The crucial link compensation and career trends for German Investor Relations executives.

Transcription

1 The crucial link 2015 compensation and career trends for German Investor Relations executives.

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3 1 Executive summary. Investor relations executives embody the crucial link between a company and its capital market. This first-ever research project into Germany s IR executives shows that the vital importance of this role is being acknowledged by companies in a variety of ways. In late 2014, Korn Ferry undertook a comprehensive survey of practitioners in the field with the cooperation of IR Club, one of the largest associations of investor relations professionals in Europe. The results indicated how publicly listed companies highly value IR expertise and the opportunities the function offers to business leaders. It also uncovered ways that companies might further attract, develop, and incentivize top talent. The key findings: G IR has the attention of senior management. Nearly 40% of top executives in IR report directly to the CEO, not the CFO. G Strong demand supports higher salaries. Almost 37% of those surveyed were paid base salaries above 100,000, and 84% received bonuses. G IR is open to career changers. Only about 20% of those working in IR started their careers in this discipline. Most moved into it from finance, mergers and acquisitions (M&A), or communications. G Stock is under-utilized in compensation packages. Fewer than 25% of those surveyed received any kind of equity-based compensation, which has the potential to motivate IR specialists particularly effectively. G A gender pay gap is pronounced among IR executives. Entry- and mid-level roles in IR are held almost equally by men and women, but only 28% of those heading IR are women, and they earn substantially less than their male peers. Investor relations is a dynamic area for corporate leaders looking to advance their careers, add breadth to their CVs, exert influence on top management, and make an impact on behalf of their organizations. The findings in this report offer guideposts for companies and IR leaders on credentialing, establishing career paths, optimizing salaries and bonuses, and other human capital concerns.

4 2 About the survey. The survey was carried out in the fourth quarter of Respondents included 89 men and 62 women who work full-time in investor relations for listed German companies. More than half worked in mid-cap or larger companies, and 49% were between the ages of 35 and 45. Among respondents, 43% were the top executives leading the IR function, 47% were managers or directors, and the rest were junior professionals (see Figure 1). Besides salary ranges, participants provided information on their professional backgrounds, qualifications, responsibilities, reporting structure, and career goals. Figure 1 The survey group. Korn Ferry surveyed 151 IR professionals, including 65 who headed the IR function, and 55 managers. Entry and mid-level IR roles were held by equal numbers of men and women, but only 18 of 65 (or 28%) of those heading the IR function were women. Survey takers Women Men Junior Professional Manager Director Head of IR

5 THE CRUCIAL LINK 3 Career and credentials. Investor relations is unusual among corporate roles in that few people began their careers in it; only 17% of respondents had entered IR directly. The rest came from other corporate functions, including strategy, marketing, communications, operations, and finance (see Figure 2). Although a majority came from corporations and banking, some had been consultants, brokers, or analysts. This variety demonstrates that investor relations is an effective entry point into general business for those coming from banking and for those pivoting in their careers. Figure 2 Previous work experience. Only 14% of those in the survey began their career in investor relations, though more than half had some sort of corporate background before joining IR. Direct entry to IR Business Management Business Communications Marketing / Sales Operational Division Strategy Department Corporate Finance Investment Banking Private Banking or Broker Analyst Advisor / Agency 17% 6% 17% 12% 5% 3% 11% 11% 3% 5% 9% Other 19%

6 4 There was not a wide spread in the tenure of IR departments: Heads of IR had 9.2 years on average, directors had 9.6 years, and managers 5.8 years. This suggests that IR is a department, broadly speaking, with room to move up quickly (see Figure 3). Only one-third of our respondents held professional qualification (see Figure 4). Figure 3 Tenure in investor relations. More than half of the survey takers had been working in investor relations more than 5 years. Median tenure ranged from 3 years for junior professionals to 9.6 years for directors. Directors and heads of IR generally had 7 to 11 years experience in IR regardless of the company s market-cap. Figure 4 Certifications and qualifications. Only one-third of IR leaders in our survey held a professional certification such as Certified European Financial Analyst (CEFA), Certified International Investment Analyst (CIIA), Chartered Financial Analyst (CFA), or Certified Investor Relations Officer (CIRO). Another 5% planned to obtain or were seeking a certification. < 2 years 3-4 years 5-6 years 7-10 years > 11 years 16% 18% CEFA/CIIA/CFA/CIRO Other Pursuing certification No add'l qualifications 18% 30% 60% 19% 5% 2% IR also presents its executives with multiple future career goals, including Head of IR and CFO (see Figure 5). About one-third of those surveyed said they saw IR as a lifelong career path and 17% said they viewed it as specifically a transitional position. But half of survey respondents were unsure, and an evaluation of additional comments suggests that these leaders are particularly motivated by the scope and shape of their day-to-day work, rather than just by a prominent job title.

