The CUES survey also looked at the most common factors in determining incentive pay. Board evaluations were the top factor, named by 57.8% of respondents, followed by earnings at 57.1%, loan growth at 35.5%, membership growth at 21.3% and member satisfaction at 20.9%.

Carlson noted that the compensation determination process has become more complex in recent years, with CU boards emphasizing organizational performance factors, such as return on investment, asset growth and loan growth. Boards also tend to evaluate compensation with some distance from their credit union's CEO and often consult an independent resource such as a compensation firm, Carlson said.

“They might look at where the person is in his or her executive life,” Carlson said. “If they don't want to lose that person, they might put together a good incentive program. They might also look at whether they're recruiting for a new executive. A lot of CEOs are getting ready to retire, and that can bid up pay for the successor.”

Executive Compensation Solutions, a Covina, Calif.-based compensation and benefits consulting firm for credit unions, shared some of the preliminary findings of its 2011 employee and executive compensation and benefits survey, which found that  CEO salaries increased by 2.7% this year at CUs with $100 million or less in assets and by 6.1% at CUs with assets between $500 million and $1 billion.

However, the average salary for CEOs at credit unions of all asset sizes is slightly lower than it was last year, ECS said. This difference is an example of why it's important to not draw conclusions from individual percentage increases, ECS Director of Operations Adam Zelinsky said.

Developing a written compensation philosophy is key for credit union board members, which is an outline of compensation setting procedures and how they relate to the credit union's big-picture goals, he said.

“The main point of a written compensation philosophy is to align the compensation structure with the goals of the credit union and its members, so that it's all tied together,” Zelinsky said.

Executive base salaries are often based on a chosen percentile of the average salary for a similar position. For example, a CU with $1 billion in assets might require a CEO salary that's in the 75th percentile of its peer or competitor group. In determining total executive compensation, boards also consider factors related to the progress and success of the credit union, such as loan growth, return on assets and member satisfaction, Zelinsky said.

He added that no two CU executive compensation evaluation processes are the same; each credit union determines compensation with its own organizational goals in mind.

Reports from current and former CU chairmen demonstrate how the process can vary. Marty Goldman, chairman for the $682 million, Jacksonville, N.C.-based Marine FCU said he and other board members consult with several organizations in determining the CEO's base pay, namely the National Association of Credit Union Chairmen. The CEO's bonuses are based on six monetary goals, which may be compensated even if 75% of the goal is attained. Marine FCU has seen an average base salary increase of 2.5% for all of its executive level positions, Goldman said.

The Ewing, N.J.-based, $306 million Credit Union of New Jersey relies heavily on input from a compensation firm in determining executive level pay, president/CEO Andrew Jaeger said. The CU assigns each executive-level position a salary range with a minimum, mid-point and maximum salary and manages each person within the range depending on performance. He said merit-based salary increases have averaged 2% to 3% for the executive team over the past couple of years.

“It is our policy to utilize third-party expertise to ensure objective salary administration,” Jaeger said. “Procedurally, we adjust the ranges each year based on their suggestion, and we develop a merit matrix based on their assessment of what the average merit increases will be for the coming year.”

John Steck, former chairman for the Salt Lake City-based Utah Central CU, developed a performance and gains-based points system that the board used to determine the CEO's annual raise; items on the system's checklist included loan growth, asset growth, delinquencies, charge-offs, return on assets and net operating expenses. Bonuses for the executive team were pulled from an annual bonus pool that amounted to  3.5% to 7% of the credit union's net earnings, said Steck, who now serves as chairman for NACUC.

Due to a salary freeze, employees at Utah Central CU have not received raises since 2010, Steck said. Utah Central CU was acquired by Chartway FCU of Virginia Beach, Va., earlier this year and has seen declines in the value of its real estate portfolio since 2010.

“Some credit unions have been very aggressive with their compensation, but we were in a different scenario,” Steck said. “We tried to put ourselves in a safe zone.”