Large salary and benefits payouts always attract attention – buteven more so when they concern credit union presidents/CEOs asopposed to other corporate heads. Despite credit unions'not-for-profit statuses, seven- and even eight-figure settlementsoccasionally bubble to the surface.

David Maus, president/CEO of Public Service Credit Union inDenver, Colo., made headlines in 2012 when he took a preretirementpayout of some $11 million on top of a $500,000 annual salary. Thelarge payout for Maus' 36 years at the credit union's helm, whilerare, was an attention-getter, according to Charles Shanley,executive vice president of the executive recruiting firm John M.Floyd & Associates based in Baytown, Texas.

“It's the crazy amount of money he made,” Shanley said of Maus,who left PSCU this month to make way for new president/CEO ToddMarksberry, the former executive vice president/chief operatingofficer at $4.6 billion Delta Community Credit Union in Atlanta,Ga.

Although Maus' situation was highly unusual, the growing cost oftop executive talent takes some credit union boards by surprise,Shanley added.

“There are still credit union boards out there that suffersticker shock when it comes time to replace long-term CEOs who areretiring,” he explained.

More of those boards will have to face the music in the comingyears as the growing number of baby boomer retirees take their tollon credit unions' veteran leadership. Although most candidateswon't hum as rich a tune as Maus did, salary and benefit trends areclimbing upwards, and top-quality candidates will be facing what,for them, is becoming a sellers' market.

However, savvy boards are responding with pay-for-performancepackages that are simpler in design and, many feel, more effectivein motivating high-level performance. During the coming years,well-designed incentive packages will be crucial in attracting toptalent, according to Sue Mitchell, CEO of executive recruiterMitchell, Stankovic and Associates in Boulder City, Nev.

“With 46% of the credit union industry eligible for retirement,we're looking at a significant leadership transition period,”Mitchell said. “The need is there, and we have to have betterrecruiting processes in place and do a better job identifyingemerging leaders.”

Even though the credit union industry continues to consolidate,which will lead to fewer top-level positions overall, currentdemographic trends will mean more opportunities for the rightcandidates in the near future. The next generation of CEOs willneed to be effective strategic and tactical thinkers, andsecond-tier executives must be given the opportunity to learn theskills they need to step effectively into the C-suite of theircurrent or another credit union, Mitchell said.

“Simply hiring a recruiting firm to do a search isshortsighted,” Mitchell said. “We have some real talent waiting inthe wings that isn't being given the chance to develop.”

Marksberry's move to PSCU is a good example of a second-tierexecutive migrating from a larger credit union to take the reins ofa smaller institution. In the coming years, similar scenarios willplay out all over the country, various recruiters said, and boardsneed to understand and develop the proper environment if they wantto keep the next generation of leaders at home.

“The next five years will be transitional, and by 2020 we'll befacing a perfect storm of leadership needs and changingconditions,” Mitchell added. “The consolidation of smallerorganizations will no longer allow existing CEOs to easily step upthe asset ladder to larger credit unions.”

John Andrews, executive vice president for executive recruitingfirm D. Hilton Associates Inc. in The Woodlands, Texas, saidsuccession planning has become key for credit unions that want tokeep the leadership they have in preparation for the day when theirCEOs exit and they are faced with filling what has become anincreasingly complex role.

“The last statistic I saw said that 19,000 people are retiringevery day,” Andrews said. “As a result, you see a lot of internalhires at the CEO level at the larger credit unions more so than inthe past simply because the supply is relatively low rightnow.”

Read more: Succession plans that allow promotionsfrom within are popular …

Succession plans that allow credit union EVPs to move into theCEOs' roles are becoming more commonplace, Andrews noted. When itcomes to compensating those new CEOs, however, some boards stillbalk at the growing cost of compensation and, in the worst case,try to cut a deal with a newly minted chief executive. Severalrecruiters advised against that strategy.

“Boards have a fiduciary responsibility to hire the bestpossible candidate from the marketplace,” Mark Angott, president ofAngott Search Group in Rochester, Mich., said. “But some boardsthat don't do it often don't do it well.”

Andrews agreed. “Some boards think they can get a 'hometowndiscount' for hiring an internal person, but as soon as you becomea CEO, you're in play,” he said. “Get the retirement or retentionpiece in writing during the first year of the CEO's tenure. NewCEOs also make this mistake by not asking for the market rate rightup front.”

Compensation rates vary based on the asset size of the creditunion and the complexity of the challenges that the institutionfaces, several recruiters said. But despite popular belief, creditunion location plays little or no role in determining CEOcompensation, Andrews said.

“It's counterintuitive, but geography only matters at the stafflevel and doesn't change what credit unions pay their CEOs,”Andrews said. “Try and bargain based on location and it might bethe worst $5,000 you'll ever save.”

More and more, compensation packages are being based onperformance pay tied to the credit union's strategic plan and mayexceed the salary itself, Mitchell said. The recruiter suggestedthat the base salary be reviewed periodically to make sure it's inline with the marketplace, while performance pay goals can beexamined annually.

Performance pay can focus on up to five key ratios, she added.Three of those ratios should be tied to the credit union'sfinancial performance, while two others can link to discretionarygoals, like completing an IT conversation or other tasks designedto move the institution forward.

In terms of other perks, recruiters said that relocation,company cars, country club and health club memberships and othercommon benefits are less prevalent now than they have been in thepast. Contracts of three to five years are still fairly commonamong credit union leaders, they said.

Mitchell noted that many compensation packages includerecognition and provisions for the candidate's spouse and providetravel and conference attendance expenses for that person. Theconcept of being a “virtual CEO” and working only part-time onsiteand the rest of the time from a remote location is getting greaterattention during negotiations, she added.

As the percentage pay parameters get bigger, however, contractstend to get simpler, according to Andrews. The days of long,complicated multi-page agreements are over, he added.

“We're seeing much more simplified packages in terms ofcomponents,” Andrews said. “Incentive plans have replaced bonusesand boards are willing to pay a premium in the marketplace if theythink they are going to get a premium performance.”

In hiring a CEO, either internally or externally, boards mustremember that they are making a business decision, not merelyanswering a human resources question, he added.

“You're looking for the best person to run your credit union, socast the widest net possible and search every nook and cranny,”Andrews explained. “Then you will have done your due diligence andyou'll be able to sleep better at night.”