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don't be so compliant

60% of compliance officers are women—and that may be a bad thing

Compliance officer: It’s one of the hottest careers today. The guardian of an organization’s good corporate citizenship, the job ranges from creating and enforcing guidelines and policies that ensure a company’s integrity, to promoting ethical standards and values that form strong workplace cultures. Compliance officers are the ones who meet government investigators at the door when they knock.

The position has become vital to corporate America, and there are strong indications that it is tilting toward becoming female-dominated. It’s encouraging from a workplace diversity perspective that women are in compliance roles, given the authority that comes with the profession. But it’s equally important that these female compliance professionals be in true leadership positions where they can actually move the dial on corporate ethics. It’s essential that these are positions of influence that go right to the top, representing actual advancement. Otherwise, a golden opportunity will be lost to truly enhance women leadership, and to best utilize these professionals to re-build the battered reputation of corporate ethics that is the result of a sorry decade of scandal, damage, and a complete erosion of trust.

Women in numbers

We’re not entirely sure why the number of women is edging out that of men; nearly 60% of the Society for Corporate Compliance and Ethics’ (SCCE) members are now women, and some industries may have even higher concentrations. A 2008 survey by the Health Care Compliance Association (HCCA) found 72% of respondent organizations in that sector have a female compliance officer. When SCCE and HCCA surveyed 626 of their members last month on the growth of the profession, they found 69% of their respondents were women. That survey also found that the C-suite is listening more to compliance officers. Among publicly traded companies, however, only 33% of compliance officers reported directly to the CEO.

A pool of untapped talent

Organizations need to realize that high-performing individuals in a compliance role are low-hanging fruit for the C-suite and the board, and represent a new and untapped talent pool. Drawing leaders from compliance professionals will ensure greater diversity along with leveraging a unique set of skills and perspectives around organizational culture, reputational value and risk mitigation. This can only be good for business because, simply put, the larger the pool of talent, the better the quality you can draw, as addressed in a classic McKinsey & Company study, among many others.

Lessons from the women in HR

It would be truly unfortunate if the compliance profession becomes mired in the same predicament of the female-dominated human resources profession, where women and men develop a sophisticated understanding of the company culture, work hard to improve it, yet have little say at the most senior levels, and are rarely called upon to fill top roles.

According to the US Department of Labor, 72.7% of HR managers were women in 2012. That statistic becomes  worrying when qualified by  data from Catalystan advocacy group working to promote gender diversity in the workplacewhich  reveals that women currently hold only 4.6% of Fortune 500 CEO positions, and 16.9% of Fortune 500 board seats. General Motors’ Mary Barra not only joins a small circle of female CEOs, she also joins a small circle of CEOs that spent time as HR leaders. It has been a topic of debate, whether HR has become a place to park high-achieving women off the CEO track—as highlighted in Human Resource Executive’s coverage of the issue in 2012–and more broadly by Carole Kleiman’s 2006 column looking at female-dominated professions. Will we soon find ourselves asking the same questions of the compliance profession?

The hunger for compliant talent

There is urgency to figuring out this dynamic as the compliance profession expands rapidly. Driven by new post economic crisis regulations and the expansion of corruption prosecutions abroad, companies are hiring more compliance officers than ever before. As reported by The Wall Street Journal, US Department of Labor statistics show the unemployment rate for compliance officers in last year’s third quarter was 5.7%, compared to an overall jobless rate of 7.2%. JP Morgan is reportedly spending $4 billion more than initially planned for risk and compliance for this fiscal year—hiring 3,000 employees for the function, as well as reassigning 2,000 more into it. Demand like JP Morgan’s is outstripping supply.

Starting compliance salaries are growing more than 3.5% a year, with large companies paying chief compliance officers between $162,000 and $232,000, according to human resources consultancy Robert Half. There have been reports of salaries for hedge fund compliance officers reaching $800,000, and the percentage of women in this industry is climbing. According to a study completed by the Rothstein Kass Institute, women hold 34% of the C-level hedge fund compliance positions, with the highest percentage of women in C-level jobs within the operational space at 35 percent. This is followed closely by C-level compliance and financial positions at 34 percent and 32 percent, respectively. However, the percentage of women CEOs and CIOs averaged less than 20 percent within the firms polled.

Measuring real female leadership

All of this compliance leadership could be good, however, if women hired into these positions have true impact and influence, with access to the channels that lead to the top of an organization. A recent study by the University of British Columbia’s Sauder School of Business shows the cost of a successful acquisition is reduced by 15.4% with each female director on a corporate board. There is other evidence that women in leadership bring significant advantages, such as Catalyst’s Bottom Line research series. It’s arguably not the female presence per se, but rather the fact that having unrepresented groups in a company’s leadership position is emblematic of an organization drawing talent from a wider pool.

That diversity at the C-suite and board level has positive, tangible results—from better corporate culture, to better stakeholder engagement, to better financial results—has not gone unnoticed by savvy organizations. The companies that recognize tapping diverse talent isn’t just good for their bottom lines but also adds to their reputational currency—from clients to shareholders to employees—stand to reap the rewards across every facet of the business. Filling key leadership positions with “token” women won’t benefit anyone.

Follow Shanti on Twitter @ShantiNAVEX. We welcome your comments at ideas@qz.com.

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