Compensation Growth Revealed

Salary increases and bonuses over the past year equaled or surpassed compensation raises for at least a decade among credit union CEOs. And other members of executive teams received healthy raises as well, according to the 2014 CUES Executive Compensation Survey.

On average, CEO base salaries increased 7.8 percent over the year ending April 30, 2014, base plus bonus pay increased 10 percent, and total compensation was up 9.5 percent. Those compensation increases are near or above the high-water mark for the previous decade, posted in 2006 (8.5 percent base salary, 9.58 percent base plus bonus, and 9.75 percent total compensation) and are much higher than the low point in 2010, when base salaries rose only an average 3.62 percent and the other two measures were well below 3 percent.

“What we’re seeing, across the board, is pretty healthy increases for all executives,” says Scott Dettmann of Carlson Dettmann Consulting, Middleton, Wis. “Credit unions continue to lead the pack in the financial services sector in terms of base salary increases. It’s a case of more of the same—and that’s a good thing.”

Reviewing the CUES survey results on a “same-sample basis,” comparing data only from credit unions that participated both last year and this year, “we can see increases ranging from 3.5 percent to 10 percent, which is in line with or on the higher side of compensation in other business sectors,” says Michael Becher, CPA, senior project director with Industry Insights, Dublin, Ohio, which administered the survey. “It certainly reflects the resurgence in financial services in the wake of the Great Recession.”

Based on all respondents, the average base salary for CEOs was $254,647, with base plus bonus averaging $295,018 and total compensation at $301,256. Among other members of the executive team, the business lending executive position posted the largest total compensation increase, at 11.3 percent. Average total compensation ranged from $202,749 for executive vice presidents and $186,089 for senior CUSO executives to $121,598 for marketing executives and $95,859 for business development executives.

Quantifying Key Factors

Industry Insights conducted a statistical analysis to identify and quantify the impact of variables that have the most consistent and significant impact on compensation decisions in the credit union industry.

“When executives are up for review or changing positions, credit unions using this report can apply these variables in helping to determine equitable compensation and whether an increase is due,” Becher explains. “This type of modeling is new to this report, but it’s been applied in other industries. You can learn a lot through statistical analysis and apply it across most of the executive positions in your organization.”

The four factors that have the greatest influence on pay raises and bonuses are asset size, experience in current position, education, and attainment of CUES’ Certified Chief Executive—or “CCE”—designation. These variables, taken together, account for 83 percent of variations in CEOs’ compensation, and 71-74 percent of the pay variation for nine other executive positions, including executive vice president, chief operations officer, marketing executive, and information systems/e-commerce executive.

This analysis goes a step further to quantify the impact of each variable. For example, controlling for other conditions, the CEO of a CU that has 1 percent more assets than another typically makes 0.4 percent more than the chief executive of the slightly smaller organization. The factor related to asset size ranged from 0.34 percent to 0.28 percent for other executive positions. Applying this factor, a CU board could estimate that growing assets by 10 percent should boost the CEO’s total compensation by 4 percent, the CFO’s by 3.4 percent, and the chief lending officer’s by 2.8 percent.

The analysis, reported in the executive summary of this year’s survey, indicates that each additional year of experience in their current position typically nets CEOs an additional 0.8 percent in total compensation, 0.5 percent for IT execs, and 1.1 percent for marketing executives, for example.

Under the category of education, CEOs with an MBA could expect to earn 14.5 percent more, and those with a doctorate typically 21.3 percent more, than peers with a two-year degree or less formal education. Executive vice presidents, second executive officers, chief lending officers, and marketing and HR executives who’ve earned an MBA can also expect to earn significantly more than peers with a two-year degree.

Along the same lines, chief executives with the CCE designation typically earn 6.4 percent more than their peers who have not attained it. This designation has the greatest impact on the compensation of second executive officers, who earn an average 8 percent more for having achieved this professional milestone through completion of the three segments of CUES’ CEO Institute and two between-segments projects. Information systems/e-commerce executives earn 7 percent more, and marketing executives, 6.9 percent. On the other hand, the designation has a smaller impact for HR and branch/member service executives, who earn, on average, only 0.7 percent and 1 percent more, respectively.

Executive ‘Snapshots’

Another new feature in the executive summary of this year’s survey is a “snapshot” page for each executive position, showing average and median compensation levels for all credit unions and across five asset ranges, as well as charts depicting highest level of education, rate of respondents who hold the CCE designation, years in the credit union movement, and years in current position.

These one-page summaries are a “user-friendly” means for boards and executive teams to gain a high-level profile of the typical executive in each of these positions to aid in recruitment and/or compensation decisions, Becher notes.

Relying on objective industry data like the information provided in the CUES Executive Compensation Survey gives boards a “reasonable” basis on which to base their pay, bonus, and benefit decisions for chief executives, in a way that would pass regulatory muster, Dettmann suggests. (For more information on regulatory concerns regarding executive compensation, see “Make Your Way … Through the Pay Maze,” by Dettmann and Bob Cartwright, in our July 2014 issue)

Over the past decade, credit unions have made steady gains in providing comparable salaries for their executives in line with pay practices in the wider financial services industry, he adds. “Where we used to have a disparity between how the various executive positions were compensated in comparison to their banking peers, there’s now a relative parity, at least in terms of base salary. The bonuses that are paid to credit union executives, though, remain quite modest in comparison to what we would see on the banking side.”

The CUES Executive Compensation Survey is conducted online and continuously updated throughout the year. Subscribers can create customized reports to analyze compensation data using a variety of filters, including asset size, number of members, region or state, number of employees, and loan portfolio size.

The 2014 executive summary is based on data submitted by 409 credit unions. Becher urges all credit unions subscribing to the survey to supply compensation data for their executives. “The more people who participate by sharing their data, the better the results,” he notes.

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, Stoughton, Wis.