All may not be wine and roses for Canadian IROs, who are facing contracting IR departments and a tough job market given the continued slump within the energy and mining sectors, but there is at least one bright spot. Compensation for Canadian IROs is on the rise.
When asked to describe the biggest surprise from CIRI’s just-released 2014 Investor Relations Compensation and Responsibilities Survey, President and CEO Yvette Lokker cited this trend: “Given the environment and what I’m seeing with our members, I did anticipate that department sizes would be decreasing,” she says. “But I didn’t expect that the compensation part of their budgets would be increasing. I would have thought the opposite.”
In 2013 (the most recent year studied), total cash compensation for full-time Canadian IROs averaged $199,000 – a $16,400 increase over 2011. Over one-third earned at least $225,000 a year (up from 24% in 2011) and only 21% were paid less than $100,000 (down from 29% in 2011).
Lokker attributes the fatter paychecks to the esteem in which the profession is held. “I think that the increased responsibilities of the IRO – with the role being viewed more strategically, counseling management or making presentations to the Board – mean that companies are paying higher for those tops IROs.” She continues: “Compensation has become a bigger portion of the overall IR budget.”
She points out that one aspect of higher remuneration is the growing number of IR professionals who possess a finance background – a qualification that often commands higher levels of pay. According to CIRI’s 2012 report, 67% of respondents had pursued post-secondary education in business and finance. Today that figure has risen to 70%.
Denise Tobin, Co-Managing Partner of the technology practice for Caldwell Partners in Toronto, agrees, noting that the requirements for IR professionals have become more “rigorous.” Hence, the more attractive compensation. “We’re seeing demand for a slightly different flavour of individual,” she says, explaining that a working knowledge of financials, capital markets, corporate strategy, equity research and financial markets is arguably now “table stakes” for IR success.
Within the past two years, Tobin has completed seven IR searches and she’s noticed that “compensation is creeping up.” What’s more, she says, the rate of compensation growth within IR is “more accelerated than for people in a number of other roles.”
What’s New for IROs in Canada
For Canadian IROs, Tobin observes, equity payouts are increasingly part of the overall remuneration package. One effect of giving IROs more of an equity stake is that they tend to stay in positions longer, and it’s more difficult to lure them away when a new opportunity presents itself. “IROs expect a premium to make a move,” she says. As a rule of thumb, she believes that most IR professionals receive about a 15% pay increase when they take a new position.
CIRI’s study uncovered other trends in compensation and in the IR role more generally. Lokker, for instance, notes that the gender gap for IR compensation is narrowing. CIRI found that in 2013, on average, male IROs received total cash compensation of $226,000, while women earned $174,000. This $52,000 pay gap is 4% – or $6,000 – less than in 2011.
Another big surprise, says Lokker, was the change in reporting relationships for IROs, with fewer reporting to the C-suite today than two years ago. In 2013, 32% of respondents reported to the CEO, down from 49% in 2011, while 27% reported to the CFO, compared to 36% in 2011. CIRI speculates that this shift may be a consequence of a higher concentration of participants from large-cap issuers, which tend to have more management layers.
Even as direct reporting relationships to the CEO and CFO declined in number, Lokker saw more IROs reporting to an EVP, SVP, or VP. In the next survey, she would like to delve into this type of reporting relationship more deeply in order to see whether a higher number of IROs are now reporting to the EVP, and therefore to a member of the executive team.
Naturally, there’s no one-size-fits-all description of how IR departments are attracting and keeping talent.
Rudy Sankovic, Senior Vice President of Investor Relations at TD Bank Group, heads a nine-person IR team, including himself and an executive assistant. In his experience, compensation has held steady, although he does note that hiring for certain financial skills – such as experience working on the buy-side – does command a higher salary.
“Are we seeing people leave to the competition at a higher salary?” Sankovic asks himself, noting that such defections can be a sign that it’s time to revisit compensation practices. He believes that TD’s current compensation levels are attractive given the low turnover in the past two-to-three years.
A Global Perspective
In its latest compensation survey, completed in 2014, NIRI also saw a trend upward in terms of the paycheques that IROs are taking home.
NIRI found that median base salary for all respondents rose for 2014 to $185,000, a 2%, inflation-adjusted increase over $175,000 in 2012. The picture was even rosier for IROs at large-cap companies. The median base salary for Fortune 500 IROs in the NIRI survey was $195,000.
The 2014 NIRI survey data also reflect continued improvement in the size of cash bonuses received. The percentage of all respondents taking home a cash bonus increased in 2014 to 92%, up from 82% in the 2012 survey. What’s more, average cash bonuses were $69,000 in 2014, up from $65,000 in 2012.
NIRI also found that IR budgets were experiencing a slight downward shift. The NIRI study notes that this represents a reversal given that IR budgets had previously risen each year seen since 2008.
In the U.K., some similar trends hold. Debbie Nathan, Principal Consultant for EMR in London, which conducted the EMR Investor Relations Talent Survey 2015, also draws attention to the financial credentials of people entering the IR profession in the U.K. “One thing we’re seeing in the U.K., particularly, is the big shift of people coming out of capital markets and wanting to get into IR,” she says. “Recently, we’ve seen people with backgrounds in equity research or corporate brokering coming into the profession.”
Nathan is not convinced that these newcomers are driving up IR compensation. In fact, she contends, “A lot of them take a pay cut to go into IR. If you’re coming from an investment bank, you’ll be used to a higher salary.”
Nathan believes the trend for higher IR compensation is spurred by “the increased value being placed on an IR role,” and she credits the growing responsibilities that IROs are assuming for the fact that many practitioners are commanding higher salaries. “The remit of the IR role is widening so you’re doing more on the corporate access side and with regulatory changes,” she says. “You have more direct access with the buy-side than you did previously.”
Finally, Nathan observes that “IR is less of a stepping stone” and more of a desirable career destination in its own right. “IR nowadays is viewed as a profession – and it probably wasn’t 10 years ago,” she says. “And this longevity is attractive to people.”
In Germany, IR salaries are also up, with two-thirds of German IROs reporting a salary hike within the past two years, according to a study by Korn Ferry and the IR Club, a social media organization for German-speaking members of the IR community.
When asked what might account for this trend, Patrick Kiss, Head of Investor and Public Relations for Deutsche EuroShop, AG, and founder of the IR Club, said that while the bull market is one possible explanation, he hoped the real reason “is that companies are more and more aware of the strategic importance of IR.” He also believes that the challenges of the job, especially as the legal aspects become more complicated, mean that there’s “an increased level of professionalism.”
Coming Soon?
When asked to predict what CIRI might see in its next survey two years hence, Lokker anticipates the average IR budget to be reduced because of the economy. While in its 2014 survey, budgets still appear “very healthy,” she anticipates that the difficult market circumstances for the energy and mining sectors will lead to more caution – and therefore a tightening of financial belts.
Again, while IR budgets and departments might see difficult times ahead, Lokker believes that IROs themselves will continue to fare well. One sign of the robustness of the profession is how highly educated and experienced today’s Canadian IROs are collectively. In the CIRI study, 49% of respondents had a professional designation, with the CFA (16%), CPIR (11%) and CPA or CA (8%), proving most common.
“If there’s one takeaway from our survey, it’s that Canadian issuers are seeing the IR role as a strategic one. Companies are bringing IROs into the boardroom and asking them for advice when they’re thinking about acquisitions and other major decisions,” concludes Lokker. “And that speaks volumes for the profession.”