Management

Executive Compensation: Waiting for a Rebound

Expect smaller pay increases, fewer incentives.

September 09, 2011
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Ask Beth Soltis to cite the most noteworthy executive compensation trends among credit unions today and she’ll quickly reel off three: Lower average pay increases, a lower likelihood of receiving a pay increase, and lower prevalence of incentive awards, says CUNA’s senior research analyst.

Before the recession, credit union CEOs typically had annual pay increases of 7% to 8%, and about 5% of CEOs wouldn’t receive a pay increase in a given year.

“But in 2009, 31% of CEOs did not receive a wage increase, while the average increase was 4%,” Soltis reports. “The 2010 average CEO pay increase was 3%. Although more CEOs received an increase, 26% did not.

Average Pay Increases for CU Management*
2007: 4.27%
2008: 3.59%
2009: 2.59%
2010: 2.16
2011*: 2.17
2012*: 2.17%
*budgeted
Source: CUNA’s 2011-2012 Complete CU Staff Salary Survey Report

“Also, fewer CEOs are planning retirement,” she continues. “They’re trying to rebuild their nest egg or are waiting for the economy to improve. Many CEOs, especially those at smaller credit unions, are personally invested in their credit unions and don’t want to leave until their credit unions make it through these tough times.”

Soltis says “planning to retire” generally means retirement will occur within five years. The percentage of CEOs planning to retire fell from about 30% pre-recession to about 20% during the recession, and remains at that level.

According to CUNA’s 2011-2012 CEO Total Compensation Survey Report, about 30% of credit unions offer CEO incentives—typically cash awards based on predetermined performance criteria. Before the recession, 45% of credit unions offered CEO incentives, Soltis reports.

She believes pay increases will start to rebound this year, albeit not to pre-recession levels. “Although the economy is improving, it needs to stabilize for credit unions to dole out higher increases. Generally, bonus and incentive amounts are up a bit, mostly because financial institutions are a little better able to give them.”

Even if executive compensation does rebound, Soltis says there will be a higher level of accountability due to provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act and increased public scrutiny.

“Boards of directors will need to be closely involved in every piece of compensation planning and document every decision and the rationale for it,” Soltis says. “For example, if you use peer comparisons to justify an incentive or salary, you have to document who and why you selected as your peer group, and what standards you used. NCUA will ask, ‘Is this truly a peer group?’ There will be some teeth here—boards will be held responsible for decisions that are later called on the carpet.”

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Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

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