For a number of 2011 IPOs, corporate governance didn’t appear to be a priority. There were companies with multiple shareholder structures, disproportionate voting rights and boards of directors that didn’t seem to represent the shareholders effectively.
The private equity firm has filed to go public, and according to NY Times DealBook, Carlyle Group ‘is proposing the most shareholder-unfriendly corporate governance structure in modern history.’ Here’s what you need to know, according to DealBook:
1. Power outage: the power will not rest with the people, it appears. They won’t be able to elect directors. So, who will represent the shareholders? It doesn’t look like anyone will. Power will remain in the hands of management, particularly co-founders Daniel D’Aniello (chairman), William Conway Jr (co-CEO) and David Rubenstein (co-CEO). DealBook reports: ‘They will have special power to elect Carlyle’s board of directors as long as they and Carlyle’s affiliates own more than 10 per cent of the company.’
2. (In)dependence day: apparently, there will be some independent directors on the board, but Carlyle Group hasn’t revealed if they’ll be the majority.
3. Compensation without representation: There will not be a committee of independent directors to deal with executive compensation and director nominations.
4. Shareholder suffrage: Carlyle Group won’t be holding annual shareholder meetings. At this company, there’s no right to vote!
5. No pride of ownership: before you buy your shares of Carlyle Group at the IPO, think about whether you’ll really own them. According to DealBook:
Carlyle has a right to summarily repurchase all of the public’s shares if less than 10 per cent of the company is held by those shareholders. Carlyle puts the consequence of this aptly when it states in its initial public offering registration statement that ‘a holder of common units may have his common units purchased at an undesirable time or price.’
At the end of the day, does any of this matter? You know how it is … the shareholders will put up with almost anything if the returns are high enough.
Source: NYT DealBook