New market demands reward IR professionals: increased corporate disclosure and the declining influence of brokerage analysts are redefining the IR role. There's a need for more advanced financial skills--and greater influence and compensation.

• Author: Randerson, Erik
• Position: From where I sit - Investor relations - Column

The prolonged market decline that erased 60 percent of the Nasdaq's value a few years ago served as a catalyst for profound changes in corporate interactions with Wall Street. Although the market rebounded strongly in 2006, corporate reporting of quarterly performance and managing relationships with the investment community have become significantly more complex in recent years. Using my company, Digital Insight, as a benchmark, the number of pages contained in our quarterly earnings announcement has more than doubled, from five in 2000 to 12 last quarter. Clearly, times have changed.

An interesting undercurrent is that the new market dynamics have effectively raised the bar for investor relations (IR) officers. Investor relations is a profession that, while always viewed as important, often didn't merit a regular seat in the boardroom at most corporations. But change is underway. Today, companies are seeking a new breed of investor relations officer with acute financial acumen and strong experience to serve as a credible advisor to the executive team. Indeed, financial experience ranked highest among the skills required of IR officers, according to a recent survey of corporate CEOs conducted by Rivel Research Group.

Several factors have converged to elevate the role of IR officers within U.S. corporations. Following the Enron collapse, corporations seeking to promote greater transparency have significantly strengthened their disclosure of financial and operating metrics--particularly when reporting quarterly financial results--as demonstrated by my experience at Digital Insight. New regulatory changes governing investment banks have also led corporations to communicate directly with institutional investors far more frequently, a significant shift from the days when powerful brokerage analysts were a company's primary conduit to the "buy side."

Importantly, financial rewards for IR officers have increased commensurate with greater market demands, presenting an attractive career path for financial executives. In fact, IR officers with financial experience earn 20 percent more than their IR counterparts who came to the profession from a marketing/communications background, according to a survey published by the National Investor Relations Institute (NIRI). What's more, the NIRI analysis reports that average compensation for IR officers at large-cap companies has risen to nearly $225,000 (excluding grants of stock options and restricted...