Q. My board of directors is considering re-pricing the company’s stock options at a much lower price than they were initially issued at. The measure is not in response to the company’s relative performance – we have actually outperformed our sector – but to poor stock market performance in general. So what can I do to make sure shareholders support this management decision and vote for it?
A. Re-pricing options is never a popular decision. The purpose of stock options is to align managers’ and shareholders’ positions, but shareholders don’t have the option of re-pricing their stock at a higher price than they paid for it, do they? However, a couple of suggestions. First, try to persuade your compensation committee to issue new stock options rather than reduce the price of the existing ones. I’m sure you’ll have fewer problems persuading shareholders to support this measure. Second, identify those of your company’s shareholders who have voted against similar proposals at other companies in the past; chances are they’ll vote the same way in your case. Once you have identified them, approach them and ask for a one-to-one meeting to try to explain the reasons behind the decision. There’s no need to worry about any regulatory risks; you’re not providing any price-sensitive information, so the meetings are perfectly legitimate.
Q. I work in a European company that has lots of interests in the US. So we need to have good and experienced US managers running the business over there. We are considering a new compensation scheme to attract some of the best senior executives, who are obviously very expensive. How can I get the support of shareholders for higher executive salaries and at the same time avoid any bad press?
A. Make sure you know well all the career details of all your senior management; familiarize yourself with their track records and their industry achievements. That will allow you to argue the company’s case for how much they are worth. Also, try to get profiles of executives in the media, ahead of proposing any compensation. Positive press coverage of the achievements of the people who work for your company will go along way towards deflecting criticism.
When the scheme is proposed, make sure that the presentation to investors encompasses the strategic plans for the company’s growth and initiatives aimed at creating more value. That way you link the compensation scheme to the firm’s strategy, instead of presenting senior management pay hikes out of context.
Q. I don’t know whether this is fair, but all the senior management salaries at my company are very high and, in addition, they do very well out of their stock options. Why am I, as an IRO, so much less well paid? Should I demand a pay raise?
A. Investor relations officers always complain about their level of compensation, claiming they have the greatest influence on the price of a company’s shares. Although this is true in a few cases, it’s not in the vast majority of others. A company’s share price doesn’t depend on the IRO’s personal ability but on the ability of the management to deliver consistent performance. IR professionals need to communicate well to investors the good job done by their management, but they don’t have any influence on corporate performance as such. The IRO is never going to be paid as much as a CEO. In fact, good IR can go a long way to making up for bad management, but never completely obscure it, while bad IR can be very effective in ruining a good management record.
E-mail questions to Heather McGregor – [email protected]. McGregor is a former IRO and investment analyst who currently works on IR assignments for Taylor:Bennett, an executive search firm specializing in communications jobs
