The public market governance backdrop has shifted since we first published this piece in 2024. In the US and parts of the global market, regulators and exchanges have moved toward a lighter-touch approach in certain areas, while founders and management teams continue to seek more flexibility over control, disclosure, and board design.

That shift does not minimize the importance of the governance function. On the contrary, it places a greater onus on companies to balance their capabilities with long-term investor expectations. For private companies preparing to go public, the goal is not to mimic every public company convention, but rather to build governance that serves their current business models, with an infrastructure that supports future credible evolution.

A changed public market backdrop

• US regulators have moved toward a more company-specific and materiality-focused approach in areas such as shareholder proposals and climate disclosure.¹
• The SEC has also stepped away from its longstanding shareholder-proposal review process, leaving companies and their counsel with greater responsibility for making proposal-exclusion decisions.²
• Some prescriptive listing and disclosure requirements have been reduced or challenged, including Nasdaq’s former board-diversity rules.³
• Europe has also proposed simplifying sustainability reporting and narrowing the number of companies in scope.⁴
• Dual-class structures remain common among newly public companies, signaling continued market tolerance for founder or management control in the early post-IPO period.⁵
• State corporate law changes have also increased the focus on board discretion, director protections, and limits on certain shareholder claims.⁶

The practical takeaway for private companies is simple: There may be more room to choose your governance structure, but investors will still want to understand why you chose it, how it protects long-term value, and whether it will evolve as the company matures.

Shareholder rights

Wellington’s public market proxy voting approach functions on a case-by-case basis focusing on long-term economic value. Within that framework, we think the following practices foster durable alignment between companies and shareholders.⁷

• Align votes with ownership. “One share, one vote” remains our preferred long-term structure. If a company uses dual-class shares, we think a sunset provision ending unequal voting rights within 6 – 8 years after the IPO can balance founder flexibility with long-term shareholder accountability. If unequal voting rights linger beyond that period, institutional investors such as Wellington may factor this into their analysis when voting on board governance matters.
• Support accountable director elections. We generally prefer annual elections and majority voting in uncontested elections, giving shareholders a regular and meaningful method of holding directors accountable. Plurality voting can still make sense in contested elections.
• Keep shareholder rights usable. We generally support special meeting rights with a threshold of approximately 15%, while recognizing that the appropriate level may depend on the company’s shareholder base, plus how responsive the board is to investors.
• Listen to meaningful shareholder feedback. Boards should highly regard majority-supported proposals, significant votes against directors, and other clear signals from long-term shareholders, and they should be prepared to disclose the rationale for their responses to these scenarios.
• Avoid unnecessary entrenchment. Poison pills and similar protections can play a role in limited circumstances, but we generally favor appropriate safeguards, such as shareholder approval or a clear sunset, to preserve accountability over time.

Board composition and oversight

We believe that strong board can help management make better decisions, challenge assumptions, and oversee the risks that matter most. Although we do not endorse an identical formula for all companies, certain principles remain universally important.⁸

• Build a board with the right mix of skills and perspectives. Investors care less about a checklist than whether the board is equipped to execute a company’s strategy, manage risks, satisfy customers, and navigate future growth.
• Maintain meaningful independence. For US public companies, Wellington generally looks for at least two-thirds independent directors that are subject to company circumstances and local norms. We also expect strong independent oversight of key committees, including audit, compensation, and nominating/governance functions.
• Separate oversight from management where practical. We generally support either separate chair and CEO roles or a strong lead independent director.
• Make sure directors have the time to do the job. Attendance, preparation, and external commitments matter. Wellington may vote against directors serving on five or more public company boards, and they may likewise oppose public company executives serving on three or more boards, including their own. We may also withhold support from directors who attend fewer than 75% of scheduled board meetings.
• Keep the board effective as the business evolves. Regular board, committee, and director evaluations help identify opportunities to improve operational functionality and inform succession planning as the company’s strategy and risk profile change.

Executive compensation

Compensation should help attract strong leaders, reward performance, and align management with long-term shareholders. Wellington evaluates compensation on a case-by-case basis and generally supports an annual shareholder vote on executive pay.⁹

When evaluating your compensation plan, we suggest focusing on four questions:

1. Is pay aligned with company performance and long-term value creation?
2. Is the overall level of pay commensurate with the company’s size, industry, and development stage?
3. Do the metrics and time horizons encourage the right behavior?
4. Are the plan’s key features clear enough for investors to understand?

In practice, investors will look closely at dilution, option repricing, evergreen share provisions, severance, and clawbacks. Equity can be a powerful alignment tool, but plans should avoid excessive dilution or features that weaken shareholder oversight.

Best practices to preserve, even as rules evolve

Bottom line

While public market governance is becoming less prescriptive in some areas, the core investor questions have not changed. Who has control? Is the board capable and independent enough to oversee management? Do incentives align with performance? And can shareholders hold directors accountable when it matters?

For private companies, we believe the best approach is not to overbuild governance prematurely. Start with the practices that matter most, clearly articulate any temporary founder or management protections, and create a roadmap illustrating how governance will evolve as the company transitions to the public market.

Wellington aims to help portfolio companies make those choices with the benefit of both private and public market perspectives, including board buildout support, compensation benchmarking, governance guidance, and access to relevant investment expertise.

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