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News April 18, 2005 Issue

Negotiating a Salary Increase: Tips for CCOs

Been with your firm a few years? Got a nagging feeling that you are underpaid relative to what you could be making if you shopped yourself around?

Youíre probably right.

"Compliance is very busy," said David Martin of Michael Page Internationalís Boston office. "Quite frankly, there are genuine opportunities out there where people can increase their compensation quite significantly." And with hedge funds just starting to staff up, the market for CCOs isnít showing any sign of easing. Martin said he tells employers that the market for CCOs is a lot like the overheated housing market: "What looks expensive now is going to look cheap in six months."

If you want to command top dollar, youíll probably have to make a leap. "If you donít move, you wonít be within the top 20 or 30 percent" of the CCO compensation scale, Martin said. "People at the top end of the compensation scale generally have moved every three to five years." In contrast, "people who stay in the same compliance position for an extended period of time do not, in general, see the compensation that they could have if they look."

But what if you really like your firm and donít want to move? How can you ensure that your salary is on par with your peers, even if you stay put?

Where thereís a will, thereís a way. In this market, said Martin, even CCOs who donít move can obtain salary increases. A CCO should be able to "get in the upper half" by negotiating internally, he said. "An intelligent company should recognize that they could lose someone if they donít raise salaries." The "clever organization" does their own salary survey or "comes to us and says ĎWhere is the market?í so that they can pay their people fair wages." Employers know that if they lose their people, they will have to pay the market level anyway, he explained. Moreover, they likely will have to pay a recruiter a fee to help them, he added.

How can a CCO tell how much heís worth? Martin said that it is difficult to provide any general approximation of what a CCO should be making, because the markets are in a "state of transition" and circumstances vary by geography and type of firm. He said that Michael Page regularly gives employers an idea of where the market is by preparing tailored salary surveys. "We donít just guess that," he added. However, Martin discounted the value of broader salary surveys, noting that the salary information may vary significantly based on firm-specific factors.

One easy way for CCOs to get a sense of what they are worth on the market: look at the job postings on the Michael Page. The salary ranges, he said, arenít "kites" flying out there to attract candidates. "Theyíre real," he said.

Andrew Wang, CEO of Beacon Hill Staffing Group, suggested that CCOs talk to recruiters about what someone with their particular experience could expect to command. Another way to gauge oneís market worth: talk to peers. Like Martin, he downplayed the value of general salary surveys. "I donít buy into them," he said.

Once youíve gotten an idea of your market price, (and assuming itís more than your current salary), how do you go about asking for a raise? Should you make the case to the firmís board or senior management in the context of discussing your firmís compliance program generally? Or should the discussion take place as part of your annual performance review?

Martin noted that CCOs certainly could raise the compensation issue while presenting their compliance plan for the year. In fact, the topic may come up naturally. For example, if the CCO is staffing the department, he will have to discuss how he is going about finding the staff and what their compensation might be. "Anyone who is presenting a plan for compliance for their business for the coming year also has to provide in the overview of where the compliance market is," Martin noted.

Ideally, however, the discussion should take place behind closed doors. "Probably most of it" should be in a requested, scheduled, one-on-one meeting, said Martin, with the CEO or whoever the CCO believes is the appropriate person who would be making the salary decision.

CCOs will have to walk a delicate line between being too casual and too aggressive. On one hand, "it probably shouldnít be in a social environment," he said. "Thereís no point saying ĎGosh, have you seen the prices of compliance people,í while youíre having a beer." On the other hand, "you donít barge into someoneís office with a competing offer and say ĎRaise my salary or Iím outí," said Martin. "Donít bang around like a bull in a china shop." To that end, Martin didnít recommend printing out speeches of SEC officials emphasizing the CCOís role and bringing them to the meeting. "I would very much hope that the person you are speaking to is aware of that already," he said. "It could almost come across as patronizing."

In the meeting, the CCO can explain that "there is a lot of interest in me" and that he is getting called repeatedly by recruiters, Martin suggested. The CCO can emphasize that he is "keen to stay" but that he wants to be sure that his compensation is keeping up with the compensation in the market.

