The crucial link

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

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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: 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 â‚Ź100,000, 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.

G

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.

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About the survey.

The survey was carried out in the fourth quarter of 2014. 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.

70

Survey takers

60

Women Men

18 27

50

47

40 30

28

20 10

9

6 Junior Professional Manager

8

8 Director

Head of IR

THE CRUCIAL LINK

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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.

17%

Direct entry to IR Business Management

6% 17%

Business Communications

12%

Marketing / Sales Operational Division Strategy Department

5% 3% 11% 11%

Corporate Finance Investment Banking Private Banking or Broker Analyst Advisor / Agency Other

3% 5% 9% 19%

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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 yearsâ&#x20AC;&#x2122; experience in IR regardless of the companyâ&#x20AC;&#x2122;s market-cap. < 2 years 3 - 4 years 5 - 6 years 7 - 10 years > 11 years

16%

18%

18% 30% 19%

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.

CEFA/CIIA/CFA/CIRO Other Pursuing certification No add'l qualifications

60% 2% 5%

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.

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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.

48%

Head of IR

25%

Chief Financial Officer

19%

M&A / Corporate Finance

15%

Chief Communications Officer

11%

Business Advisor

5%

CEO Chief Strategy Officer

3%

Chief Operating Officer

3% 0%

10%

20%

30%

40%

50%

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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.

10%

More than € 1 million

19%

€ 500k - € 999k

23%

€ 250k - € 499k

19%

€ 100k - € 249k

1%

< € 100k

28%

No information

0%

10%

20%

30%

40%

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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.

49%

Internet / Intranet

39%

Business Communications

38%

Reporting

36%

Public Relations

29%

Sustainability / ESG

27%

Internal Communications

25%

Competitor Analysis

22%

Corporate Governance

18%

Financial Analysis

10%

Marketing

5%

Corporate M&A / Strategy

5%

Strategic Planning

1%

Treasury 0%

10%

20%

30%

40%

50%

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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.

31.7%

Head of IR

38.6%

CEO / Board president

44.8%

CFO / Financial board

4.1%

Financial or Treasury Director

4.8%

CAO / Communication Director 0%

10%

20%

30%

40%

50%

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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.

20%

€ 40k - € 69k

42%

€ 70k - € 99k

14%

€ 100k - € 119k

11%

€ 120k - € 139k

6%

€ 140k - € 159k

2%

€ 160k - € 179k

1%

€ 180k - € 199k

2%

€ 200k - € 239k

1%

€ 240k and up 0%

10%

20%

30%

40%

50%

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 €119,300.

€300k

Top salary

Micro-cap Mid-cap Mega-cap

Small-cap Large-cap Average annual base salary

€200k

€100k

€0k

63k 63k Junior Professionals

76k 76k

Managers

105k 1105 05k 05 5k

Directors

1119k 119 19k 9k

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%.

120%

Top bonus rates

100%

Micro-cap Mid-cap Mega-cap

Small-cap Large-cap Average size of bonus

80% 60% 40% 20% 0%

3% Junior Professionals

112% 2% Managers

30% 0% % Directors

26% 2 6% % Heads of IR

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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 €150,000.

500k

Highest salary + bonus

400k

Micro-cap Mid-cap Mega-cap

Small-cap Large-cap Averge

300k

200k

100k

0k

65k 65 5k Junior Professionals

85k 8 85 5 5k k Managers

137k 137k 7 7k

Directors

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.

1150k 50k 50 0k k

Heads of IR

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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 â&#x201A;Ź140,000 compared with â&#x201A;Ź100,000 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.

THE CRUCIAL LINK

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 departmentsâ&#x20AC;&#x2122; 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.

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Key contacts Andreas J채ger Senior Client Partner, Head of Financial Services Practice Germany and Member of the Financial Officers Center of Expertise in EMEA Feuerbachstrasse 26-32 60325 Frankfurt am Main Germany +49 69 71 670 175 mobile: +49 151 52 630 520 andreas.jaeger@kornferry.com

Kristin Brodel Senior Associate, Financial Services Practice Feuerbachstrasse 26-32 60325 Frankfurt am Main Germany +49 69 71 670 182 kristin.brodel@kornferry.com

Sonja Martinovic Project Assistant Feuerbachstrasse 26-32 60325 Frankfurt am Main, Germany +49 69 71 670 196 sonja.martinovic@kornferry.com

About Korn Ferry Korn Ferry is the preeminent authority on leadership and talent.

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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.

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