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LAS VEGAS – The trend toward variable or incentive pay for credit union CEOs shows no sign of slowing down with more than half of the nation’s credit unions now using this format to compensate their top managers, a Kansas salary consultant told directors here. Addressing the 28th annual National Directors’ Convention, Clinton Koker, a partner in Koker Goodwin & Associates of Wichita, warned, however, that regardless of pay formula, boards and their CEOs need to agree on defined performance objectives early in the year instead of hurried assessments at yearend. The result of boards putting off those reviews in the cycle can be wide misunderstandings and ill feelings, said Koker. Those defined objectives to measure results permits the board and the CEO to be on the same wavelength at all times, maintained Koker, a former human relations executive and whose current client list includes 300 CUs. “There has to be collaboration and it simply can’t be unilateral with the board coming in at yearend and telling the CEO-here’s what you’re getting,” said Koker. He said the board and the CEO need to agree on what defines performance based on such factors as efficiency of operations, ROA, operating costs as a percent of assets, or cost per member. Or perhaps the objectives would simply be growth in members, loans or shares. Still other important factors include: safety and soundness of capital, charge-offs, and member satisfaction. Whatever objectives are agreed on during creation of the performance plan, they need to be stated clearly at the beginning of the year for compensation practices to work to the satisfaction of both board and CEO, advised Koker. As an example of base pay strategy, he took a small CU where the CEO pay was $54,000, but the going market rate was $60,000 and the average market change was 2.5% and thus the strategy would be “to require an average increase of 5.5% per year to get to market within three years.” In his remarks to a breakout session at the NDC meeting, Koker cautioned boards against paying CEOs based solely on local markets without peer comparisons. “Many boards simply personalize the whole process based on what individual directors had been receiving in the workplace,” Koker concluded noting also 457 plans continue to be a popular compensation feature. As for perks, he recommended the physical exam remain on the permanent list as a helpful and precautionary tool for boards should the CEO become ill. Also in his remarks, the Kansas consultant and former human relations professional cited a 2004 base pay salary survey for a CEO in an $80 million CU. The CUES data lists average pay at $106,943 while CUNA was below at $101,447. The fact is, said Koker “both are correct” based on differing samples, a point to be considered in examining salary data in industry surveys. [email protected]

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