Going public represents a milestone in corporate evolution, opening doors to capital markets and enabling expansion. Yet what if this achievement comes with hidden costs for the people who work at these companies? Our recent analysis of millions of Glassdoor reviews reveals an unexpected pattern: Employees become significantly less satisfied with their employers after an initial public offering (IPO). This finding challenges conventional wisdom about IPOs and raises important questions about how the transition to public ownership affects workplace culture and human capital management.
The IPO Satisfaction Paradox
Using 3.7 million employee reviews from Glassdoor between 2008 and 2022, we document that employee satisfaction drops measurably after companies go public. While employees at private firms typically rate their companies favorably, the ratings decline after an IPO and remain lower for years. This decline appears across multiple aspects of workplace experience, with the largest drops occurring in perceptions of senior management (10 percent lower ratings) and work-life balance (6.6 percent lower).
What makes this finding particularly compelling is that we observe no decline in satisfaction in the months and years leading up to the IPO. The drop occurs specifically after companies file their S-1 registration statements and enter the public markets, suggesting that the IPO process itself, rather than underlying company characteristics, drives the change.
Who Feels the Impact Most?
Not all employees experience the post-IPO blues equally. Our analysis reveals three key patterns.
First, the effect is concentrated among employees who were with the company before it went public. These pre-IPO employees experience the full impact of the transition, while employees hired after the IPO show no significant difference in satisfaction compared with their private company counterparts. This pattern supports our hypothesis that the organizational changes accompanying public status, rather than selection effects, drive the satisfaction decline.
Second, employees in management and compliance roles experience particularly large drops in satisfaction. These employees, who must handle the new regulatory requirements from preparing quarterly earnings reports to maintaining internal control systems required by the Sarbanes-Oxley Act, report satisfaction declines roughly 2.5 times larger than does the average employee.
Third, smaller companies and those audited by Big Four accounting firms see larger satisfaction declines. Smaller firms face proportionally higher regulatory costs relative to their resources, while Big Four auditors typically impose more rigorous compliance standards, amplifying the burden on employees.
The Regulatory Burden Mechanism
Why does going public reduce employee satisfaction? Our evidence points to regulatory burden as a key reason. Public companies must comply with extensive regulations that private firms avoid, including SOX internal controls, quarterly SEC filings, and numerous disclosure requirements. The SEC estimates that public firms collectively spend 14.2 million hours annually preparing reports, while surveys indicate individual companies spend millions of dollars and hundreds of hours yearly on SOX compliance alone.
However, regulatory burden likely isn’t the whole story. Other factors may contribute to the satisfaction decline, including increased pressure to meet quarterly earnings expectations, changes in company culture as firms grow and become more formal, reduced autonomy as public companies face greater scrutiny, or shifts in the type of work as companies adapt to public market demands. Our research focuses on regulatory burden because it’s both measurable and potentially addressable through policy, but future research should explore these other channels.
This regulatory burden transforms daily work life. As one General Motors executive noted in congressional testimony, “the real cost isn’t the incremental dollars, it is having people that should be focused on the business focused instead on complying with the details of the rules.” Employees find themselves diverted from core business activities to regulatory compliance, potentially reducing both job satisfaction and sense of purpose.
The JOBS Act of 2012 provides a natural experiment to test the impact of the regulatory burden. The act created a new category called Emerging Growth Companies (EGCs) that face reduced regulatory requirements when going public. We find that EGCs experience only about half the satisfaction decline of traditional IPO firms, with the difference concentrated precisely in areas where regulatory burden was reduced. This evidence strongly supports regulatory costs as a driver of post-IPO satisfaction declines.
ESG as a Buffer
Interestingly, not all companies suffer equally from the IPO transition. Firms in industries with strong Environmental, Social, and Governance (ESG) reputations, particularly those with robust social practices, experience significantly smaller satisfaction declines. Companies in industries with low social reputation risk see drops only about half as large as the typical effect.
This finding suggests that companies with strong stakeholder orientations and employee-centric cultures may be better equipped to manage the challenges of going public. These firms may have already developed the infrastructure and practices needed to balance regulatory compliance with employee well-being, or their existing values may help maintain morale despite increased bureaucratic demands.
Implications for Corporate Governance
Our findings contribute to several important debates in corporate governance and securities regulation:
The Real Costs of Being Public: While much attention focuses on the direct financial costs of regulatory compliance, our research highlights significant indirect costs through human capital channels. Employee satisfaction links directly to productivity, retention, and innovation. If going public systematically reduces employee morale, this represents a previously unrecognized cost of public markets that should factor into IPO decisions and regulatory design.
Regulatory Reform Considerations: The JOBS Act’s success in mitigating satisfaction declines for EGCs suggests that thoughtfully designed regulatory relief can preserve market integrity while reducing human costs. Policymakers might consider whether certain compliance requirements could be scaled or phased in gradually to ease the transition burden on newly public companies.
The Role of Corporate Culture: The moderating effect of ESG practices, particularly social dimensions, indicates that companies can take steps to minimize IPO-related satisfaction declines. Firms contemplating IPOs might invest in strengthening their organization’s culture and employee support before going public, potentially smoothing the transition.
Stakeholder Capitalism in Practice: Our findings inform debates about stakeholder versus shareholder primacy. The tension between regulatory compliance (often focused on shareholder protection) and employee satisfaction illustrates the practical challenges of balancing different stakeholder interests. Companies that successfully manage this balance appear to fare better in the transition to public ownership.
Looking Forward
This research opens several avenues for future exploration. Do satisfaction declines translate into reduced innovation or productivity? Can companies that anticipate these challenges implement strategies to maintain employee morale through the IPO process? How do international differences in regulatory requirements affect the relationship between going public and employee satisfaction?
For practitioners, our findings suggest that companies preparing for IPOs should not just budget financial resources but also pay more attention to managing the employee experience through the transition. For regulators, the results highlight how compliance requirements, while serving important investor-protection goals, create ripple effects throughout organizations that may ultimately affect their competitiveness and success.
The transition from private to public ownership represents more than a change in capital structure, it fundamentally alters the employee experience. Recognizing and addressing these human dimensions of going public will be essential for companies seeking to maintain their competitive edge in the war for talent while accessing public capital markets.
This post comes to us from Meng Li at the University of Oklahoma’s Steed School of Accounting and Jedson Pinto at the University of Texas at Dallas’s Naveen Jindal School of Management. It is based on their recent paper, “How Does Going Public Affect Employee Satisfaction? Evidence from Glassdoor Reviews,” available here.