If your paycheck shrank a little last year, you're notalone.

“The 2010-2011 CEO Total Compensation Survey” from CUNA showstotal credit union CEO paychecks slumped 3.5% in 2009, mainly dueto a reduction in variable pay. Overall, 39% of CEOs at creditunions with $100 million or more in assets received a bonus orincentive reward in 2009, down from 73% in 2008. The median amountawarded was $16,345, compared to $26,000 in 2008.

Because credit unions cannot provide equity vehicles such asthose offered in publicly traded companies, base salary is thebiggest hunk of the total compensation package for credit unionCEOs. Base salary typically accounts for 86% of CEO totalcompensation among credit unions with $100 million or more inassets.

“As of Jan. 1, 2010, median base salary among these CEOs is$185,496-3.6% below the 2009 figure,” the study reveals.

The study also suggests it's time for credit unions to take aclose look at their executive compensation plans.

“While executive compensation reform is targeted toward publiclytraded companies, experts advise nonprofits to be prepared forsimilar requirements and to implement SEC disclosure rules whenmaking pay decisions.”

“Furthermore, to proactively comply with executive reformmeasures-and to avoid a poorly designed compensation package-creditunions should review their executive compensation plans,” theauthors cautioned.

Changes in variable pay plans can have a definite impact, saidBeth Soltis, CUNA senior research analyst.

“In fact, if CEOs are eligible for variable pay but don'treceive payouts and perceive the cause to be external marketfactors which they cannot control, the result can be diminishedmotivation and a greater likelihood for them to seek opportunitieselsewhere,” she stated. “As business performance improves, creditunions will need to evaluate their variable pay plans-and theirability to produce payouts-in order to reward and retain theirCEOs.”

If you're looking for some good news, you can check the latestCUES comparison of credit union and bank CEO compensation. The CUES“Executive Compensation Survey” found CEOs of credit unions with$250 million or more in assets actually beat their communitybanking counterparts on average in terms of both base salary andannual bonuses.

Among the largest financial institutions, credit union CEOsearned a median base salary of $390,270, compared to $389,400 fortheir banking peers.

Kevin Kaeding, president of Kaeding Ernst & Co., benefitbrokers and consultants, puts the issue of CEO compensation inperspective.

“Because of the yield curve, it's not business as usual,” hesaid. However, he doesn't believe CEOs are as eager to move on toanother jobs as studies indicate many workers are.

“I don't think I see that in the ranks of the CEOs. Creditunions are a very specific world. I don't see that many [CEOs] arepreparing to move on.”

However, he continued, lack of a solid retirement plan couldindeed prompt a CEO to start looking.

“In our business we tend to focus on providing supplementalretirement plans. That's still a key concern among all executives,and certainly among CEOs.”

Kaeding noted that when he went into the business 30 years agothere were defined benefit plans everywhere, including the world ofcommunity banks and credit unions.

“Not so today,” he said. “In many cases we've seen very, verymodest compensation increases. But we've also seen the situationwhere if an executive doesn't have a supplemental retirement plan,that's when an executive may really look at otheropportunities.”

If a board does need to find a successor, it may discover thetalent pool is not as deep as it might have thought. As creditunions have grown larger and more sophisticated, the skill setneeded by the CEO has also expanded.

John Andrews, executive vice president/compensation at D. HiltonAssociates, doesn't see a lot of commonality in CEO paystructures.

“The main driver right now is capital position,” he said. “CEOsare not being singled out.”

A credit union struggling with its capital position may avoidfilling a vacancy when someone leaves. But it may pay a premium tohire a CEO who can help them fix its problems.

“We see a lot more boards concerned about reasonableness ofcompensation levels. They're putting together performance standardsso they can demonstrate to regulators and the membership that thepay is reasonable. That's been really strong in the past two orthree years,” Andrews said.

From the CEO's perspective, an executive taking over afinancially challenged credit union will be looking for somesecurity. The CEO wants well spelled-out retention and severancepackages. Or the executive may ask to be made whole when it comesto benefits if they move from Job A to Job B.

“One of the things we're telling boards right now is thatdocumentation is their friend,” Andrews indicated. “They need aformalized pay philosophy and need to document their compensationplan. It's not so much the dollars, but how you deliver the dollarsand a clear history of why decisions were made.”

Perhaps that's part of the reason CUNA found 45% of the CEOs ofcredit unions in the $100 million-plus ranks have an employmentcontract. Sixty percent of those contracts were required by theboard.

Andrews' advice is pretty much echoed by Paul R. Dorf atCompensation Resources Inc. Dorf lists on his website sevenspecific steps he believes can improve current pay programs:

Move from discretionary bonuses to results-oriented incentives.This requires appropriate realistic goal setting that balances bothquantitative and qualitative measures.

Clearly define expectations and hold executives accountable fortheir successful completion.

Balance short-term and long-term decision making by introducingcomplementary plans so “all eggs are not in one basket.”

Add sufficient checks and balances to incentive plans to ensureawards are justifiable.

Institute circuit breakers to all plans that prohibit paymentsunder certain circumstances.

Institute claw-back provisions in the event problems areuncovered after the fact.

Communicate effectively.

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