To start the New Year, it is a good idea to review the trends in the role and status of Chief Compliance Officers.  As we witness the continuing growth in stature of the CCO, we need to exercise caution.  Some troubling concerns are becoming apparent. 

With a new Attorney General and Biden Administration, CCOs have to be mindful of their ever increasing responsibilities and concomitant personal and professional risks.  The Justice Department has relied on the CCO to assist in monitoring and ensuring legal compliance by corporations.  DOJ expectations are going to increase and quickly.

The debates over CCO position versus the legal department and CCO independence continue to generate a continuing debate. Matt Kelly, in a recent post, highlights a recent survey indicating that CCOs may be losing ground in their quest for independence from the legal function. Let’s hope that this survey is an outlier because CCOs have to consolidate their position in the corporate governance framework.  

From my perspective, in many companies, CCOs have consolidated a unique position in corporate organizations.  In mid-size and large organizations, CCOs are often independent, report directly to the CEO and maintain a dotted line relationship with the board or board committee.  In smaller organizations, CCOs tend to be part of a legal department but nonetheless maintain independence and a dotted line reporting relationship to the board. 

Studies by PWC, the Association of Corporate Counsel and Corpedia, and the SCCE show a steady drop in CCOs who report to the General Counsel and an increase in CCOs reporting to CEOs. An Ethisphere study of Ethical Companies shows that 75 percent are led by a professional with the title, Chief Ethics and Compliance Officer, and 44 percent report directly to the board and/or the CEO.  Only 28 percent report to the General Counsel. 

In smaller organizations, it is not surprising that CCOs operate in the legal function given the need to leverage resources and provide basic ethics and compliance functions.  This is the exception and not the rule.  As companies grow in size and risks, inevitably they separate the compliance function and create an independent compliance function.

The average salaries for CCOs and compliance officers continue to rise.  This is before bonuses and stock benefit plans. This reflects the rising stature and capabilities of the profession.  As Donna Boehme, a compliance leader always pointed out, CCOs are subject matter experts and CCOs have to start from this point.

CCOs are also gaining a seat at the business table.  Ethisphere found that ethical companies usually ensure that CCOS participate in strategic business decisions.  This has been evident in CCO participation in supplier and procurement processes, and mergers and acquisitions.  I remain hopeful that CCO access and participation increases in the next few years to include all senior business decisions and management processes.

There are “new” and significant issues on the horizon.  These issues threaten the success of the CCO, the ability to exercise his/her authority, and ultimately may require CCOs to face personal liability issues.  My review of the State of the CCO is meant to highlight some of these issues.

While I am always an optimist, and passionately support the CCO profession and it’s importance to ensuring effective ethics and compliance program performance, the future is threatened with some real tangible risks for the CCO profession. 

But, we should not underestimate the accomplishments so far – stature, strategic line of sight issues, reporting obligations and pay are critical basic requirements that should help CCOs to develop even greater professionalism and opportunities.  As a profession, compliance is till the “go-to” profession for many professionals, especially as compliance develops into a multi-disciplinary profession.