Credit: A lot.
Yes, there are all the predictable costs: travel, legal fees, consultants, Investor Relations (IR) site management, conferences, annual reports. And the average IR budget in North America is a shocking $799,000 according to XbInsight, the research arm of IR Magazine. That’s before IR staff expenses in an environment when a top-flight investor relations officer might command a salary of $175,000.
But the real cost is the value of the CEO’s time. Here’s a an eye-popping back of the envelope calculation:
The 2,591 C-suite executives at the S&P 500 earned $14.3 billion according to an analysis conducted by The Analysts Accounting Observer. That works out to about $21,000 per executive per day. Given this and the bare bones c-suite investor relations activity budget (typically undertaken by a CEO) shown below yields a hidden, yet additional cost of $2.7 million.
Of course there is tremendous leverage in a CEO’s time. Their focus on any issue can yield tremendous results in terms of share appreciation. But, in my view, this cuts two ways.
In terms of growing the business, how much more value could be created by allocating 128 hours of a CEO’s time to strategy, business development, recruiting and supplier/customer relations?
So, not only is investor relations expensive on a cash basis, but there’s an opportunity cost as well.
None of this is to suggest going public, and being public is a bad idea, but rather to offer perspective for companies considering an IPO, and some insights perhaps on just how expensive it can be to use the public’s money.
ps: The C suite compensation figures used above come from a study executive pay in 2010. Given compound annual growth in executive compensation of about 6.5%, (2010 to 2014) costs are even higher.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