7 THE CRUCIAL LINK 5 Figure 5 Ambitions of IR executives. Asked about career goals, many are interested in becoming the head of IR or moving to that job at a larger company. Those who are already at the top are most frequently interested in becoming chief financial o cer. Head of IR 48% Chief Financial Officer 25% M&A / Corporate Finance Chief Communications Officer Business Advisor 11% 15% 19% CEO 5% Chief Strategy Officer Chief Operating Officer 3% 3% 0% 10% 20% 30% 40% 50%

8 6 Today s IR department. Investor relations departments are lean as a rule. Only 48% of the executives reported having three or more employees in their departments. Just under half had no staff responsibility at all. Two-thirds of the people surveyed had some budget responsibility, and the median department budget was 250,000 (see Figure 6). Figure 6 IR department budgets. The budgets for investor relations departments tend to grow with the size or market cap of the company. Of those who reported budgets, the median was above 500,000. While no one s budget was above 2 million, 10% said their department budget was more than 1 million. More than 1 million 10% 500k - 999k 250k - 499k 100k - 249k 19% 19% 23% < 100k 1% No information 28% 0% 10% 20% 30% 40%

9 THE CRUCIAL LINK 7 Figure 7 Scope of responsibilities. In addition to traditional investor relations tasks, IR departments often oversee other areas. Most common are internal and external communications-related responsibilities, though a few IR departments have some strategy, analysis, or finance tasks. Internet / Intranet 49% Business Communications Reporting Public Relations 39% 38% 36% Sustainability / ESG Internal Communications Competitor Analysis Corporate Governance Financial Analysis 29% 27% 25% 22% 18% Marketing 10% Corporate M&A / Strategy Strategic Planning 5% 5% Treasury 1% 0% 10% 20% 30% 40% 50%

10 8 Still, these small departments have a mighty scope. Most often they take on tasks related to facets of internal and external communications (see Figure 7), but interestingly many report up into the CFO or Finance Board (see Figure 8). Some work on competitor and financial analysis, and 22% work on corporate governance issues. Only 5% said they have a role in M&A strategy or general strategic planning. Figure 8 Reporting structure. The position of investor relations in the management hierarchy suggests that IR has a prominent seat at the table. Almost 45% of executives report up into the CFO or financial board, and nearly 40% directly to the CEO. Despite the prevalence of communications activity in IR departments, few report into a communications director. Note: respondents could select more than one response. Head of IR CEO / Board president CFO / Financial board 31.7% 38.6% 44.8% Financial or Treasury Director CAO / Communication Director 4.1% 4.8% 0% 10% 20% 30% 40% 50%

11 THE CRUCIAL LINK 9 Compensation Overall, it appears that strong demand for IR expertise is buoying compensation (see Figures 9 and 10). In the last two years, 66% of IR leaders received salary raises and 41% saw their bonuses increase. Only about 16% of respondents didn t receive bonuses, and those were primarily at the junior professional or manager level (see Figures 11 and 12). Figure 9 Base salaries. Our data on base salaries showed that 38% of those in IR are paid 100,000 a year or more, and 12% are earning above 140,000. Two-thirds of IR professionals reported that their salary had increased within the last two years. 40k - 69k 20% 70k - 99k 42% 100k - 119k 120k - 139k 14% 11% 140k - 159k 160k - 179k 180k - 199k 200k - 239k 240k and up 6% 2% 1% 2% 1% 0% 10% 20% 30% 40% 50%

