The age-old question, “Are you being compensated for the work you perform?” rages not only in the boardroom at many banks and publicly held companies, but even within the credit union industry.
Known as the industry for “people helping people” and devotion to public service, credit union executives are typically paid considerably less than what ivory tower multi national bank fat cats bring home. However, a recent report in The Denver Post pointed to one credit union CEO who was being compensated along the same lines as the big boys, which is raising a few eyebrows.
According to The Post, Public Service Credit Union ($1.15 billion, Denver, CO) is shelling out a multi million-dollar compensation package to CEO David Maus, which includes benefits that covers approximately 30 years of service.
The Post’s breakdown is $9.3 million, which represents an accrued retirement payment in an effort to reward Maus for 30 years of service, an additional $1.2 million if he defers retirement, plus his base salary draw is just shy of $500,000. Executive Compensation Solutions, an independent credit union compensation and benefits firm, reports that the median credit union CEO salary is approximately $451,000.
Although members and other credit union executives are up in arms, Maus and PSCU board members explain that he led PSCU from being a small $15 million credit union once upon a time to the current $1.15 billion powerhouse it is today.
Maus defended his position by telling The Post, "There are very few credit union executives who have been in their position with one credit union that long and who have taken them as far as what we have accomplished."
"I am absolutely convinced that PSCU would not be the credit union that we are had we not had him as our leader," adds JoAnne Groff, chairwoman of the PSCU board. “Had Maus left before the five years was up, he would have lost his retirement benefits.”
Although Maus did take the credit union to an entirely different level, other credit union CEOs are not feeling the love. Community Resource Federal Credit Union ($66 million, Albany, NY) CEO, Elizabeth Kindlon said, "While CEO David Maus has clearly proven to have grown PSCU during his 27-year tenure, his compensation is exorbitant,” she says. “Compensation for credit union managers should be competitive but excessive compensation such as his conflicts with the credit union philosophy of giving back to our members. The other thing to keep in mind is that most credit unions are small with under $10 million in assets. PSCU is one of the few over $1 billion in assets and isn't a typical credit union."
In fact Community Resource pointed out that NCUA published a document last year that discusses how CEO compensation should be curbed for credit unions greater than $1 billion.
Comparing Apples to Apples?
Although Maus did lead the credit union to becoming one of the bigger credit union players in the market is he actually just being fairly compensated? According to Alec Berkman, president of Executive Compensation Solutions, credit unions should do what they can in order to attract the best and most talented leaders to their organization.
Berkman says that one way to explain the reasonability of a CEO’s compensation is to examine the ratio of compensation to member. In January, he discussed CEO compensation with credit union marketing strategist Mark Arnold and said, “For example, if your CEO’s total compensation is $500,000 and you have 200,000 members you are only spending $2.50 per member or $.20 per member per month. However, having a compensation philosophy and a methodology for establishing CEO compensation is at the core of the issue of fairness and increased scrutiny.”
Beckman adds that while the compensation structure should be meaningful, affordable and reasonable, it should also be tied to goals and performance.
Comparatively, multi national bank executive salaries make Maus’ compensation look like chump change.
CNN Money released a report of the total compensation for nine of the largest banks in 2007. Just to name a few, Kenneth D. Lewis, chairman and CEO of Bank of America drew a $1.5 million salary with a total compensation package of $24. 8 million; Charles Prince, former chairman and CEO of Citigroup was raking in $1 million in salary and a $15.1 million compensation package; Gary D. Cohn, president and chief operating officer at Goldman Sachs only made $600,000 a year but held a compensation package of $72.5 million and James Dimon, chairman and CEO of JP Morgan Chase was paid a salary of $1 million and a compensation package of $27.8 million.
During Berkman’s interview with Arnold he references a few trends in CEO compensation saying that many credit union executives are getting paid based on their performance. “We are also seeing a shift in credit unions where more CEO compensation is ‘at risk’ or tied to performance. Executives will get paid when they hit credit union goals,” he explains.
With regard to how bank versus credit union executives are paid, Berkman adds, “For awhile we were seeing a narrowing of the gap between bank and credit union CEO pay. However, bank CEO compensation is accelerating again. So now the gap between banks and credit union is widening.”
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