CU CEOs Rake It In Compared With Banking Counterparts
Credit union CEOs who manage more than $250 million in assets earn more in base salary and total compensation than their banking counterparts do, according to the 2013 CUES Executive Compensation Survey, released Aug. 2.
Is it an apples-to-apples comparison? It depends on who you ask.
First, the numbers: in the $250 million to $499 million asset class, credit union CEOs earn a median base salary of $236,125 and median total compensation of $260,522. Bank CEOs in the same asset class earn median base salaries of $221,053 and median total compensation of $247,853.
The difference in pay grows as asset sizes increase. From $500 million to $999 million, credit union CEOs earn $350,000 in median base salaries compared to $275,206 for bankers; median total compensation is $366,068 for credit unions and $344,562 for banks. And in the billionaire’s club, credit union CEOs earn $449,948 median base salaries and $541,820 total compensation, while bank CEOs who run $1 billion and larger shops comparatively earn $383,750 median base salaries and $483,750 in median total compensation.
In its executive summary, CUES said it is important to note that comparisons consider only cash compensation. Benefits, long-term incentives like stock options and perquisites are not included in the analysis, which would inflate total banker compensation, the report said.
For banks that are publicly traded entities, that is the case.
“You can’t make an apples-to-apples comparison because much of bank executives’ compensation is incentives, bonuses and deferred compensation,” said CUNA Executive Vice President of Strategic Communications and Engagement Paul Gentile.
He added that a Wall Street Journal/Hay Group 2012 CEO Compensation Study revealed that long-term performance plans accounted for 31% total compensation for CEOs that run publicly traded companies, and bonuses accounted for another 23%.
“Credit unions can’t offer these same equity vehicles. Therefore, incentives and bonuses constitute a dramatically smaller portion of credit union CEO cash compensation,” he said.
That may explain why the difference in pay between CEOs at credit unions and banks increases along with asset size, said American Bankers Association Senior Economist Keith Leggett. Small community banks aren’t as likely to be publicly traded, and as a result, can’t offer additional compensation beyond cash, just like credit unions.
Next Page: Competing for Talent
Community banks compete for the same talent as credit unions, Leggett said, so compensation packages at either institution, regardless of asset size and what form that compensation takes, tend to be in line with each other.
“So while banks may have more discretion offering incentives such as stock options–and most community banks don’t because they aren’t publicly traded entities–you’ll find credit unions will make up for it in other ways,” Leggett said. “That’s why their median base salaries are higher.”
Compensation is driven by demand, not institution type, he added. Leggett said he doesn’t consider credit union compensation to be unreasonable, even for a not-for-profit entity. Credit union boards and bank boards are bringing in compensation consultants when considering what kind of packages to offer executives, and those consultants consider the entire financial services marketplace, not just credit unions or banks.
“You may find that some may decide to give higher base pay, while others may say, ‘we’ll give you a lower base but put in incentives for performance’,” he said.
Despite competing for the same pool of talent, credit unions assert on Capitol Hill that they are different from banks. Will the survey be used by bankers when they lobby against preservation of the credit union tax exemption?
Leggett said the question was beyond his call, because he’s not a lobbyist. But he speculated that compensation could open up a can of worms for bankers due to the large packages earned by big bankers.
“Credit unions could say, well look at Jamie Dimon,” he said. “It’s a double-edged sword.”
John McKechnie, partner at the Washington-based strategy firm Total Spectrum, said throwing rocks at glass houses won’t necessarily stop bankers from using the survey results in their lobbying efforts.
“That doesn’t mean they won’t try it to cause trouble,” he said.
McKechnie said he recalls 10 years ago, the last time the credit union tax exemption was an issue on Capitol Hill, banks did press the compensation issue.
According to the survey, credit union CEOs at shops with fewer than $250 million in assets earned less than their banking counterparts. In the $100 million to $249 million class, the credit union CEO median base salary was $153,300 and total compensation was $173,605. That’s considerably less than bank CEOs managing the same assets, who received median base salaries of $196,200 and total compensation of $221,250. And below $100 million in assets, credit union CEOs earned median base salaries of $101,909 compared to $130,866 at banks. Total compensation was $106,500 for credit unions and $148,514 for banks.