Try these talking points on for size:

  • Iím seeing a lot of interest on the outside.
  • Iím very happy here, but I want to make sure Iím on the right compensation track comparable to my peers.
  • I just want to raise this with you and hear what your thoughts are.

Wang suggested a similar approach: "I love my job, Iím very happy here. But I wanted to have a heart-to-heart because Iím getting phone calls from competing firms and from search firms, and Iím talking to colleagues. I feel like Iím being underpaid. This isnít a money decision for me, but I would like to feel like Iím more in line with the market. This is not a fun conversation for me to have, but this is something thatís really been on my mind. I donít want to leave this company, but I also donít want to feel like Iím selling myself short."

However, Wang advised CCOs to consider the potential downside to raising the compensation issue, such as causing oneís boss undue concern. "If you are definitely going to put yourself on the market unless you get a certain kind of raise, you should handle the conversation differently than if youíre simply trying for higher compensation but have no intention of actually leaving," he said. In the latter scenario, you need to assure your boss that you really are not looking to leave. While you might mention that you are getting calls from recruiters and competing firms, you also should assure your boss that "Iím not taking any of these phone calls." In fact, you might even add that "the truth is regardless of whether or not you give me a raise, Iím going to stick it out here," Wang suggested.

"The biggest thing CCOs should do is point out to their employer that the role has changed," said one investment management attorney, who asked to speak on background. Even if the CCO doesnít have personal liability, as the SEC has so adamantly insisted, the CCO certainly has the "focus" of the SEC, she said. Go in and say, "Look, I need to be a senior person in the firm and I want to be paid as such. Where am I ranked with my senior officer peers with my firm?í" she suggested.

Thomas Ulrich, CCO and chief counsel of Geneva Investment Management, suggested that CCOs outline the risks involved in their position and remind senior management of the CCOís exposure. "Really put it on the table," he said. CCOs also could discuss the reputational risk that other firms have had, and emphasize that the firmís business is at stake. "Youíre going to lose business if you have bad compliance," he said. "Look at Strong [Capital Management]. They didnít lose business when they had bad performance. But they did lose business when they had bad compliance."

Martin said that the request for a compensation review meeting shouldnít come as a surprise to firm management. "It would almost be expected to be raised," he said. The CEO should listen to the CCO, since the CCO is theoretically someone who is "fundamentally a key person" within the firm, he added. Of course, "if youíre doing it every other week, you just get to a point where youíre being a pain."

In all likelihood, your firmís CEO will be well aware of the hot compliance market, particularly if the firm is looking to expand its compliance department. The CEO will know the market firsthand, because he will be "seeing the wage inflation on his desk," said Martin. "Heís going to be very aware of where the market is," particularly if heís trying to hire a compliance officer "that is demanding a higher base salary than himself."

What happens if the CEO is not receptive? For example, what if the CEO says that the job market for CCOs, in fact, is not that busy? Martin said that the CEO might be thinking of other investment management areas, such as fund accounting, where the market is quite slow.

And if the answer continues to be No?

"If you keep getting kicked back [after] youíve pushed internally in that delicate fashion," and you really want additional compensation, said Martin, "just go outside." There are plenty of jobs for CCOs, even those that have worked in smaller advisory firms. In particular, he said, hedge funds are looking for people who have operated as stand-alone CCOs in their shops. "Thatís very positive to the hedge funds," said Martin. "They want people who can roll their sleeves up and can do the day-to-day, as well as have the credibility as a standalone CCO."

If you do get an offer and decide to resign, donít "fall for the buyback," advised Martin. If "only at that point they throw you the extra cash, itís almost an insult." Moreover, in his firmís experience, CCOs who present another job offer and are "bought back" typically are looking again within six months or a year. While it may be tempting not to have the challenge of integration and transition, he said, "at the end of the day, youíve damaged yourself to some degree." Not only will your loyalty be questioned, he said, "you have to question why it was that you were looking anyway, and are the answers really cured by another $20,000?"