The average annual compensation package for IR professionals in large-cap companies was $185,100 in 2002, according to a recent National Investor Relations Institute (Niri) survey. In the same year, the average CEO compensation package was just over $10.8 mn, according to the New York Times.
No wonder CEO compensation is such a hot-button issue. Considering all the weekends, holidays and late nights IROs spend writing earnings releases and preparing presentation notes, it hardly seems fair that their take home is less than 2 percent of what the average CEO makes. When you look at these figures, IR professionals – as well as pension funds – should be up in arms over CEO pay.
But top-dog compensation is a sensitive issue for IROs. Having finally earned a seat at the table with senior management, the last thing you want to tell your CEO is to slim down his or her multi-billion dollar retirement package. But if your chief’s package is astronomical, it’s your duty – as the conduit between management and the Street – to politely suggest downsizing it. If not, chances are shareholder activists will put a lot of pressure on management to make changes next proxy season.
Even if shareholders don’t push for change, the board might. Compensation committees, now composed of independent directors, might not be so quick to lavishly reward senior management this year with all the bad press hefty packages have attracted.
As this month’s cover story shows (see Death of the fat cats?, page 30), while compensation is more of a proxy issue than an investment criterion right now, some shareholders want more information about executive pay. Generally speaking, investors want to know how compensation for a company’s top five executives is determined and how much they get in total – perks included. This may seem like basic information but companies have not traditionally been upfront in providing details about executive pay. Now they have no choice but to do so.
If a stock’s performance is down and the CEO’s bonus is up, the message to shareholders is that the top executive – the one steering the ship – doesn’t care about building shareholder value. That’s definitely not the message IROs want investors to receive.
Recent high-profile scandals have brought the compensation issue front and center for investors. Outsized pay packages for top management are officially taboo. As such, IR professionals need to be armed with solid information on compensation policies. They also need to be fully informed on how senior management’s pay compares with the compensation of peer companies’ CEOs.
