Is Your Paycheck Underperforming the Market? Insight into the Compensation Structure of IR
By Brian Rivel, President, Rivel Research Group
How much do you make a year? That’s not a question you’re often asked, we hope, and it’s not something enthusiastically discussed on the walls of Facebook. But it’s no stretch to think it’s a topic everyone is curious about—Am I being paid fairly? Are my peers getting more than me? Does my education level dictate my base salary?
The answer to all these questions is “yes.” How do we know? Well, we at Rivel Research Group took the non-PC route over the past several months and using an in-depth, telephone questionnaire asked people in the investor relations field, “What is your salary?” And the responses to that question and many, many others were surprisingly forthcoming.
Focused on a broad-based representative sample of Russell 3000 IROs, the research in Rivel’s Examining IRO Compensation in 2010compiles salary/bonus data on 743 IR professionals (428 of whom are the senior-most IRO at their company). What we found is that:
• IR budgets and salaries are rebounding, having come off a period of profound uncertainty in the markets in 2008 and 2009,
• job satisfaction is high,
• and most head IROs believe they are adequately compensated.
Would you agree with that statement?
Moreover, the biggest drivers of salary are what they commonly are expected to be: company size, title and education. However, before you run out and enroll in an MBA program, the difference between median salaries for graduate and undergrad degrees appears to be less than what is actually spent for a graduate diploma. True, over time the degree will provide the ROI you’re looking for, but that’s considering you stay in the IR profession long term and not as a stepping stone to some other position. And it appears that is the case with a significant majority of senior-most IROs regarding the profession as a career avocation.
Now, aside from pursuing an MBA to get a substantial bump in compensation, we uncovered various methods IROs use to advocate for raises in salary and bonuses. Yet, the robust nature of the research offers not only the most effective method for securing the raise (hint: it does not involve blackmail), it also offers unique insight into what tactics are the most influential on those managers tasked with performance reviews. Oh no, those two dreaded words: performance review.
Nobody likes to be judged, except maybe those wannabes on “American Idol,” but it’s a necessary evil in the workplace. And considering the fundamental importance of IR—namely, recent Rivel data showing that the buy-side believes “superb” IR accounts for a valuation premium of 10% while poor IR results in a 17.5% discount—you would bet managements around the world are consistently assessing the performance of their IR heads.
But how is IR performance measured exactly? We have come to find out, not quite uniformly.
All too often, IRO performance review criteria are left to chance and ad hoc considerations. Only half of senior-most IROs have pre-defined metrics and/or measures by which their yearly performance is judged. And even when they exist, the measures used often are ones over which the IRO has limited control (e.g., number of management meetings, amount of sell-side coverage).
It’s a trend that has shown signs of reversing to a more tangible set of markers, as we’ve found through our Intelligence Council (Rivel’s program that draws on the buy-side view of effective investor relations). Research shows it will take a more proactive approach for this facet of IR to change, and we are seeing pioneers at large-cap firms working to establish criteria by which performance can be judged going forward.
“I make the case using my performance against goals. I have individual goals and goals for my group. They are not financial goals. They are more strategic and operational. They can include anything from increasing the shareholder base to making sure we are effectively communicating our story. It is things like that.”
Whether or not it is change we can believe in is something for future studies.
Nonetheless, the research provides a highly robust and representative look at compensation, bonus structure, benefit plans, budgets and anything else compensation-related within the investor relations world. In fact, Examining IRO Compensation in 2010 offers the unique opportunity for IR professionals to compare their compensation with that of their peers using custom parameters and with an option for developing a multi-dimensional model, which will help pinpoint what they perhaps should be making given their own individual circumstances and experience. The good news for IR professionals—salaries are up and so are budgets. That’s a good start …