Almost 15% of the largest credit unions in the nation lost moneylast year and more than 20% experienced negative loan growth. Ifyour credit union was fortunate enough to make money or grow loans,then congratulations and condolences are in order.

You are now officially on the radar of almost 1,500 creditunions that covet your CEO. Today's environment suggests thatboards need to formally evaluate their CEOs' performance, andupdate salary, incentive and retirement plans to keep their toptalent.

While most credit unions provide an annual salary increase fortheir respective chief executives, 30% do not have a formal reviewprocess for their CEOs' performance, almost 40% don't review theirCEOs' retirement plans on an annual basis and more than half findtheir incentive plans to be difficult to maintain. Reviewing andmaintaining your CEO's compensation, incentive structure andretirement plan are essential to inspiring top performance.

Based on our experience over the last 30 years, here are fivereasons why credit union boards fail to perform annual performanceand compensation reviews and incentive plan and retirement benefitupdates:

1. CEO is too close to retirement.

Even if your CEO is close to retirement, not placing him or herat the proper compensation level or providing competitiveretirement benefits can be detrimental. It can lead to poor hiringchoices. If the board doesn't commit to a competitive package forthe CEO, then the next layer of existing executives may not get acompetitive package.

If the intention is to save money, the strategy can backfirequickly once one executive leaves the credit union for a morelucrative position. This can leave a vacancy in a crucial positionwith the CEO unable to hire the top outside talent.

2. We are already paying enough.

“Enough” is a relative term. When enough is defined by adirector's current or past employer, the comparison can bemisleading. The market for a credit union CEO is set by the creditunion industry using nationwide salary ranges, not the sponsor orlocal economic conditions.

3. What will our members think?

In most cases, a CEO will make more than the average member.However, this is the situation in most businesses. The board'sresponsibility to the membership is to make sure they hire thehighest-performing CEO available. A willingness to commit to marketcompetitive pay and retirement benefits gives the board a chance atcontinuity, which is a major factor of employee and membersatisfaction.

4. Collecting the data is time consuming.

The market moves daily as CEOs are hired and fired throughoutthe year. The most important responsibility of the board ismanaging its only employee – the CEO. If you are unwilling toreview your CEO's compensation and retirement structure annually,there is a good chance you will lose your executive.

5. We just reviewed the retirement plan.

Retirement plans need to be continually reviewed. IRS rules andfederal regulations change and the funding amount can vary fromyear to year. You don't want to be in a situation where your CEO isready to retire and the plan is out of compliance or significantlyunderfunded.

Using a third party can be useful for not only designing andimplementing a retirement plan, but also maintaining it andensuring it is compliant.

Debra Hilton is EVP at D. Hilton Associates Inc. She can bereached at [email protected] or 800-367-0433.