Are You Properly Rewarding Your CEO?

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Are You Properly Rewarding Your CEO?Being a credit union CEO in 2019 can be challenging—not only do executives have to stay current with constantly changing regulations, but they also must keep a firm hand on many day-to-day issues, such as cyber security, finances, marketing and brand management. Furthermore, CEOs must also manage the expectations of their staff, members and the board.  

Not properly recognizing and rewarding a CEO for their work can create dissonance between CEOs and their boards, leading to a tense relationship or an open executive position that could have been avoided with the right governance practices. 

Where evaluation and compensation often falls short 

An ideal relationship between a CEO and their board is one of mutual trust, collaboration and professionalism. The board provides guidance and ensures that a credit union is moving in the right direction, while the CEO executes on the board’s direction and oversees the day-to-day operation of the organization. However, CEOs ultimately report to the board, and one common source of dissonance between chief executives and their boards is the topic of compensation. 

Compensation challenges chart

Indeed, many CEOs are surprised at the lack of process their evaluation usually entails, especially since the evaluation directly influences their compensation. In clear contrast to the organized, systematic performance evaluation process that other employees might go through, the evaluation process for CEOs can be short, lacking in detail or structure, even cursory. 

Many CEOs have experienced an evaluation that ended nearly as quickly as it began, with only a document detailing their compensation package… no explanation, no discussion, no real evaluation. This occurs most often with inexperienced boards, but it also happens fairly regularly with board members that should know better. CEOs desire the same type of rigorous evaluation that their employees go through, not in the least because many credit union executives are not compensated at the same level as their peers. 

Questions credit unions and their CEOs need to ask themselves

In an ideal world, both the CEO and their board would be interested in an effective evaluation process that ties the CEO’s performance and initiative to compensation. However, in many cases it falls on the CEO to get the ball rolling to develop this process, whether they are co-opting something similar to the same performance management system their credit union is already using, or something completely different. 

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