Investor relations officer survey

Investor Relations Officers The 2014/15 survey of IR leaders in the Fortune 500.

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Introduction For the fourth time, Korn Ferry’s Corporate Affairs Center of Expertise and Financial Officers Practice has collaborated with the National Investor Relations Institute (NIRI) to survey those leading investor relations about how this crucial function is evolving.

More investor relations officers show finance expertise: A 22%

are former analysts.

A 20% A 16%

have a CPA.

have or are pursuing a CFA.

The results—showing that more than 90% of respondents report directly to the chief financial officer or CEO—mirror what Korn Ferry partners hear anecdotally from investor relations officers (IROs) every day. Today’s IRO has a key seat at the executive table in two capacities. First, as a safeguard of the company’s financial reputation (with shareholders and other stakeholders). Second, as the advisor to the CEO and CFO for external financial communications.

To provide a clearer picture of the requirements and rewards among the top IROs, Korn Ferry and NIRI collected responses from over 50 IROs in Fortune 500 companies. The majority (78%) came from mid- or large-cap companies, 88% were NYSE-listed, and 71% were covered by 15 or more sell-side analysts. A heavy concentration of respondents came to the function from backgrounds in the corporate finance (25%) and accounting (18%) industries. Their responses covered information from the calendar year 2013.

Although the IR function has, on occasion, been viewed as a communications role, that has changed. A communications background and training may be the price of entry, but the evidence in reporting lines clearly shows that the function is a key part of the financial officer’s cabinet. Financial acumen and technical fundamentals—whether from early CPA training, MBA or CFA credentials—are now normative. This is reflected in the increase in percentage of former sell-side/buy-side analysts holding these roles.

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Profile of the Fortune 500 IRO. Background and education. Serving as an IRO in today’s Fortune 500 increasingly means being steeped in finance. More than 50% of IROs have an MBA, and 82% have completed CFA continuing education course work. The most common precursor to the IRO role is another corporate finance position (38%), and other aspects of IROs’ backgrounds show a significant sector of the field has a background in corporate finance, accounting, or investment banking.

Former sell-side/ buy-side analysts.

2014 2014 2012 2012 0

50

Former PR or communications role.

22% 15% 10 5

2014 2014 12%

22%

2012 2012 8%

15% 1510

2015

2520

25

Have CPA designation.

20%

2014 2014 2012 2012 0

50

1510

50

8% 10 5

1510

2015

2520

Have or are getting CFA designation.

2520

16%

2014 2014

21%

2015

25

2012 2012 11% 0

50

10 5

16%

11% 1510

2015

2520

Experience in IR. More than half of the Fortune 500 IROs

in our latest survey have been in the role for 11 or more years.

(Totals do not add up to 100% because of rounding.)

8%

6% 2 years or less

16%

12% 12%

27%

18%

25

20%

21% 10 5

0

12%

3 or 4 years 5 or 6 years 7 to 10 years 11 to 15 years 16 to 20 years 21 or more years

25

INVESTOR RELATIONS OFFICER SURVEY

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Job title. The vast majority of IROs carry vice president or executive vice president titles (83), while an additional 16% are directors.

6%

1% Vice president

10%

Senior/executive vice president

16%

Director

67%

Senior director Other

Demographics. Most Fortune 500 IROs are in their mid 40s to 50s.

And the gender gap appears to be closing: 41% of IROs are women, up from 34% two years earlier.

Gender

Age 8

41%

6

Men

59%

Women

37%

40 to 49

49%

50 to 59 30 to 39 60 to 69

Career path. Most Fortune 500 IROs have worked in at least one other industry before taking their current job.

In how many industries have you worked?

18%

25%

1 2

22%

3

35%

4 or more

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Our data also indicates that although IROs arrive with experience outside investor relations, the function itself is less frequently used as a rotational role in the Fortune 500. In 2014, the top IRO role was considered a rotational position by only 10% of our respondents.

Experience outside investor relations.

18%

Other 4%

Investment banking

22%

Securities analyst or retail broker

25%

Corporate finance Communications/PR

12%

Accounting

18% 0%

5%

10%

15%

20%

25%

At the same time, only 49% define themselves as “career� IROs and are committed to a future in investor relations, down from 61% in 2008.

