By Ray Birch
MADISON, Wis.—Credit unions were paying up in 2020 to keep their executive talent, according to a new Credit Union Executives Society (CUES) study that reveals CUs increased CEO pay at a much higher pace than other businesses, including banks.
The moves were made, the study’s author stated, not only to compete in what is becoming a heated war for talent. but also to make sure leaders remained in place during uncertain times brought on by the pandemic.
“Credit union executives saw a significant increase-- in fact 6.8%, just shy of 7% year over year in 2020,” explained Scott Hackworth, CEO of Industry Insights, whose company conducted the CUES Executive Compensation Survey. “This is among our same sample grouping—we look at the same credit unions from year to year. About 3% is the average increase. This was big.”
Hackworth, a CPA, acknowledged he was somewhat surprised at the finding, coming in a year in which the pandemic had many credit unions setting aside additional reserves out of concern over loan performance and net income.
“I admit, this is not what you might think you would find going into the 2020 study,” Hackworth said.
It’s All About Retention
What the numbers reveal, Hackworth told CUToday.info, is credit unions were handing out big raises not so much to reward strong financial performance but to make sure management teams remained in place.
Scott Hackworth
“This finding seems like a bit of an oddity,” Hackworth said. “Back in March of 2020, everyone is thinking everything could be falling apart. People were just glad to keep their jobs. But, instead, in the end, we saw very much the reverse when it comes to compensation.”
Hackworth said he believes credit unions paid approximately two percentage points more in termso of compensation increases than most other industries in 2020 out of fears over what might lie ahead for the economy and a desire for a steady hand at the wheel.
“During these difficult times we saw that credit unions wanted to make sure their captains, those leading the ship, remained in place during the tough times,” he said.
What the Data Show
Hackworth said the data show compensation increases were strong throughout all executive positions.
“We went all the way from CEO down to investment services executives, regional branch managers, legal counsel, marketing executives—a very wide gamut of executive positions,” said Hackworth. “Our survey covered 24 positions.”
While leaders of smaller credit unions are paid less than those at the big shops, Hackworth said the CUES report reveals the pay increases took place across all asset peer groups.
Moreover, he said, the pay raises, by percentage, were comparable among all asset sizes. Credit unions above $500 million in assets increased average pay by 7.2%, while those under $500 million boosted salaries by 6.5%.
“Bonuses represented a larger share of compensation for CEOs of larger CUs—25% at the big organizations compared with 12% for smaller CUs,” he said.
Retirement Surge
Hackworth said what also added to pressure to pay more is many leaders retired during the health crisis, which has brought new pressures in the war for talent.
“Many credit union executives, who had likely been considering retirement, during the pandemic as they worked remotely decided they were not going to go back to work as the pandemic subsided,” said Hackworth. “Many felt it was a good time to exit. Too, personal investments, after the initial drop due to the shock of the pandemic, have done well, giving some leaders another reason to quit—they have more money to retire.”
The tight market for effective leadership, an issue on which CUToday.info has regularly reported, will continue to drive pay increases, Hackworth is forecasting.
“Experienced talent is in high demand, and there is a shorter supply of it,” said Hackworth. “Credit unions know they are facing more competition for their top executives and they are paying to keep them.”