Do CU CEOs Really Earn More Than Bankers?

Credit union CEOs who run shops with more than $250 million in assets earn more in median base salary and total compensation than their banking counterparts do, according to the 2013 CUES Executive Compensation Survey, released Aug. 2.

However, credit union and bank trade associations disagree over whether the survey provides a fair comparison of total compensation.

According to the survey, in the $250 million to $499 million asset class, credit union CEOs earned a median base salary of $236,125 and median total compensation of $260,522. Bank CEOs in the same asset class earn lower salaries of $221,053 and less total compensation too, at $247,853.

And, the difference in pay grows as asset sizes increase. From $500 million to $999 million in assets, credit union CEOs earn $350,000 in median base salaries compared to $275,206 for bankers; median total compensation is $366,068 for credit unions and $344,562 for banks.

At more than $1 billion in assets, credit union CEOs earn $449,948 median base salaries and $541,820 total compensation, while bank CEOs who run $1 billion and larger shops comparatively earn $383,750 median base salaries and $483,750 in median total compensation.

In its executive summary, CUES said it is important to note that comparisons consider only cash compensation. Benefits, long-term incentives like stock options, and other perks are not included in the analysis, which would inflate total banker compensation, the report said.

“You can't make an apples-to-apples comparison because much of bank executives' compensation is incentives, bonuses and deferred compensation,” said CUNA Executive Vice President of Strategic Communications and Engagement Paul Gentile.

He said a Wall Street Journal/Hay Group 2012 CEO Compensation Study revealed that long-term performance plans accounted for 31% total compensation for CEOs that run publicly traded companies, and bonuses accounted for another 23%.

“Credit unions can't offer these same equity vehicles. Therefore, incentives and bonuses constitute a dramatically smaller portion of credit union CEO cash compensation,” he said.

That may explain why the difference in pay between CEOs at credit unions and banks increases along with asset size, said American Bankers Association Senior Economist Keith Leggett.

Small community banks aren't as likely to be publicly traded – the median-sized publicly traded bank or bank holding company was approximately $694 million in assets, he said – and as a result, they can't offer additional compensation beyond cash, just like credit unions.

Community banks compete for the same talent as credit unions, Leggett said, so compensation packages at either institution, regardless of asset size and what form that compensation takes, tend to be in line with each other.

“So while banks may have more discretion offering incentives such as stock options–and most community banks don't because they aren't publicly traded entities–you'll find credit unions will make up for it in other ways,” Leggett said. “That's why their median base salaries are higher.”

Compensation is driven by demand, not institution type, he added.

Will the survey be used by bankers when they lobby against preservation of the credit union tax exemption?

Leggett said the question was beyond his call, because he's not a lobbyist. But he speculated that pointing at credit union compensation could open up a can of worms for bankers due to the large packages earned by big bankers.

John McKechnie, partner at the Washington-based strategy firm Total Spectrum, said throwing rocks at glass houses won't necessarily stop bankers from using the survey results in their lobbying efforts.

“That doesn't mean they won't try it to cause trouble,” he said.

McKechnie said he recalls 10 years ago, the last time the credit union tax exemption was an issue on Capitol Hill, banks did press the compensation issue.