Growth Driving Hires, But Many Banks Still Don’t Tie Pay to Performance

What’s going to be the primary driver for executive hires at the nation’s banks in 2015? Growth and strategy, say a whopping 80 percent of the 175 bank CEOs, human resources officers, chairmen and board members participating in an audience survey at Bank Director’s 2014 Bank Executive & Board Compensation Conference yesterday at Chicago’s Swissôtel. Meyer-Chatfield Compensation Advisors sponsored the survey. Just 4 percent expect regulations to drive hires.

This lines up with what we saw in the 2014 Bank Compensation Survey earlier this year. And it looks like competition for lenders will remain tough in 2015–62 percent expect to see the strongest demand for lending executives next year, an increase of 41 percent from lending hires in 2013 (also according to the 2014 Bank Compensation Survey). And despite the banking industry’s struggles to keep up with innovation, just 14 percent expect technology executives to be in high demand.

One-quarter of respondents expect at least one key executive departure in 2015. Departing talent may prove difficult to replace, as 41 percent say a lack of talented candidates in their market is the most challenging aspect in attracting executive hires.

Almost half of the respondents cite corporate culture as the primary factor that makes their bank attractive to potential hires, while just 4 percent cite the bank’s compensation program. That said, tying compensation to performance, at 59 percent, remains the top compensation challenge facing bank boards, and 40 percent say that the development of competitive compensation packages is the most challenging aspect when it comes to attracting and retaining talent. There’s no doubt that aligning pay with long-term strategy continues to challenge bank boards: In an audience survey later in the day, 68 percent revealed that tying pay to performance is a bigger challenge for compensation committees than dealing with regulation.

Despite these challenges, almost 40% don’t believe that CEO pay should always be directly tied to the bank’s performance, as revealed in an audience survey later in the day.  Previously, the 2014 Bank Compensation Survey found that less than half of respondents tied CEO pay to the bank’s strategic plan, and more than one-quarter said that CEO compensation was not linked to their bank’s performance.

Interested in more highlights from the 2014 Bank Executive & Board Compensation Conference? Al Dominick, Bank Director’s president, provides his perspective on About That Ratio, and highlights why banks must reward creativity and innovation HERE. Editor Jack Milligan explains the importance of corporate culture HERE.

Big Disparities in Bank CEO Pay

As discussed in my prior blog post, the 2014 Compensation Survey finds that bank boards are earning more and lending is a big focus for executive hires. But the survey also delves more into CEO pay this year, and while the disparities in pay for the largest and smallest banks should be expected, it’s still jarring to see.

CEOpayBySize

For the industry overall, the median compensation amounts for bank CEOs total:

Salary: $241,600
Cash incentive: $44,600
Potential cash incentive: $57,600
Equity grants: $50,000
Benefits & perks: $21,231

Ninety-nine percent report that the CEO receives a salary, while 41 percent report that the CEO receives equity grants. Half report a cash incentive, and more than two-thirds say that the CEO receives some benefits & perks.

You’ll find more details on bank executive pay within the 2014 Compensation Survey.

Financial Research: Is a Focus on Growth Yielding Higher Board Pay?

GrapesUnsplashBank Director just released the results of its 2014 Compensation Survey, sponsored by Meyer-Chatfield Compensation Advisors, and the results may reveal some good news for the banking industry, as evidenced by two key trends:

Lending is fueling more executive hires than compliance or risk, with boards focusing more time on loans. Loan officers are in strong demand at banks of all sizes, with more banks citing growth than regulations as the driving force behind change at the executive level. 

Bank boards are earning more. After getting their regulatory ducks in a row, a renewed focus on profitability may have translated into increased pay and benefits for bank directors. With median fees set at $750 per board meeting and median annual retainers at $20,000, bank directors are seeing a modest income for their service. However, the view isn’t as rosy for small banks: Almost half of boards at banks with less than $500 million in assets haven’t increased pay since at least 2010, and director pay is significantly lower at these institutions.

You’ll find the complete results to the survey, including median pay data for CEOs and boards, HERE.

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Financial Research: PayDay Loans, Compensation

From The Pew Charitable Trusts: while payday lenders claim that their loans allow borrowers to avoid checking overdrafts, many end up paying more:

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How Low is Too Low?

Bank Director and Meyer Chatfield Compensation Advisors released results to their compensation survey last week, and I was struck by the fact that community bank directors are working harder – yet paid less – than their big bank counterparts. Amidst news that JP Morgan’s Jamie Dimon, at $23.1 million, is America’s highest-paid banker – in the midst of an uncertain economy and public perception that the rich get richer, and bankers are the richest of the lot – low director pay to the average American may prompt them to play the world’s saddest song on the world’s smallest violin. But how high is too high – and more important too community bankers, how low is too low?

It’s risky to be a director. Everyone – from shareholders to regulators to the general public – has their eye on the banking industry these days, and the government increasingly wants community banks to play in the same sandbox as the big banks, despite a lack of resources. Per Meyer Chatfield’s Flynt Gallagher, community bank directors work longer hours to make up “for limited resources to fulfill fiduciary and oversight duties, while at the same time trying to meet shareholder expectations and ensure regulatory compliance.” Add into that the risk and liability of potential FDIC lawsuits should the bank fail – it’s something that a potential director will take into account. In fact, liability and potential growth are more important to the board members surveyed than the compensation and benefits package.

So, community bankers – how low is too low?

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Concerned about risk? This one-day risk event might be just up your alley.

Need insight on FDIC lawsuits? Some lessons learned from legal experts.