Among those who see the role as transitional, 32% expect to become chief strategy officer next, 28% look to a CFO position, and 16% look to advance to chief communications officer.

Scope of responsibilities. The IR role sometimes overlaps with other corporate roles, such as competitive intelligence, corporate development, and strategic planning. Although 69% of the IROs in our survey said that their purview is limited to investor relations, others have their hand in adjacent aspects of communications or finance.

INVESTOR RELATIONS OFFICER SURVEY

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Among those, the percentage who are responsible for community relations declined from 28% in 2012 to 13% in 2014. Interestingly, 30% include external communications in their responsibilities.

Scope of responsibilities beyond IR. 31%

Financial analysis

31%

External communications

25%

Competitive intelligence Financial media relations

19%

Corp. social responsibility/sustainability

19%

Corp. development

19%

Strategic planning

19%

Internal communications

13%

Community relations

13% 6%

Treasury

19%

Other 0%

5%

10%

15%

20%

Reporting relationships. Of IROs surveyed, 91% report directly to the CEO or the CFO. For comparison, in 2012 82% directly reported to the CEO or CFO, consistent with the increased strategic importance of investor relations.

2% 4%

4%

3% Chief financial officer CEO/president Treasurer Chief operating officer

87%

Other

25%

30%

35%

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Head count. IROs’ direct reports, excluding administrative staff.

4%

2%

0-1

38%

2-4

56%

5-7 N/A

Budget. IR has not been immune to pressure to increase efficiencies across all enterprise functions. Departmental budgets were somewhat lower than they were among our survey pool in 2012: in 2012, 65% of organizations reported budgets above $1 million; in 2013, only 58% did.

$100,000 to $499,999

8% 34%

$500,000 to $999,999

46%

$1,000,000 to $2,499,999 $2,500,000 to $5,000,000 More than $5,000,000 0%

10% 2% 10%

20%

30%

40%

50%

INVESTOR RELATIONS OFFICER SURVEY

Compensation and bonus. Nearly all top IROs are granted some type of equity, and equity/long-term incentive plans (LTIP) remains a key component of total compensation. More IROs receive restricted stock units (RSUs) than stock options (85% v. 48%).

Base salaries ranged from $100,000 to $366,500. The median bonus rose $2,000 from the previous survey, and the highest bonus reported jumped $20,000.

Average base salary: $224,347 A Median base salary: $230,000 A Average bonus: $86,919 A Median bonus: $77,000 A Average annual short term compensation: $311,266 A

A majority of IROs, 77%, do not have a change of control agreement, which would govern terms for deferred compensation and employment in the event a company is bought or sold. For those who do, 80% are for 12 months.

Benefits. Benefits remained mostly unaffected since our last survey in 2012, except for medical examinations; 22% today receive this benefit, down from 38%.

In addition, IROs report that they receive other types of benefits beyond cash and equity compensation, including:

A A A A A A A A

401(k)—98% Health insurance—84% Deferred compensation plan—67% Medical examinations—22% Financial/tax planning—18% Automobile—8% Special officer pension plan—6% Club membership—6%

Employment agreements. The vast majority of IROs, 85%, don’t have an employment agreement. The duration of the 15 agreements survey respondents reported ranged from 12 to 18 months.

Work environment. The vast majority of IROs, 94%, report full time to their company’s office; the remainder work in a satellite or other office, or telecommute from home.

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Key contacts.

Financial Officers Practice

Bryan Proctor Leader, Global Financial Officer Practice Financial Officers Center of Expertise +1 312 526 0568 bryan.proctor@kornferry.com

Carroll Leatherman Client Partner Financial Officers Center of Expertise +1 212 973 5803 carroll.leatherman@kornferry.com

Corporate Affairs Practice

Richard S. Marshall Global Managing Director Corporate Affairs Center of Expertise +1 404 577 7542 richard.marshall@kornferry.com

Megan Shattuck Senior Client Partner Corporate Affairs Center of Expertise +1 212 984 9430 megan.shattuck@kornferry.com

About Korn Ferry At Korn Ferry, we design, build, attract, and ignite talent. Since our inception, clients have trusted us to help recruit world-class leadership.

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