The biggest hit occurred at smaller credit unions, with the ECS survey showing CEOs at credit unions with less than $100 million in assets earned $103,138 in 2011 compared to $110, 837 in 2010. For CEOs at credit unions on the other end of the scale, those with assets greater than $1 billion, total cash compensation in 2011 averaged $486,117. That was up from $460,234 in 2010.

Banks, of course, have faced a flood of criticism including concern about executive salaries. But the 2011 American Bankers Association survey showed bankers still outpacing their credit union counterparts. The national average for bank CEOs in 2011 was $298,968, compared to $228,178 for credit union CEOs. At small banks under $100 million in assets the CEO averaged $164,465 compared to $103,138 at a comparable size credit union. The figures at institutions $1 billion and more in assets were $550,479 for bankers and $486,117 for credit unions.

One interesting finding was that credit union boards are taking a much more objective view in setting incentives and bonuses. It's an effort to align the credit union's goals with executive compensation.

Board discretion is becoming less important. Twenty-six percent of those responding to the ECS survey indicated such discretion was a major factor, compared to 46 % in 2009.

“For the second year in a row,” the report indicated, “loan growth was the leading performance factor evaluated by credit unions in the measurement of performance goals. This is not surprising given an environment where loan demand is weak and placement of funds is difficult. Return on assets was used by 56% of respondents. Other important criteria are membership growth and satisfaction, expense ratios, and loan delinquency measurements.”

It means credit union CEOs and other executives face more at-risk or pay-for-performance compensation.  The survey found a national average of $42,405 in incentive pay to credit union CEOs, jumping to $108,826 for CEOs at credit unions with more than $1 billion in assets.

However, Collins offers some cautions on bonuses.

“If you're looking to motivate your executives with bonuses, you may have hired the wrong executive team,” he stated. “A good executive typically doesn't need motivation, but does need targets and direction. They do need to be told what the credit union wants to accomplish. When structured with an aligned compensation plan, the incentive targets go hand-in-hand with the bonuses. It clearly lets the executive team know what the organization wants accomplished.” 

Even though, as indicated earlier, credit union boards are increasingly binding CEO compensation to long-term goals, that shift isn't complete.

“There have been some struggles with how to incorporate that goal planning into the compensation program,” Collins said. “We still see a large percentage of programs utilizing a rear view mirror. You get to the end of the year and ask, 'How did we do? I guess we did pretty good.' 

“This typically leads to confusion regarding how to reward executives. It doesn't really answer the question of whether the credit union accomplished what it set out to do.  

“We've seen organizations that had recent success point to the linking of long-term goals to performance in their executive plan as a key driver of that success.”

If that suggests communication between the board and executive team is important, Collins agrees.

“Communication is probably the most important piece of the process,” he said. “But it does have to be a two-way street. It goes hand-in-hand with the aligning of objectives with compensation. How will that be measured? What will the resulting profit to the executives be? What will the benefit to the credit union be? It all contributes to the success of the compensation program.”

So we're seeing closer scrutiny of executive compensation, and a move to pay for performance. What about the impact of the expected large number of credit union CEO retirements? Will credit unions have to compete harder for talent?

“Credit unions will have to look more closely at the non-CEO executive compensation and make succession planning more of a priority,” Collins responded. “As the market recovers and the current population of CEOs reaches retirement age, credit unions will need more people who can step up into those roles.

“Credit unions that have home-grown talent in their executive teams will begin looking at the same incentive review and goal-setting processes used for their CEOs. Dollar amounts might be different, goals might be different based on roles and experience, but these plans will keep the executive team together and possibly keep the ultimate successor to the CEO at that credit union. Succession planning is going to be a higher priority.”

Joe Brancucci, president/CEO of GTE FCU, also expects to see some changes in executive compensation.

“You are going to have to work very hard to get talent,” he said. “You have to make sure you take care of the existing talent on board. When the economy recovers, you will have a number of senior executives retiring, you are going to have an economy looking for really talented executives in general, and we're going to have to compete with the best of them. You will have to make sure that when you have an available position you are considered.” 

GTE FCU uses a consultant to assess all positions every year and establish an appropriate salary range. 

“We're very much focused on having a balanced plan in place,” Brancucci said. “We also have to manage cost, so we've done a lot of things to manage the cost of the benefit package. We have a lot more variable pay and variable benefits, for example a variable 401(k) contribution from the organization. 

“We have an incentive plan which is very much designed around the goals for the year. You know what to focus on. I'm a big believer in setting goals and rewarding people accordingly. We had a very elementary plan in 2007, and now we have a much more sophisticated one. Employees are accustomed to having it as part of their compensation, and they're very much into it. Compensation is definitely aligned with strategic objectives and performance objectives for the year.”

Central Willamette Credit Union also struggles with compensation issues and is current reviewing its approach.

“We had not completed a compensation survey in several years,” explained president/CEO Elaine Eastman. “We were scheduled to complete this review in 2009. However, once the recession hit, we decided it was a moot point given that we were faced with salary freezes and furlough days until the recession was over and we moved into economic recovery.”

The review includes:

Ensuring all job descriptions are up-to-date and reflect current duties and responsibilities.

Comparing positions to like or similar jobs using local compensation surveys.

Benchmarking executive positions using CUNA data. Other positions will be benchmarked using those local compensation surveys.

Initial research indicates the credit union is close to market except for a few mid-management positions. However, further research is underway to ensure positions are accurately compared to like positions.

Is CEO compensation being aligned with strategic objectives?

“This is another area that is being clearly defined,” Eastman indicated. “Compensation is based on both subjective and objective qualifiers. Subjective is tied to characteristics as outlined in my job description. Objective aligns with strategic goals and objectives.”

The challenge, Eastman added, is to balance a fair and competitive compensation package with the realities of the credit union's budget.

“Economic recovery is still slow,” Eastman noted. “We must continue to manage all expenses to rebuild capital, yet recognize how critical it is to maintain and build a total compensation packet to reward and retain employees.”