One nugget of news from last month's House Ways and Means Committee hearing on the credit union tax-exemption that isn't being talked about much is the panel's interest in credit unions disclosing executive salaries. I'm not sure the industry is ready for this. Compensation is an inherently controversial topic. Just last year we witnessed the stir it can cause. Portland Teachers CU CEO Cliff Dias' $1.6 million compensation package went public and raised a lot of eyebrows among credit unions and drew criticism from bankers who pointed to it as one more way credit unions are becoming more bank-like. Shortly after, another CEO of an Oregon credit union decided to inform members about her $1 million-plus compensation package. One million dollar salaries aren't common in this industry, but salaries are on the rise and they will continue to move up. Here's why. As homegrown industry talent retires, more and more credit union CEOs are coming from outside of credit unions. In a few of the high-profile credit union executive searches going on right now, boards have chosen to contract with international search firms, rather than one of the many well-established credit union industry search firms. This can only increase the number of applicants from other industries. Former bankers are joining the credit union CEO ranks all the time. These bankers know what they were paid as bankers and they're negotiating with credit unions as bankers. They are willing to give up their stock options, but at a price. I recently spoke with some credit union consultants who specialize in executive searches and they say more credit unions are discovering they have to bolster their compensation packages to attract top talent. Credit unions are piling bonuses upon bonuses that address short-term and long-term goals. CEO candidates want to know that their hard work today will pay off down the road. With no ability to beef up stock price, they want cash. For example, a CEO receives a percentage bonus each year for meeting annual performance goals, but to sweeten the deal on the long-term the CEO may get a five-year bonus that pays them half of the total amount of bonuses they earned in the five-year period. Creative and becoming more common. Credit unions are learning the value of perks. Not so-called perks like a cell phone. Is a cell phone an executive perk in this day and age? No way. They are buying country club memberships that can cost up to $100,000. These are risky because once that money's spent it's spent. You don't recoup country club memberships, but it's attractive to some CEOs. This changing landscape is causing sticker shock for boards who have to go out in today's market and recruit a new CEO after their longtime CEO, who has been in place for 20 years and came over from the main sponsor company, decides to retire. The board quickly discovers the bargain they had with their past CEO. But that's the next question. How do you know what's a bargain? One consultant told me his firm stepped in to take over the management of a credit union for a full year as they went through an exhaustive CEO search. One of the bonus contract provisions was for the firm to increase the bottom line of the CU by a million dollars. Turns out the firm was able to increase it by almost $2.5 million. The credit union's board was left wondering if the salary in the low 100′s they were paying the former CEO was worth it given how quickly a new team was able to grow the credit union. Some bargains come at a price. Compensation is such a unique, individual thing, it's hard to say what is fair. It's not an exact science. Face it. Sometimes you'll pay too much, and some times you won't pay enough. The best measurement is time and results, having a track record to base decisions. Salaries are definitely going up, but sometimes money isn't everything. I heard stories of boards laughing at bankers' lofty salary levels at their bank jobs. They'll never get those dollars in the credit union industry, they say. But they shouldn't laugh too quickly. Oftentimes the bankers are willing to take a lower salary in exchange for their sanity. They see leading a credit union as a breeze compared to the pressure cooker of having to meet shareholder expectations, and they're willing to leave money on the table. The makeup of a board could have more to do with a CEO's compensation than anything else no matter what the credit union achieves under the CEO. Board members who have their homes paid off and living comfortably on modest fixed income each month, wonder why their CEO can't survive on less. Some board members may have an artificial ceiling, like the CEO shouldn't make more than seven times the lowest paid staff member. As one consultant told me, it's human nature and these issues will be around as long as credit unions are. One thing that credit unions are going to have to get over is the belief that since they are nonprofit cooperatives they shouldn't pay the big bucks. Members deserve a high-quality credit union experience, and that may mean paying for high-quality talent.within reason. The CEO of Costco is often held up as the antithesis of the greedy CEO who can't seem to get enough. Costco is a multi-billion dollar company, yet the CEO is paid only $350,000, and the company has grown exponentially under his leadership. Credit unions would be lucky to run into those unique executives. When you see those rare individuals, seize the day. But don't forget, the Costco CEO's stock options are worth well over $100 million. -

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