A lot of factors go into CEO compensation

In the August 14th issue the article on CEO compensation using CUES data caught my eye. When inflation has remained relatively low for a number of years, it is surprising to see double digit salary increases for CEOs. Or is it? First off, who does CUES represent? It’s not called the executive society for nothing. If I had received a minimal raise last year and knew my board was using CUES data to set my next salary adjustment, I wouldn’t report my low percentage. Why would I want to bring the average down? Second, if we always use history to set the next raise, how will it ever be any different? For example, if 2001 had a 10% increase, I would be lobbying for a 10% again based on history. If I get it, you can bet I’ll try for a similar percentage the following year. Meanwhile, my employees get something in the 3% to 5% range. Performance based bonuses make sense but boards must not reward average performance. Goals need to be based on superior performance in a number of categories. Some categories may actually cancel others out in that excessive share growth can lower loan -to-share ratios. In addition, I believe boards should look for managed growth since low loan rates or high dividend rates can inflate those areas but at the expense of ROA. Finally, should a subjective board evaluation be a primary factor for a bonus? I feel it can be a part of the total evaluation but should not be higher than 20% of the total criteria. Objective factors should be the primary determinants since personalities and philosophies may clash – especially with a new CEO or new board member – when the membership is actually being well served. Bill Slach Director Kitsap Community Federal Credit Union Bremerton, Wash.