Why now may be exactly the right time for a credit union c-suiter to ask for more money

You know the line “it was the best of times, the worst of times” – thank you Charles Dickens – but this just might be a key thought for credit union c-suite executives to mull on right now. That’s because we are in a time of paradox and “a very volatile environment,” said Kirk Kordeleski, onetime CEO of Bethpage Credit Union and now a partner with OM Financial Group where he focuses on SERPs, supplemental executive retirement plans.

So does “volatile” mean it is not a good time to push for a pay hike – and a more generous retirement package – at a credit union? You might think.

But not if you ask Kordeleski. In a series of conversations we have had in the past six months, Kordeleski has hammered home this idea: now is the time when the best credit union management talent is desperately needed, precisely because credit unions are entering a period where what had worked (single family home loans for instance ) is producing much less results, where fintechs (from PayPal to Klarna to Intuit) are gobbling up ever more profitable business from credit unions, and where the nation’s biggest banks are aggressively growing marketshare.

Big credit unions now also are getting bigger. NCUA now uses $1 billion in assets as the marker for a big credit union, up from $500 million not long before. And a billion dollar credit union just is much more complex than a half billion dollar institution, said Kordeleski.

It will take top talent to compete in that big credit union universe, stressed Kordeleski.

He ominously added added: “Top talent expects to be compensated accordingly.”

CUES data say that CEO total compensation is up 9.2% – but get this. The highest performers, the ones who are growing their institutions at warp speed, probably are up twice that much. Maybe more.

Why? How?

We are in a brave new world for credit unions, said Kordeleski, where new, smart and aggressive c-suiters are coming in from outside the credit union ecosystem. Many arrive from traditional banks. Obviously they are attracted to the distinctive credit union values – but most of them also want to be compensated at a rate they believe they deserve.

Does that mean matching big bank pay? Not likely, said Kordeleski, who pointed out that in many cases a big chunk of bank pay comes in stock options which are not in the credit union playbook. Data via Pearl Meyer has consistently shown that total comp for bankers significantly exceeds that for credit union executives, even where salaries are comparable. It’s the stock that makes the difference.

However, stressed Kordeleski, if credit unions cannot attract and retain top talent they cannot expect to compete against the better banks. Talent will win out. “If we don’t have the best talent we cannot expect to create the best products that will help credit unions keep their members.”

That’s why Kordeleski insisted that credit unions that want to compete against the best need to be looking at ways to boost c-suite total comp and, absent stock options, he said, probably the surest way is a SERP where the c-suiter is awarded a retirement package that is designed to produce a retirement income equal to about 65% of the compensation of the last three years of employment.

Millions of dollars can be and usually are involved in SERPs constructed for c-suiters in billion dollar plus credit unions.

That sounds like a lot of money, right? It does and it is.

But what happens to the credit union if the current high performing CEO gets frustrated and decides to look for a better paying job. And he/she will find it, said Kordeleski, because we are in the midst of a huge wave of credit union CEO retirements as long-serving Baby Boomer executives decide it is time to move on and out.

And, guess what, the jilted institution probably will have to dramatically increase total comp for a capable incoming CEO because that is what the market says is required.

Bottomline: credit union CEOs and other c-suiters are in the prime position right now – despite the present uncertain times, although maybe in fact exactly because of them – to look to optimize income. And credit union boards that want to keep their institution competitive will have to learn to accept that it is going to take more operating cash to stay in the race.

“You need the right executives for this,” said Kordeleski, “and that means the right compensation.”

Robert McGarvey

Robert McGarvey

A blogger and speaker, Robert McGarvey is a longtime journalist who has covered credit unions extensively, notably for Credit Union Times as well as the New York Times and TheStreet, ... Web: www.mcgarvey.net Details