Investor Relations and Financial Communication. Alexander V. Laskin

2 Investor Relations and Financial Communication Industry

      Investor Relations Officers

      First of all, it is important to note that investor relations is a relatively small profession. The leading professional association for the industry, the National Investor Relations Institute (NIRI) has only 3,300 members. Furthermore, some of the members are academics and service providers rather than investor relations officers (IROs). As a result, the number of actual IROs in NIRI is under 3,000 members. However, these 3,000 members represent 1,600 publicly traded companies with more than US$9 trillion in stock market capitalization. Not every investor relations professional is a member of NIRI – some are members of other professional organizations such as the Public Relations Society of America (PRSA), which has a dedicated financial communications section, and some are members of the International Association of Business Communicators (IABC). In addition to investor relations, there are professional organizations for financial communicators working in other industries; for example, the Association of Fundraising Professionals (AFP) unites about 30,000 members working in the field of philanthropy and fundraising.

      Even taking all this into account, investor relations and financial communication is a relatively small professional area. One of the key reasons is that not every company needs investor relations. Investor relations is required for the publicly traded companies – in other words, the companies in which shares of stock are available for people to buy and sell. These companies are called public companies because their stock is available to the public as opposed to private companies where the ownership is private. Public companies are also called publicly traded companies, publicly held companies, or publicly listed companies. Although the estimates vary slightly, the World Bank calculated that there are only about 4,100 public companies in the United States. This actually correlates well with 3,000 investor relations members of NIRI. The World Bank also estimates that globally there are about 43,000 public companies.

The shares of public companies are traded on stock exchanges or on the over-the-counter (OTC) markets. The New York Stock Exchange (NYSE) trades shares of 2,800 companies and Nasdaq lists about 3,300 companies. These numbers include US companies as well as foreign corporations that want to be listed in the United States. It is also possible to have dual listings – where a company can be listed at NYSE and Nasdaq, or at an exchange in its home country and at an exchange abroad. For example, BHP, one of the largest Australian corporations, is listed domestically at the Australian Securities Exchange, and at the London Stock Exchange in the UK. Carnival, a cruise line operator, is listed at both the London Stock Exchange and at NYSE.

      All these public corporations are governed by a specific set of laws and regulations focused on helping investors make an informed decision about buying and selling the company stock. In order to satisfy these requirements, these companies employ investor relations professionals. Many large corporations would have a standalone dedicated investor relations department. These departments may have from just one IRO to 20 or more. The reporting structures vary widely – the investor relations department may report directly to the chief executive officer (CEO), or the department may report to the chief financial officer (CFO), chief communications officer (CCO), chief operations officer (COO), or even the head of Human Resources (HR).

      At smaller companies, there may be no dedicated investor relations department. In this case, the investor relations function is commonly performed by the office of the CFO or the treasury department. In other cases, investor relations may reside in the corporate communication/public relations department. Since investor relations relies on both financial and communication expertise, if assigned to the CFO or to the CCO, the investor relations function must work closely across the corporate silos with departments that can supplement their missing knowledge and skills. It is also not uncommon for such investor relations programs to rely on investor relations agencies and consultants to, once again, make up for the missing skill set.

      The person responsible for leading the investor relations department typically has a title of vice president of investor relations, in some cases, senior vice president or executive vice president. In large investor relations departments, there are also positions of director or senior director or associate director of investor relations. In those cases where the investor relations function does not have a dedicated department, the function is usually led by the director of investor relations. At the lowest level of the corporate chart, investor relations departments and programs employ professionals with titles like manager of investor relations, investor relations specialist, or investor relations analyst.

      The average salary for a vice president of investor relations who is leading an investor relations department is over US$290,000. Mid-level investor relations roles pay on average US$201,000, and the manager/specialist/analysts jobs pay about US$140,000. According to a NIRI/Korn Ferry 2019 salary survey, the average IRO’s paycheck also varies depending on the industry and location. IROs working for consumer goods companies make on average US$284,375, while IROs in the life sciences industry make on average only US$226,974. The highest IROs salaries are in the northeast (US$267,824), and the lowest in the South (US$242,130).

Salary is not the only compensation that investor relations professionals receive. It is also common to collect some kind of performance bonuses: these bonuses average to about 30% of the IRO salary. It is also common to receive equity as part of the compensation – this may be stock options, restricted stock, or other types. The equity component on average varies from a quarter to a half of the base salary. All this makes investor relations a well-compensated profession. In fact, quite a few studies call investor relations the highest paid specialization in corporate communication.

      The most common activity of investor relations professionals is providing information to the investors, shareholders, financial analysts, and regulatory agencies. In fact, investor relations professionals are responsible for assembling and filing key periodic reporting documents – quarterly reports (Form 10-Q) and annual reports (Form 10-K). These disclosure reports are required documents with specific guidelines for what must be included in them and when and how they must be filed. As a result, producing these reports is a complex and collaborative task. Although IROs take the lead, many other departments within the organization contribute as well. Working on these reports is almost a never-ending process – as soon as one quarterly report is submitted the work starts on the next quarterly report.