MPI has recently completed its third annual survey of Chief Compliance Officer Compensation and Organizational Practices. This Bulletin is a summary of the findings and is based on the submissions of 64 fund families following 46 which reported last year.

We analyzed the data by plotting the total compensation against assets under management. We found that CCO compensation increased as size increases but that economies of scale exist (i.e. a CCO is paid more for the first $1 billion of assets than the second $ billion and so on). We found that the highest paid CCOs approach $1 million per year and very few are paid less than $150,000. When we compared the same CCOs year over year we found an average pay increase of 9%.

The most important function served by mutual fund directors is the annual review of investment management arrangements. One of the most complex and potentially confusing factors in this review is the analysis of the investment manager's profitability. Not only is the computation of this factor difficult, but determining what weight to give the results of the analysis in renegotiation of the advisory contract can be even more puzzling. For example, if the manager’s profit margins are high or consistently increasing, should directors take this as indicating a reason to reconsider certain terms of the contract? Or should adviser profitability be viewed in some other way?

Management Practice Inc. (MPI) has just completed its fifteenth annual Survey of Mutual Fund Director Compensation and Governance Practices, with data covering 2,158 directors from 406 fund families. Copies of, and specific comparisons to, the survey detail are available.

Year over year “same director” compensation increased an average of 7.3% last year, a slower growth rate after more than five years of double digit increases since the passage of Sarbanes-Oxley and the fund scandals at the start of the decade.