Pay Raises Indicate CUs, Economy Coming Back
COVINA, Calif.-Credit union CEOs received larger pay increases in 2010 than in 2009, a sign that the CU industry and the economy are recovering, reports Executive Compensation Solutions (ECS).
In 2010, CU CEO base compensation increased by 4.37%, and 4.17% in 2009, according to ECS' annual credit union executive compensation and benefits survey, reversing a two-year trend. In 2008 and 2009, pay increased, but the percentage of increase in CEO compensation declined each year, ECS reported.
"This does not mean we are out of the woods, but we have stopped the downward trend," pointed out Bridget McNamara, the survey's executive editor. McNamara noted that in 2008 the CEO base compensation increase was 6.03%, and 7.23% in 2007.
In recent years the ECS survey found that many credit union CEOs voluntarily did not take short-term bonuses. "This year, we did not see so much of that," McNamara said. "The fact that bonuses are re-emerging is another sign that things are improving."
More importantly, what the survey clearly showed about CEO bonuses is that many more are being linked to individual and CU objectives. "Not just short-term bonuses but longer term, as well," McNamara said.
McNamara surmised that tying more bonuses to performance metrics is a sign that boards are taking their responsibilities very seriously. "There are new standards now in terms of the board's role and what they must understand. They want to make sure that anything they put their stamp on is in the best interests of the membership."
For the first time in recent years, ROA was not the top performance metric according to the Executive Compensation Solutions study, as loan growth took No. 1 (64%). "That is very reflective of the economy, with weak loan demand," McNamara said. "But ROA still remains an important metric, coming in just behind ROA."
Bank Vs. CU Pay Gap Narrowing
McNamara stated that the latest survey further indicates that executive comp between banks and credit unions is coming closer together, and that CUs realize they have to pay more to attract and retain top talent. "This extends to the entire executive team," McNamara explained. "Boards are clearly looking at succession planning."
According to the survey, CU salaries compare more favorably to banks as credit union asset size increases. "The larger the credit union the more they compete with banks for leadership talent and are more likely using bank compensation information as a benchmark," concluded McNamara.
Last year the average CEO cash compensation (salary and short-term bonus) was $250,059 for all CUs in the survey and $292,448 for all bank CEOs according to a 2010 ABA survey. Further comparing the two surveys, CEOs of CUs under $100 million received $110,837, compared with $158,398 for banks in the same asset category. CEOs of credit unions over $1 billion received $460,234, compared with $508,633 for bank leaders in the same group. CEOs of CUs from $500 million to $1 billion averaged more than their bank counterparts, $314,525 to $303,062.