With COVID vaccines on the horizon, many companies that had put their IPO plans on a “pandemic hold” in 2020 may revive those plans in 2021. As they formulate their plans, one of the most important decisions they face will be the composition of their Boards.

Newfront recently co-sponsored a virtual panel discussion on preparing for an IPO, in conjunction with Columbia Pacific Wealth Management, and Nasdaq, that considered some vital aspects of this challenge. They include transitioning existing Board members, finding the right additions to the Board, how to protect Board members from the growing cost of liability claims – and the need for CEOs to be patient.

The composition of a new public Board is always a challenge for a CEO. When it comes to existing Board members, it’s possible that some of them may not want to remain because of the additional time that a public board requires. They also may be reluctant to expose themselves to the higher level of public scrutiny and potential liability that comes with the territory. CEOs should feel free to have open conversation with their private Board as it will often help avoid problems later.

Companies also should recognize how times have changed for directors. There’s far greater scrutiny of individuals as well as the overall makeup of Boards. Directors need a sophisticated awareness of listing requirements and SEC rules, which can increase the time commitment for serving. There are growing demands by investors and the public for gender and other forms of diversity on Boards; in some states, such as California, there are legal requirements that Boards have a minimum number of women and minority directors and more states planning to follow California’s lead.

All these changes translates into a scarcity of available experienced and willing candidates, making it more difficult for CEOs from which to choose. It can take six months or longer to find the right people for a public Board, and certain individuals such as a female audit committee chair may be particularly difficult to identify.

That means CEOs should start the process early. To find candidates, CEOs should reach out to legal counsel as well as their peer networks for help in finding the right fit. It’s also crucial to be strategic about the process, paying close attention to your leadership team’s current skill sets and potential future needs.

Protecting Directors and Officers in this environment is another key consideration when putting together a public Board, said Deirdre Finn, Practice Leader, Executive Risk Solutions, Newfront. Since the Supreme Court’s 2018 decision in the Cyan case there has been an “uptick of companies facing litigation in federal court and several state courts at same time,” she noted. State courts don’t offer companies that same procedural benefits as federal courts, and also are less sophisticated when it comes to class action shareholder suits. Plaintiffs have become emboldened  and “push the envelope…if they get past first motion to dismiss, plaintiffs’ settlement demands are doubling.” So the proper level of coverage is vital; attempting to reduce costs up front can lead to significant expense later on.”