The committee identifies, evaluates, and recommends director candidates to the full board. In the pre-IPO context this usually means transitioning from a venture-backed board with investor-designated directors to a public company board with a majority of independent directors. I advise companies to begin independent director recruitment at least 12 months before the IPO, focusing on relevant industry expertise, financial acumen, and public company board experience, with board diversity increasingly scrutinized by investors and proxy advisors.
The governance committee is responsible for identifying, evaluating, and recommending director candidates to the full board. In the pre-IPO context, this typically means transitioning from a venture-backed board with investor-designated directors to a public company board with a majority of independent directors. Gurpreet Bal advises pre-IPO companies to begin independent director recruitment at least 12 months before the anticipated IPO, focusing on candidates who bring relevant industry expertise, financial acumen, and public company board experience. Board diversity along dimensions of gender, race, ethnicity, and professional background is increasingly scrutinized by institutional investors and proxy advisory firms.
A classified (staggered) board has directors serving three-year terms with roughly one-third elected each year, providing continuity and protection against hostile takeovers and activists, but institutional investors and proxy advisors generally oppose them and ISS recommends voting against directors at companies with classified boards. In my practice, the trend among Silicon Valley technology companies has moved toward annual election of all directors, though companies with dual-class stock sometimes keep classified boards as an added protective measure.
One of the most consequential governance decisions a pre-IPO company makes is whether to adopt a classified (staggered) board structure, where directors serve three-year terms with approximately one-third elected each year. Classified boards provide continuity and protection against hostile takeovers and activist campaigns, but institutional investors and proxy advisory firms generally oppose them. ISS recommends votes against directors at companies with classified boards. In Gurpreet Bal's practice at Foley and Lardner, the trend among Silicon Valley technology companies has been toward annual elections of all directors, though companies with dual-class stock structures sometimes maintain classified boards as an additional protective measure.
Many technology companies adopt dual-class structures at IPO that give founders disproportionate voting control through high-vote shares while selling low-vote shares to the public. Committees must weigh sunset provisions that convert high-vote shares to low-vote shares after a set period, typically five to ten years, or on the founder's departure, since institutional investors increasingly demand them and some index providers exclude permanent dual-class companies. I advise founders on structuring these provisions to balance long-term vision with investor expectations and index inclusion.
Many technology companies, particularly those with visionary founders, adopt dual-class stock structures at IPO that give founders disproportionate voting control through high-vote shares while selling low-vote shares to public investors. Governance committees must consider sunset provisions that automatically convert high-vote shares to low-vote shares after a specified period, typically five to ten years, or upon the founder's departure. Institutional investors increasingly demand sunset provisions, and some index providers exclude companies with permanent dual-class structures. Gurpreet S. Bal advises founders on structuring dual-class provisions that balance long-term founder vision with institutional investor expectations and index inclusion requirements.
The committee develops and maintains the company's corporate governance guidelines, covering board size, director qualifications, meeting procedures, executive sessions, board self-evaluation, and director retirement or term limits. Post-IPO it also oversees stockholder engagement and responds to governance-related stockholder proposals. I advise companies to draft comprehensive governance guidelines before the offering that show a commitment to best practices while preserving appropriate flexibility for a newly public company.
The governance committee is responsible for developing and maintaining the company's corporate governance guidelines, which establish policies on board size, director qualifications, meeting procedures, executive sessions, board self-evaluation, and director retirement or term limits. Post-IPO, the governance committee also oversees stockholder engagement programs and responds to governance-related stockholder proposals. Gurpreet Bal advises pre-IPO companies to draft comprehensive governance guidelines before the offering that demonstrate a commitment to governance best practices while preserving appropriate flexibility for a newly public company.
Gurpreet's observation: the dual-class and classified board question has become a useful litmus test for your bankers. A banker who pushes back hard against both is making the default call — the right answer for roughly 80% of companies, and genuinely appropriate unless you have an especially powerful founder-visionary or a controlled company structure (which often go together). That pushback is not wrong. But a banker who does not push back at all is telling you something too: they are not thinking carefully about long-term stock performance or institutional investor reception. The right position is not binary. Expect real pushback, take it seriously, weigh both sides, and make a deliberate decision rather than defaulting to either extreme. The companies that get this wrong are usually the ones that treated it as a box to check rather than a genuine strategic choice with lasting consequences.
Gurpreet S. Bal is a Partner at Foley and Lardner LLP in Silicon Valley, where he advises startups, founders, and investors on venture financings, M&A, IPOs, and corporate governance. He has represented clients in hundreds of transactions with aggregate deal value exceeding $60 billion across AI, semiconductors, fintech, and emerging technology. Gurpreet's recent IPO experience includes leading company representation in the only sub-$1 billion U.S. semiconductor IPO in 2024.