12 10 Figure 10 Peak and average salaries. Average IR department salaries increase the most when reaching the director level, a jump of 38%. At the highest management level, salaries showed the most variation, with heads of IR reaching 280,000, but the average salary only 119, k Micro-cap Mid-cap Mega-cap Small-cap Large-cap Average annual base salary 200k Top salary 100k 63k 76k 105k 119k 0k Junior Professionals Managers Directors Heads of IR Figure 11 Peak and average bonuses. In the last two years, 41% of respondents said they had received a increase in the size of their bonus; only 11% said their bonus decreased. Heads of IR at mid-cap companies received up to 110% of their salary in bonus, though the average bonus was only 26%. Top bonus rates 120% 100% 80% 60% 40% 20% 0% Micro-cap Mid-cap Mega-cap 3% Small-cap Large-cap Average size of bonus 12% 30% 26% Junior Professionals Managers Directors Heads of IR

13 THE CRUCIAL LINK 11 Figure 12 Total annual compensation (salary + bonus). Heads of IR at mid-, large- and mega-cap companies earned total compensation packages that peaked above 400,000, although the average total compensation for that group was only 150, k Highest salary + bonus 400k 300k 200k 100k Micro-cap Mid-cap Mega-cap 65k Small-cap Large-cap Averge 85k 137k 150k 0k Junior Professionals Managers Directors Heads of IR Share-based compensation is used much less often in Germany than in some other countries. Only 23.5% of those surveyed received sharebased compensation. By comparison, in the United States, nearly all heads of IR are granted some type of stock either restricted stock units or stock options usually as part of a long-term incentive plan. German companies are not taking advantage of stock-based pay s strong potential to motivate their IR specialists, the group exclusively focused on developing the capital market.

14 12 German IR leaders, however, do receive other benefits, including pensions (55%), company cars (55%), tuition for training and education (37%), life insurance (21%), and club membership (11%). At the same time, there is an unmistakable disparity in salaries. Female IR executives are paid salaries 42% lower than are their male peers. Men and women enter IR advisor positions at about the same salary level, but men are paid increasingly more at each higher position. The top-paid male managers, for instance, are paid 140,000 compared with 100,000 for women. These differences, of course, are compounded by bonuses set as a percentage of salary. The size of the company by market capitalization is the other significant factor in salary. The chief IR officers in large companies, for example, are paid salaries that are almost twice as much as those in small- and micro-cap companies (see Figure 10). Change-of-control agreements are unusual for German IR leaders. Only 7.5% who took the survey had such contractual provisions, which dictate terms in the event of a merger or acquisition. In the U.S., about 15% of heads of IR at Fortune 500 firms have such contract clauses.

15 THE CRUCIAL LINK 13 Conclusion Investor relations departments play an outsized role in the success of listed companies at all levels of market capitalization. These executives have ample opportunity for influence in their organizations and for personal career growth. For some, IR is a training ground for future CFOs. For others, the upward career path goes through increasingly larger companies. Even small companies, however, are exciting employers for IR leaders. Flatter hierarchies offer greater responsibility and more decisionmaking authority, which are strong motivating factors. At the same time, many companies could improve their IR departments ability to attract and retain top performers. More could support training and education toward certification, for example. Stock-based compensation could also be a strong form of long-term incentive pay. Finally, companies would be wise to examine the widening pay gaps between men and women as they rise in position.

16 14 Key contacts Andreas Jäger Senior Client Partner, Head of Financial Services Practice Germany and Member of the Financial Officers Center of Expertise in EMEA Feuerbachstrasse Frankfurt am Main Germany mobile: Kristin Brodel Senior Associate, Financial Services Practice Feuerbachstrasse Frankfurt am Main Germany Sonja Martinovic Project Assistant Feuerbachstrasse Frankfurt am Main, Germany

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18 About Korn Ferry Korn Ferry is the preeminent authority on leadership and talent. For nearly half a century, clients have trusted us to recruit worldclass leaders. Today, we are their partner in designing organizational strategy and developing their people to achieve unimaginable success. For more information, visit About The Korn Ferry Institute The Korn Ferry Institute, our research and analytics arm, was established to share intelligence and expert points of view on talent and leadership. Through studies, books and a quarterly magazine, Briefings, we aim to increase understanding of how strategic talent decisions contribute to competitive advantage, growth and success. Korn Ferry All rights reserved. TCLL2015