Going public often creates an agency conflict between the owner-manager and minority shareholders. One possible way to resolve this conflict is through independent board monitoring. But board monitoring does not arise automatically in IPO companies. Owner-managers tend to entrench and capture the board. Analyzing a sample of French IPO firms, we find that the fraction of independent directors declines if the owner-manager is more powerful. However, we find that large pre-IPO non-management shareholders, such as venture capitalists, are successful in bargaining on board composition. These shareholders are successful in opposing the owner-manager and prevent a further reduction in the proportion of independent directors in the board. We also find that these shareholders contract on board composition in shareholder agreements.

Boards, Going public, Initial public offerings (IPOs)
dx.doi.org/10.1007/s10997-005-4035-8, hdl.handle.net/1765/63057
Journal of Management & Governance
Erasmus Research Institute of Management

Roosenboom, P.G.J. (2005). Bargaining on board structure at the initial public offering. Journal of Management & Governance, 9(2), 171–198. doi:10.1007/s10997-005-4035-8