7 minutes
In recent years, credit unions have recognized and responded to the challenge of retaining and recruiting executive talent by offering salaries and incentives that met or exceeded national averages, and the most recent 12 months were no exception, according to the 2016 CUES Executive Compensation Survey.
Pay and bonus increases for CEOs over the year ending in May averaged 7.1 percent, with the average base plus bonus across all asset ranges increasing to $382,175 in 2016, up from $356,900 in 2015 in the same-sample survey (CUs participating in both years to more clearly indicate trends). Across the same sample, average base salary rose 7 percent to $318,444, and total compensation (base salary plus bonus plus other taxable compensation, such as club dues and personal use of a company car) increased an average 6.8 percent to $394,173.
Across asset categories, average base plus bonus pay ranged from $93,595 among CEOs of credit unions with less than $30 million in assets to $590,735 for the chief executives of $1 billion-plus organizations.
Other executive team members posted salary and bonus hikes above average across U.S. business sectors as well, ranging from 3.4 percent for regional branch management executives to 8.7 percent for human resources executives. Spanning total compensation by position in 2016, executive vice presidents received an average $223,003, chief financial officers $205,201, and regional branch executives $88,708.
This year’s survey “reflects an overall upward trend in both the independent and same samples,” notes Michael Becher, CPA, vice president of Industry Insights, Dublin, Ohio, which administers the survey for CUES. The executive summary reports median and average salary and bonus data for 18 executive positions, based on all respondents in the independent sample; adequate same sample data was available for 16 positions from credit unions that participated in both 2015 and 2016.
The CUES survey reports “healthy increases” for CEOs and other executives, agrees Scott Dettmann, partner in Carlson Dettmann Consulting, Madison, Wis. Salary and bonus hikes for credit union leaders are well above the 3 percent projected by many compensation experts for the past year—and, more to the point, the actual 4.1 percent and 4.6 percent increases reported in the ADP Workforce Vitality Report for the fourth quarter of 2015 and first quarter of 2016, respectively.
Nearing Parity
In his work developing pay plans for mid-sized and larger credit unions around the country, Dettmann regularly runs into executives he had met previously when they worked for other financial service clients—banks. While these observations are anecdotal, he suggests that credit unions’ efforts to move closer to salary parity with their nearest competitors are widening their field of qualified candidates for executive positions.
A larger hiring pool is an advantage as the unemployment rate drops to prerecession levels and as credit unions are recruiting experienced executives to head new product lines for which the talent pool may be relatively small within the credit union industry, he notes.
“We have more competition for qualified candidates across the board, and what we have to pay people, even at entry-level positions, has jumped some,” Dettmann says. “I’m seeing all sorts of trading of employees in management and executive ranks between credit unions and banks now.
“I used to have the conversation about keeping bank executives in the mix when hiring for a position. We don’t even have to have that conversation any more. It’s just a given,” he adds.
Even with their efforts to close the salary gap with banking competitors, credit unions still face limitations on long-term compensation and with the for-profit institutions’ ability to structure stock options to reward their executives. But Dettmann sees progress in this area as well: 95.4 percent of credit unions participating in the survey offer 401(k) plans for their CEOs; 45.3 percent have structured 457(b) plans; and 36.1 percent now offer 457(f) plans.
Utilization of all these retirement programs has increased a percentage point or two since 2014, indicating that credit union boards are using more of the tools at their disposal to structure more competitive, full-fledged compensation packages for their chief executives.
“It’s telling that we have higher utilization of 401(k) and 457(b) plans overall, and we’re starting to see more evidence of the use of 457(f) plans, which is the plan for more generous set-asides for the CEO,” Dettman says. “That’s where credit unions can make up for the lack of long-term incentive options.”
Another trend evident in the survey data is increasing reliance on incentive pay for CEOs across nearly all asset classes, Dettmann notes. Across the board, 83 percent of all CEOs included in the 2016 survey were eligible for bonuses, compared to 78.5 percent just two years ago. Among the chief executives of credit unions with less than $30 million in assets, 66.7 percent are now bonus eligible, up from 59.1 percent in 2014; in the largest credit unions, 93.9 percent of CEOs earn bonus pay, up from 91.7 percent.
“In an effort to be more competitive, credit unions are choosing to increase pay and there’s a preference to do that in the area of at-risk pay, which mirrors what’s been going on in the private sector for the past decade or more,” Dettman adds.
Economic Boost
The executive summary of the CUES survey suggests that steady growth in the post-recession U.S. economy, with forecasted growth of 2.4 percent in the gross domestic product for 2016, tempered by continued uncertainty in the financial services sector, is likely to result in “modest” hiring and pay gains in the coming year.
“After several years of staff reductions and salary freezes during the financial crisis, companies are starting to hire again and grant larger increases in pay,” the report concludes. “Forecasts for the GDP, salary budgets, inflation and unemployment are all favorable for 2016.”
GDP, inflation and unemployment tie closely to compensation trends and may be even more pronounced for CUs “given how money flows in and out of the financial services sector,” Becher notes.
The survey summary provides a snapshot of executive compensation practices of credit unions across the U.S. and running the gamut of fields of membership and asset size, with 275 organizations submitting data over the past year.
Even with the wide disparity between salary and bonus levels across asset ranges, the percentage changes reported for each executive position provide a useful “apples-to-apples” guide on compensation increases considered competitive within the industry, Becher suggests. The summary also includes a breakdown of base salary, base plus bonus, and total compensation for five asset classes to permit a closer comparison for each executive position.
The survey reports on both median and average compensation data, which provide differing perspectives. Median salary and bonus information may provide the clearest indicator of the middle of the market, while averages, especially from the independent sample, are more sensitive to changes in the composition of the group, such as shifts in the relative number of smaller or larger credit unions participating in the survey.
CUs subscribing to the survey have options to generate customized comparisons to peer aggregates based on asset size, membership base size, full-time equivalent employees, loan portfolio size, region, state, metro size of headquarters location and field of membership. They can also filter data by position for highest level of education, CCE designation and years of financial services experience. In short, subscribers “have a whole lot more ways to filter and dissect the data” for each position, Becher notes.
In addition, the second executive officer was not reported as a separate stand-alone position, so there likely is some double-reporting of salaries of executives serving as executive vice president, CFO, COO, etc., who are also designated as the second-in-command at their credit unions.
Karen Bankston is a long-time contributor to Credit Union Management and writes about credit unions, membership growth, marketing, operations and technology. She is the proprietor of Precision Prose, Portland, Ore.
