The investor relations officer: A 2010 survey of Fortune 500 companies

The investor relations officer: A 2010 survey of Fortune 500 companies

July 2010

Introduction The investor relations (IR) function continues to grow in importance, responsibility and value. The dramatic and volatile market events of the past few years have only furthered that trend, and today’s IR officer (IRO) has become indispensable.

In April 2010, Korn/Ferry International’s Corporate Affairs Center of Expertise and the National Investor Relations Institute (NIRI) conducted a study of the executives who run the investor relations function at Fortune 500 companies. This is the second such NIRI-Korn/Ferry survey and, like the 2008 study, it examines how IROs are compensated, where they reside organizationally, the size and scope of their responsibility, and evolving trends in the function. It is our hope that this survey will continue to be conducted on a regular basis every two years.

In conducting the survey, Korn/Ferry and NIRI spoke with 144 IROs who currently work for Fortune 500 companies. The data reported in this survey covers the calendar year 2009.

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Profile of the Fortune 500 investor relations officer

Figure 1

IROs by IROs gender

According to the survey data, the typical Fortune 500 IRO:

• is male; • is 40- to 49-years-old; • has a staff of two to four, including one professional IR deputy; • has worked in more than one industry during his or her career; • and has been in the top position between three and four years.

IROs

62% Male

38% Female

Only 9 percent of IROs identify themselves as minorities. That said, in the past two years, the percentage of female IROs has risen 5 points, which we see as a positive development for increased diversity in the function.

Educational Background Figure 2

Background Historically, the investor relations function often was regarded as a communications role, but today there is a growing emphasis on financial acumen. Some 62 percent of IROs hold an MBA and 14 percent are former sell-side/buy-side analysts. Further proof that the position is no longer primarily a public relations position: the number of IROs who moved into IR from previous roles in communications/PR is 8 percent, down from 15 percent in 2008.

Educational background of IROs

Educational Background 6% CFA 6% MS

4% Other

7% MA

15% CPA 62% MBA

2.0699 in squrae squish 80% and rotate -20 2.0699 in squrae squish 80% and rotate -20

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Figure 3

Direct Reportfor forIROs IROs Reporting relationships 1% CCO 1% Corporate Controller

6% MS

6% CfA 8% CEO

4% Treasurer

Reporting relationships An overwhelming majority of IROs surveyed—81 percent—report directly to the CEO or CFO of the company, demonstrating the critical value of the role.

The latest results show a significant shift since our 2008 survey, when 72 percent reported to the CEO or CFO. The battletested IRO has become increasingly indispensable in protecting the CEO and CFO, and in safeguarding the company’s most critical and intangible asset: its reputation with shareholders and other stakeholders.

73% CFO

Figure 4

IRO Career vs transitional role

IRO: Career vs. transitional role

20% Undecided

18% Transitional 61% Career

Direct Report for IROs

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Career path The top IRO is not considered a rotational position by 88 percent of the respondents. Moreover, 61 percent now define themselves as “career” IROs and are committed to a career in investor relations, as opposed to 2008, when 49 percent defined themselves as career IROs. Some 44 percent of respondents have been employed in investor relations between seven and fifteen years, and another 14 percent have been in IR five to six years.

Despite this, it is still common to find the No. 2 position in IR as a rotational post.

Scope of responsibilities Among those surveyed, 39 percent of IROs reported having additional responsibilities outside the area of investor relations. This percentage declined in 2010, from 43 percent in 2008. Interestingly, we saw a sharp decline in those IROs who said their outside responsibilities included financial media relations and corporate communications, from 47 percent and 36 percent respectively in 2008, to 33 percent and 23 percent respectively in 2010.

Figure 5

Responsibilities in addition to the IR function 100% 90% 80% 70% 60% 50% 40% 30%

33%

35% 23%

20%

11%

14%

16%

10% 0%

23% 2%

Financial Corporate Financial media communications analysis relations

Strategic Treasury planning

9%

5%

Corporate Governance Marketing secretary

26% 19% 9%

Public relations

Competitive Reporting Community Other intelligence and/or employee relations

Compensation Between 2008 and 2010, base salaries among IROs did not increase but remained flat, a likely result of the economic downturn. We feel that the fact that salaries stayed steady and did not decrease in this period of extreme market volatility is indicative of the increasing value and importance of the function in the eyes of senior management. Bonus targets also remained unchanged, although 63 percent of respondents did report a reduction in actual bonus payouts for 2009.

Additional evidence of the importance of the IR function is seen in the budgets at the companies surveyed: 61 percent of the organizations have budgets over $1 million in 2010, the same percentage as in 2008.

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Unlike the previous recession in 2001-03 where we saw IR departments dramatically reduced, staffing during this most recent downturn remained flat. Some 80 percent of the organizations surveyed left the IR departments untouched, 10 percent increased staff, and 10 percent decreased staff.

Again, we see this as evidence of the growing value of the IR function in corporate America.

Figure 6

Compensation implications of the recession 100% 90% 80% 63%

70% 60% 50% 40% 30% 20% 10% 0%

22% 7%

Base salary reduction

22% 15%

7%

Bonus target reduction

Actual bonus Equity or long-term reduction compensation reduction

Benefits reduction

Other reductions

The majority of the respondents to the survey reported earning a base salary between $226,000 and $250,000 and a bonus target between 26 percent and 50 percent, for a total compensation range of $284,760 to $375,000.

Majority compensation package for the F500 IRO:

$

Base Salary Range $226,000 - $250,000

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$

Bonus Range 26-50 percent

$

Total Compensation Range $284,760 - $375,000

Korn/Ferry’s Investor Relations Team Richard Marshall Managing Director, Corporate Affairs Center of Expertise New York +1 212 973 5816 richard.marshall@kornferry.com

Pepper Binner Washington D.C. +1 202 955 0935 pepper.binner@kornferry.com

Carroll Leatherman New York +1 212 973 5803 carroll.leatherman@kornferry.com

Asheley Linnenbach San Francisco +1 415 288 5305 asheley.linnenbach@kornferry.com

Megan Shattuck New York +1 212 984 9430 megan.shattuck@kornferry.com

Don Spetner Los Angeles +1 310 843 4176 don.spetner@kornferry.com

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