MPROVING corporate governance has been at the heart of many new regulations in recent years. So you might assume that companies issuing shares to investors for the first time would take care to institute the most shareholder-friendly practices possible.

You would, however, be wrong.

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This perplexing insight comes from Linda R. Killian, portfolio manager for the IPO Plus Aftermarket fund, based in Greenwich, Conn. She reports that 51 percent of the companies that went public last year had poor to very poor governance practices. That's even worse than the 37 percent of new companies with dubious governance identified by Ms. Killian and her firm during the maniacal stock market of 1999.

Having analyzed initial public offering statements since 1991, Ms. Killian has a long-term view of how governance is practiced at new companies and how those practices have changed. To be sure, the share of poorly governed companies from last year is lower than the 63 percent registered in 2002. But Ms. Killian is surprised by the fact that more than half of new companies last year seemed unconcerned about issues that many shareholders care deeply about.

"What we see in our research is the quality of governance has deteriorated in I.P.O.'s," Ms. Killian said. "It's surprising to me, given the enactment of major legislation and all of the emphasis that has been placed on better corporate governance."

Last year was a relative banner year for I.P.O.'s: there were some 216 new issues, up from 68 in 2003, though still down considerably from the 406 in 2000.

Of course, assessing governance at public companies is part science, part art. Ms. Killian begins her analysis with a checklist she has developed. She looks, for example, at whether the proceeds from the I.P.O. go to the company (good) or to selling stockholders (less good); the degree to which management enriches itself with perquisites and pay; whether directors are really independent; and the size of the executives' stakes in the company.

The most common governance problems cited by Ms. Killian in new issues are a dearth of truly independent directors keeping watch over the companies, meager stockholdings by top executives and big insider selling when the deal is done.

That is different from previous eras, Ms. Killian said. "In the 1990's, for example, there used to be more odious insider transactions," she said, "or part-time chief executive officers who would have outside interests that conflicted with their running of the public company."

The fact that after all these years directors at many of the companies going public are not wholly independent, at least by Ms. Killian's standards, is something of a surprise. Director independence has been a hallmark of reforms since the Enron and WorldCom debacles showed what could happen when boards were too cozy.

In many cases, these directors would qualify as independent under rules instituted by the New York Stock Exchange or Nasdaq, Ms. Killian explained. "But when you look at it in a reasonable way, you'll see that they are buddies with management," she added.

Many of the new issues scoring low in corporate governance are real estate investment trusts, Ms. Killian said. One reason is that many of them are set up to capture tax benefits and may not meet the same standards as other companies. For example, several recently formed REIT's had no outside directors, or were run by insiders with their own separate interests in the same properties held in the REIT. In some cases, executives at new REIT's had the distraction of outside interests in other properties, Ms. Killian said.

REIT's have also been such top performers in recent years that shareholders who buy them as new issues may be willing to overlook governance shortfalls. Last year, REIT's returned 30.4 percent, on average.

The Celanese Corporation, an industrial chemical company that issued 50 million shares in an I.P.O. last Thursday, is an example of a company whose officers and directors own a tiny stake in the company - less than 2 percent, according to Ms. Killian.

The company, which had hoped to get $20 a share in the offering, had to settle for $16 when the deal closed. A spokesman declined to comment because of regulations limiting public statements immediately after a stock offering.

As a practical matter, Ms. Killian said, shareholders should flex their muscle, rewarding companies with good corporate practices and penalizing those that fall short.

"Over the long term, good governance at a company makes a difference in its performance," Ms. Killian said.And investors interested in exceptional performance have to be watchful, even now.

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