A Direct Line Blog

By Donya Parrish, MCU VP- Risk Management

Last week we talked about some of the challenges of hiring and retaining staff. Now, let’s shift the focus to an even more important aspect of that same topic – your CEO’s salary! As your board’s only employee, the CEO level of pay, incentives, and benefits is one of the most critical decisions a board makes. It should not only be a priority when they are hired but regularly reviewed as the individual grows and gains experience in their career with you.

In his December 2020 blog, Kevin Smith of TEAM Resources notes, “CEOs are concerned that their board of directors is out of touch with how to handle CEO pay. The boards are concerned that their CEO is expecting too much in salary or other compensation and is not appreciative of the board’s effort to compensate them fairly.” That sets up some friction and frustration that may not benefit the credit union in the short or long-term.

Another important point Kevin makes is that board members are tasked with setting the CEO pay, but they don’t have any comparison except their own career and industry, which may be very different than a credit union. He says, “Comparing credit union salaries to your own background is often an apples-to-oranges comparison.” The credit union can consider using resources like salary surveys for reviewing the credit union industry. You can also appoint a compensation committee, including outside expertise, to regularly review and make recommendations to you.

However you choose to handle CEO compensation, I hope you will read Kevin’s article and take note of the importance of keeping this issue on your radar.