The National Investor Relations Institute (Niri) and the Canadian Investor Relations Institute (Ciri) recently released IR compensation and responsibility surveys. The Niri survey, which canvassed 527 members and came out in June, shows the average annual compensation (including salary plus bonus) for US IROs is $169,900, up 10 percent from $154,000 in 2002.
This pay rise goes hand in hand with more responsibility. ‘Clearly, IR responsibilities have increased because of Sarbanes-Oxley and the expanded role of IR in corporate governance,’ comments Lou Thompson, president and CEO of Niri. ‘Now the IRO is in the SEC’s sights as the chief compliance officer within a company.’ He cites the decline of the sell side as another reason IROs are working harder, with many now trying to deliver the company’s message straight to the buy side.
There are no signs the IRO role has reached its pinnacle, either, with the pressures and responsibilities of having to serve as the conduit between Wall Street, senior management, and the board still growing. ‘We are all doing more with less in a way,’ comments Nicholas Rolli, vice president of IR and financial communications at New York-based Altria. Rolli sees improvement in both the relative importance of IR as a strategic career position and compensation levels.
Pay scales
Market cap makes a big difference to IR compensation in the US. The average pay for IROs at mega-cap companies ($10 bn and over) is $213,400 compared with $176,300 at large caps ($1.5 bn to $9.9 bn), $149,000 at mid-cap companies ($500 mn to $1.49 bn) and $131,000 at small caps (under $500 mn), according to the Niri survey. Companies with larger market caps also give out more bonuses: 98 percent of IROs working for mega-cap companies received bonuses last year compared with 81 percent at small caps.
‘If you think about the most outrageous compensation packages, some of these people can make $600,000-$700,000 a year,’ explains Smooch Reynolds, CEO of the Repovich-Reynolds Group. ‘But that’s if you have been there [a while and] your long-term incentive plan is starting to pay out, your regular stock is starting to vest and your company’s financials are good.’
After three years of recession, Reynolds says companies are changing the proportions of their ‘compensation pie’, which is now split into an annual base salary, a target annual bonus, and stock options. Niri’s survey finds that 73 percent of IR respondents receive stock options, but there is also a trend toward restricted stock as a form of compensation now that options will have to be expensed.
‘Interestingly, Niri finds that IROs with a background in finance and/or accounting earned 9 percent more than those with a background in corporate communications or PR, and 21 percent more than those with a marketing or sales background,’ says Stephen Schultz, EVP of Dresner Corporate Services. ‘Those with financial experience understand how the markets work and how companies are covered and valued.’
Gender is another variable, partially attributed to a higher instance of males coming from financial backgrounds or having desirable accreditations. For those with more than ten years’ experience, the gap between pay levels for male and female practitioners is only 2 percent. But, for those with two years’ experience or less, male IROs are making nearly double their female IR peers’ compensation.
Top qualifications
The UK has the largest concentration of IR practitioners in Europe, where the profession has been established for around 25 years. To get a senior IR position in the UK, ‘you have to have capital markets experience,’ says Heather McGregor, a director at London-based executive search company Taylor:Bennett. ‘Beyond that, if you have a professional financial qualification, you will get more money.’
McGregor looked at 45 UK IRO job specifications from 2005, just under half of which were FTSE 100 placements. She finds the average salary (not including bonus) has fallen over the last three years, from £81,429 ($148,355) in 2002 to £71,667 in 2005. She also identifies the average salaries for IROs based on job title, with IR analysts or assistants earning £47,500, IR managers £62,143, heads of IR £90,833, and IR directors £107,273.
There is not enough data in continental Europe and Asia to support a survey on IR compensation levels, says McGregor. ‘In continental Europe there is very little movement between companies in terms of IROs,’ she explains. ‘Most of the IR
professionals in Europe have been internally promoted within the organization so they are on those organizations’ pay scales.’
On the rise
In Ciri’s summer survey, which had 271 respondents, the average total cash compensation for IROs, including salary, bonus, profit-sharing, options and any additional cash-based compensation, comes out at C$125,500 ($105,853).
Similar to US figures, bonuses are earned by most IROs in large-cap companies and are far less common in small firms. Average total compensation also increases with market cap size. ‘Larger-cap firms require interaction with higher-level individuals and most probably a more sophisticated group of stakeholders – so IROs working with larger-cap companies can dictate higher compensation,’ comments Linda Farha, president of Montreal-based Zenergy.
Ciri’s data also shows IROs with finance qualifications earn an average of C$139,900 compared with an average take-home of C$109,000 for those with communications qualifications. ‘If you have a financial background you may have a variety of other duties, be more involved in the actual strategizing and financial reporting [duties], or have dual roles as treasurer and IR officer,’ notes Bob Tait, president and CEO of Ciri.
In Canada there is a significant pay gap between male and female IROs, with men receiving 44 percent more than women in similar positions. This is down, however, from a 61 percent pay gap in 2000, and the gap is much wider at lower levels of experience. ‘There is certainly a more steeply declining scale of pay for women than men,’ says Tait. However, he also notes that ‘at the top level [of IR], compensation equality has almost been achieved.’
Despite higher pay levels in the US, it’s safe to say that as the status of the profession continues to grow worldwide, so will compensation levels. What’s key is for IR to achieve management buy-in – that’s when the real recognition begins.
