MADISON, Wis. – It’s not quite a doom and gloom scenario, but there’s considerable concern in the industry about the number of credit union CEOs expected to retire in the next five years. CUNA Mutual says its new for-profit-like compensation product can give CUs another weapon in attracting and retaining executive talent as that talent gets more scarce. With CUNA stats indicating that 20% of today’s CEOs will retire in the next five years, the question of whether not-for-profit credit unions can attract and retain tomorrow’s CEOs is being raised. The Achilles’ heel of compensating credit union CEOs and other top executives has always been the inability to offer stock options, which for-profit banks can offer. Credit unions have become better at getting around this with 403b, 457f, 401k, and other compensation plans, however options are still a golden handcuffs technique that executives seek out. CUNA Mutual Group has launched a new “Employee Options” program that mimics for-profit compensation programs in one respect, the ability to offer options. Under the program, the credit union can set aside money to purchase mutual fund options for an executive that the executive can exercise after a certain time period, typically 10-15 years. “It’s an answer for not being able to offer stock options. In the credit union world it’s becoming difficult to retain both talented management staff and CEOs, especially when you’re in competition with banks and mutual insurance companies,” said Dan Balogh, executive benefits specialist at CUNA Mutual. Under the new program, a credit union could give a CEO a $10,000 bonus, for example, and use that money to buy a package of mutual funds. The credit union can buy the funds at a 75% discount, so the CEO is getting $10,000 worth of funds for $2,500. The CU can not discount the purchase by more than 75%. The CEO does not pay taxes on the funds until he or she exercises the options. The plan also allows the CEO to defer cash bonuses or pay raises to purchase the discounted options, allowing them to grow tax-deferred until they are exercised. It can be used as a signing bonus for a new CEO; offered instead of a raise; as a performance reward; or really any way a CU wants to dole it out, said Balogh. Jim Hansen, CEO of the new O’Rourke Career Connections (see related story page 8), said credit unions are waking up to the difficulties of keeping top executive talent. “There’s more of a realization about how difficult it is. Once boards realize they have a top CEO they want to do more to retain them. I don’t see that as much with attracting new CEOs, as I do for CEOs who have done a good job for years,” said Hansen. Hansen said CUs are putting more of a CEO’s compensation “at risk” these days, meaning bonuses and other incentives are tied to the CU’s performance or some other benchmark. If those benchmarks aren’t hit, the CEO’s compensation won’t be as lucrative. “Credit unions are trying to figure out how to tie the goals and objectives of the credit union to compensation, and yet make it a long-term incentive,” said Hansen. “It’s not a deferred compensation plan, it’s another form of a compensation plan. In the for-profit world you get stock, in the credit union world our answer to that is options,” said Balogh. Regulations call for compensation through the options program to be reasonable in terms of the CEO’s salary. “You don’t want to give a million bonus to a CEO making $100,000,” said Balogh. For now, CUNA Mutual is only offering mutual fund options from its family of MEMBERS mutual funds. Two of those funds were named Best In Class for their investment objectives by Mutual Funds magazine last year. -pgentile@cutimes.com