Second among equals? Yes, say CCOs. Not by paycheck, counter cos

Mumbai: A recent Sebi circular designating a company secretary or chief compliance officer (CCO) at one level below the managing director or CEO has sparked both celebration and concern - cheered by compliance heads but viewed warily by several listed companies.

Industry insiders say the change has prompted some CCOs to seek parity with chief financial officers (CFOs) in terms of hierarchy and pay. In many mid-sized firms, CFOs often report directly to the MD or CEO, commanding salaries more than double that of CCOs.

People said compliance chiefs of a mid-sized IT firm and two chemical companies have formally asked their boards to elevate their roles to the same level as CFOs, along with corresponding hikes in compensation.

India Inc is urging the market regulator to clarify that the circular's intent is to strengthen reporting lines and not to redefine organisational structures or remuneration frameworks. This is since companies are fearing that the directive could inadvertently disrupt internal hierarchies, creating HR and pay-scale challenges, especially in those where roles differ sharply in scope and scale across functions.

"The position of a CCO is undoubtedly very important, especially in the context of the regulatory heavy environment, but this is more so in case of companies which have heavy sectoral regulatory oversight such as banks, NBFCs and insurance companies," said Ketan Dalal, managing director, Katalyst Advisors. "However, it is important for Sebi to clarify that the dispensation is more in the context of reporting, and not necessarily in terms of the HR organisation structure or compensation levels."

The regulatory amendment - issued on April 1- modifies Regulation 6 of the Listing Obligations and Disclosure Requirements (LODR), 2015. It mandates that a listed company's compliance officer must be a full-time employee and occupy a position one level below the MD or a whole-time director, if these individuals sit on the company's board.

This shift marks a broader rethinking of compliance - no longer a box-ticking role, but a core strategic function. By elevating the CCO's stature, Sebi aims to ensure they are empowered to flag lapses directly to top management, enhancing corporate oversight.

"Sebi's intent is to empower CCOs to perform their duties fearlessly and ensure adherence to regulatory norms, not to mandate changes in their compensation structures," said Shailesh Haribhakti, chairman, Shailesh Haribhakti and Associates. "When it comes to remuneration, each company will make its own decision based on the scope and complexity of the compliance function."

That said, others see the move as a much-needed step in the evolution of corporate governance in Indian companies.

"With regulatory scrutiny on the rise, the consequences of non-compliance can be just as damaging as financial mismanagement, making the CCO's role equally strategic," said Zubin Morris, partner at Little & Co.