Mounting responsibilities related to navigating new rules and identifying risks in IT helped push CCO pay up last year, according to Management Practice’s 2019 compensation survey. But recruiters say that the need to recruit top compliance talent also goes further down the org chart.
In fact, the 49 compliance chiefs whom MPI tracked in 2017 and 2018 saw their total pay rise by 6.6% last year, the survey shows.
Overall, 60 CCOs participated in the survey. They averaged $424,411 in overall comp, including an average base of $243,066 and an additional $181,345 in bonus and incentive pay. The executives worked at firms with a collective $2.5 trillion in assets.
Last year, 60 CCOs also completed the survey. That group brought home $7,500 more in 2017, or an average of $431,957. That included $246,176 in base pay and $185,781 in bonus and incentive pay. However, MPI partner Jay Keeshan noted that year-over-year totals can be skewed by factors such as the size of various respondents' firms and a change in respondent base.
In 2017, 66 CCOs reported earning a total average of $403,375 in 2016. Of that, $242,890 was base pay and $160,485 was bonus and incentive pay.
“CCOs are in very high demand, so there’s always going to be pressure to pay them fairly and attractively,” says Keeshan, who co-authored the survey’s summary.
And as pressure on these executives mounts, firms are also scrambling to find compliance staff with between five and 10 years’ experience.
“There’s intense competition in the marketplace, especially for talented mid-level professionals, whether they’re attorneys or compliance professionals,” says Dimitri Mastrocola, a partner and legal recruiter at the New York–based Major, Lindsey & Africa. “It’s a seller’s market.”
CCOs in large metropolitan areas can also expect a bigger paycheck, he adds. A New York–based CCO typically makes between $600,000 and $700,000 in total compensation, he says. Some may make “north of $1.5 million,” he says.
In its survey, MPI found that many of the CCOs were “long-term employees” at their respective fund shops, or had years of tenure at a peer institution.
The average CCO age in 2018 was 49.
One big component in CCO comp is the bonus, which is tethered to a firm’s overall financial performance, Keeshan says. At shops with $75 billion or more in assets, bonuses represented an average of 62% of total compensation.
CCOs are high earners with high-stakes responsibilities, says Keeshan. They often act as the “eyes and ears of the board,” he says, helping them to understand and oversee rules that the businesses are now digesting — some of which came out of the financial crisis.
Among the most onerous of those is the SEC’s liquidity rule, which became effective for complexes with more than $1 billion last month. The regulator’s exam team is probing firms’ compliance programs, and checking that they are evaluating whether their process for assessing liquidity of investment holdings has any gaps.
Examiners are also looking to verify that shops have a plan for handling any securities that vendors fail to give a liquidity assignment to, and that they properly distinguish between ETFs, as some are exempt from the rule.
In the coming year, CCOs will have to contend with the Securities and Exchange Commission’s new conduct rules, and potential new rules that will deal with ETF registration, fund-of-funds arrangements, advertising and marketing guidelines and the presentation of shareholder reports.
Such responsibilities have put a premium on compliance chiefs with law degrees, Mastrocola, the recruiter, says.
Of the 60 CCOs responding to MPI’s survey, 24, or about 40%, were lawyers, and about seven, or 12%, had a CPA.
But Mastrocola says that the proportion of lawyers he places is even higher. “In my experience, about 65% to 70% of CCOs are attorneys because the regulatory environment has become so complex and scrutiny from regulators is much more intense,” Mastrocola says.
For the first time, MPI also broke down figures by gender. It found that compliance could be one area of finance where men and women are generally paid about the same.
In the survey, roughly one in five CCOs was female. The dozen or so women earned about $15,000 less total average pay than their male colleagues — a number marginal enough to be attributable to age, experience or location, Keeshan says.
“At least in this world, it’s pretty much even,” he says.
For now, the job function is pretty stable, says Alan Johnson, managing director of New York–based compensation consulting firm Johnson Associates. “But that could change as soon as regulations change, or there’s one really good scandal that excites things.
CCOs who work for companies with global office locations have a particularly challenging workload, Johnson says, since regulators in Europe and Asia are less prescriptive about how they expect firms to abide by their rules, he says.
“Nobody can give a straight answer about what you can and cannot do,” Johnson says. “You talk to attorneys and they’ll say, maybe you can do this, maybe you can do that, this is how we interpret it.”