IPOs - Speak The Basics (Very Good Reading) (17)

Overcompensated or overmatched management --


You usually don't want members of the management team in a newly public firm to be making hundreds of thousands of dollars in base salary.

Rewards are fine, but make sure most of them are in the form of stock options.


That way, management will only be rewarded if the shareholders are.

Also, look for a management team that has extensive experience in the industry and/or with other public companies.

A chief financial officer with little experience running a public company could be overwhelmed by the duties.


In addition, watch out for an executive team or board of directors filled with relatives.


Nepotism rarely makes for solid management.

Found in "Management" and "Executive Compensation."