Don't Jump To Conclusions Regarding CEO's Pay

CEO compensation has been a sensitive subject for as long as there have been CEOs. It’s especially sensitive for credit union CEOs because they work for unpaid volunteer boards. Human nature being what it is, people love to find out exactly what someone else is making. One of the most popular weekly issues of Parade Magazine is the one that gives the specific salaries of a wide spectrum of workers from auto mechanics ($36,890) to rock stars ($7 million). Even Madison Magazine, published monthly in Wisconsin’s state capitol, does a yearly rundown of who makes what from the mayor ($96,258) to the head zookeeper ($35,922). For those interested, besides waiting for publication of individual-specific pay data once a year, there are other ways to find out who is making what. For instance, if anyone wants to know what the CEOs of various credit union organizations make, they need only take a look at a readily accessible document known as an IRS 990. Among the information included in them is the compensation of the CEO and a certain number of other “highly compensated individuals” who work there. Want to know what Dan Mica, Fred Becker, Fred Johnson, et al earn? Have at it. It is all there in the 990s filed by CUNA, NAFCU, and CUES. It is easy to see why 990s have caught the attention of the anti-credit union banking industry lobbyists. They want credit unions to file 990s. They feel they could embarrass credit unions by showing just how much money credit union CEOs take home each week. At one time all FCUs did have to file 990s. Usually, that was done on a group basis by the appropriate state or federal regulator. More than a dozen years ago, IRS said in effect don’t bother since the same information and more is required as part of being regulated by a separate regulator. Unlike credit unions, trade groups have no such regulator to keep tabs of them so the IRS does it directly via the 990s. Then consider the fact that the number of underpaid credit union CEOs is still considerable in number. Refer back to the statement above “because they work for volunteer boards.” The bankers are right in one sense. There will be some embarrassment when certain CU CEO salaries are revealed. However, the embarrassment will be because they are still so much lower than comparable banking and CU industry CEOs. There are exceptions of course, like in Oregon where state-chartered CUs must file 990s. I have no doubt that Portland Teachers Credit Union CEO Cliff Dias is not thrilled that his $1.6 million compensation package is creating headlines and being given as a reason in a supposedly objective news story in the Eugene (OR) Register-Guard as the reason the largest merger in credit union history didn’t happen. But he’s not embarrassed by any means, nor should he be. The reporter referred to Dias’ pay as “lavish,” “eye-opening,” and “stunning.” He also said this: “Yet whether Dias’ pay package was excessive is unclear.” Unclear to whom? Certainly not to the board of directors of Portland Teachers Credit Union. They set the CEO’s pay so they must not consider it lavish, or eye opening, or stunning. The reporter concluded that it was the reluctance and eventual refusal of the boards of the potential merger partners to disclose the compensation packages of their CEOs that led to scuttling the merger. There is no proof of that, but plenty of examples of very real operational issues that represented the actual reason(s) the credit union potential marriage partners found themselves too far apart to consummate the union. In case readers think I am picking on a reporter trying to do his job, he lost me in the credibility department when he (the reporter) said; “Some top credit union executives are earning fat compensation packages as their organizations morph from casual, small-time nonprofits into growing growth-hungry powerhouses.” This sounds more like something a banking industry PR flack would say rather than a so-called unbiased daily newspaper reporter. Does the word “morph” sound familiar? Unfortunately, too many people still believe in that old adage: “I saw it in the paper so it must be true.” Another point needs to be made when evaluating a credit union CEO’s total compensation. Is it based on achieving predetermined goals agreed on by both the CEO and his or her board of directors? Are the members’ interests put first rather than sacrificed so that the CEO can be accommodated? Service is great. Products and services are top notch. Loan rates are lower than average. Dividend rates are higher than average. And the CEO is rewarded for making it happen. Sounds fair to me! Cliff Dias wasn’t always paid $1.6 million in salary and performance bonuses. It took him and the board a number of years to get everything in sync to create a credit union that was financially stronger and better for members before it could become better for Dias as well. Which leads to a rather obvious conclusion: no credit union CEO ever should be defensive or apologetic for his or her compensation. CEO compensation is strictly a board decision (not a member’s, banker’s, or the media’s decision) that is based on the overall value the CEO brings to the credit union and the members it serves. Although there are a number of CU compensation surveys available, all have the same weakness. They tell what is being paid not what should be paid. Only the individual credit union board can make that determination. Finally, as far as the members right to know about the CU CEO’s pay, certainly it is their credit union and they should know what makes their credit union tick. But what possible good could come from members, most of who don’t have a clue what is involved in managing a financial institution, having this information? Idle curiosity is hardly a valid reason.