Credit union boards replacing retiring baby boomer CEOs,especially those who haven't shopped for top execs in years, aredoing double takes when they look at today's executive compensationpackages, said Susan Mitchell, CEO of O'Rourke, Mitchell andAssociates.

Sometimes the disparity between retiring and incoming CEO pay isso large, the retiring leader feels resentful, particularly if heor she worries about outliving retirement savings. And, addinginsult to injury, boards often expect the retiring CEO to train thenew hire, she said.

"Retiring CEOs put in years building trust with their boards,"Mitchell said, "and for their replacement to come in and ask forthat much money...and get it...goes against the grain of boomerthinking, that you should work your way up."

Board members, often 60 or older, aren't comfortable with thenew compensation packages, either. Those who retired from theworkforce years ago may be out of touch with the rate of inflation.And many use their former salary, or salaries within their selectemployee groups, as improper benchmarks.

In fact, some boards are thrown so "emotionally off balance"when replacing a long-standing CEO, Mitchell said, they oftenretire along with the manager, creating an even bigger transitionfor the institution.

"It has to start with a transition plan and an educational plan,so the board can become aware of the issues, work them out ahead oftime, including an issues that arise with the current CEO,"Mitchell said. "That way, when it comes tie to sit down and startthe recruiting process, everyone is already six months into it, andcan make clear headed decisions."

Gordon Dames, president and CEO of $2.5 billion Mountain AmericaFCU, will retire at year-end after putting in 17 years in thecorner office. The industry legend grew Mountain America from a$265 million cooperative into one of Utah's top retailinstitutions, and he said he's been blessed with a board that haskept his compensation in line with the going rate. However, he saidCEO sticker shock is nothing new.

"That's been going on since I got into credit unions," Damessaid with a chuckle. "I remember 25 years ago, I was sitting at aroundtable meeting with a CEO who was retiring after 20 years onthe job. He said, 'Well, now I know how it feels to retire. Ifinally know what I'm really worth.' Apparently, the new CEO wasgetting paid $50,000 more than the guy who had built the creditunion, and he was very bitter about it."

Dames said boards could avoid that resentment if they involvethe CEO in the compensation process throughout the executive'stenure. He said he's personally experienced a board that mistakenlyused SEG pay scales and structure to determine his pay and refusedto pay incentives because the FOM industry didn't.

In contrast, Mountain America volunteers met with Dames at thebeginning of each year during his reign, taking time to discuss thepast year's performance and upcoming year's goals. In contrast,many CEOs never receive annual reviews or have any idea whatdetermines their raise or bonus.

Mitchell said incentive pay is a common issue among her clients.Today's new 30- and 40-something CEOs want a market-driven coresalary, but they also prefer that up to half of their compensationbe based on key performance measurements. And, they don't want alimit on how much they can achieve, and in turn, earn.

"The new leaders want to be recognized for the work they putin," Mitchell said. "We're seeing more of an entrepreneurial sprittoday because this generation has seen their parents forced intoearly retirement or heard news stories about unethical corporationslosing workers' pensions. They don't trust the old guard; they wantto be in control of their own destiny."

Today's executives also expect excellent benefits, a goodretirement plan and a company car. Mitchell said some credit unionsare also assisting in relocation, given today's economy and realestate market.

Even though he had nothing but praise for his board, Dames saidthe succession won't be entirely pain-free. The CEO estimated he'sonly had 10% board turnover in nearly two decades, and volunteersare nervous about the uncertainty of change.

"We've had a lot of success, and according to my directors, theCEO has been responsible for that," Dames said. "Now that they haveto find a replacement, they keep thinking about that progress we'vehad, and their human inclination is to sigh and wonder if we cankeep this up. They worry about finding someone with the samedemeanor, who will be as effective. It's a tough decision, but thefact is, there are plenty of leaders who are ready and willing tostep into our shoes."

Dames said Mountain America received 500 applications for thehigh-profile position, but with the help of staffing firm D. HiltonAssociates, the board has narrowed the field down to a handful offinalists. Dames said he isn't directly involved in the selectionprocess, but said he would tell the board if he disapproved of oneof their finalists. For the record, he approves of them all.

"If they pick an internal candidate, they'll get a gem. If theypick an external candidate, they'll get a gem," he said.

However, both Dames and Mitchell said skill sets aren't enoughto ensure a new CEO is successful.

"This isn't about selecting the cheapest bidder, it's aboutfinding somebody who totally understands your culture," she said."Quite often, the board decides to look for somebody who'scompletely different, somebody who will embrace innovation and allthese sexy things. They automatically assume the next step must beout with the old, in with the new, and that's usually not thecase."

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