Trends in Bank CEO and Director Compensation
Carl Chatto, Managing Principal
BankDirector and Meyer-Chatfield Corporation produced a report earlier this year highlighting recent trends in CEO and director compensation. The report shares the continuing challenges of setting CEO and director compensation at appropriate levels across banks of all sizes, regions, and ownership structures.
Tying compensation to performance is the key challenge in setting compensation, cited by 69% of respondents. Of the banks responding, 32% do not tie CEO compensation to their own strategic plans at all. Approximately half of the banks that do base compensation on the strategic plan use a combination of performance metrics outlined in the strategic plan as well as other strategic objectives. Performance indicators most commonly used for CEO compensation include return on assets, asset quality and return on equity. Senior executives are offered non-qualified deferred compensation benefits at 40% of institutions and non-qualified retirement benefits at 53%.
Directors of banks with over $250 million in assets spend an average of 17.5 hours per month on director duties. Asked to select the top three issues, they reported spending most of their time on lending (60%), regulatory matters (60%), and risk (58%). Business development is a distant fourth at 35%.
When asked if director compensation was tied to key performance indicators, 93% said that it was not.
Director compensation is most commonly provided in the form of a board meeting fee (83%) and an annual retainer (49%). The retainer varied considerably from a median of $30,000 at banks with over $5 billion in assets to $4,000 at banks with assets of $250-$500 million. Meeting fees also ranged considerably, from $1,250 to $500, collectively, for the same two groups. The large majority of banks (89%) do not provide any non-qualified deferred compensation plan to directors and only 42% provide any other sort of benefit. Those that provide a benefit typically reimburse travel expenses (31%).
The full report breaks responses down by size, and often by region or ownership structure. The full report can be found here.
If you would like to discuss these matters further, please call Carl Chatto or your usual BNN professional at 1.800.244.7444.
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