100) and the high technology and life science companies included in the Silicon Valley 150 Index (SV 150).  In this report, we present statistical information for a subset of the data we have collected over the years. These include:
- makeup of board leadership
- number of insider directors
- gender diversity on boards of directors
- size and number of meetings for boards and their primary committees
- frequency and number of other standing committees
- majority voting
- board classification
- use of a dual-class voting structure
- frequency and coverage of executive officer and director stock ownership guidelines
- frequency and number of shareholder proposals
- number of executive officers
Investors are looking at risks differently than in the past. The financial crisis that affected capital markets across the globe demonstrated that companies—and even whole economies—can be rocked to their core when the connections between lending practices, securitization programs, and capital and funding levels are not clearly understood and monitored.
Investors today are expecting that those who manage the businesses that rely on their capital will exercise greater care over this expanded concept of “risk.” Of course, investors also seek steady returns, so risks cannot be eliminated. But this is when disclosure—information that provides necessary nourishment to an efficient market—becomes so important.