Off to a good start on day one of the annual Bank Executive and Board Compensation event, as the general session continued with the next panel members settling into their soft brown leather chairs to present their viewpoints on how the latest round of regulations was shaping compensation planning. Moderated by Jack Milligan, the newly-appointed editor of Bank Director magazine, the panelist included compensation industry experts Michael Blanchard, partner for compensation advisor Blanchard Chase, Thomas Hutton at the law firm of Kilpatrick Stockton and Charles Tharp, EVP at the Center on Executive Compensation.
With increased government intervention courtesy of the Dodd-Frank Act, here are five key insights on the level of impact facing today’s compensation committee shared by the panel.
- Be proactive! You just may find yourself in the position of having to actually educate the regulators on the guidelines. Just goes to show that everyone is still trying to figure these new requirements out.
- It’s not about the what but the how! New regulation isn’t about shaping compensation but rather changing the process of designing performance based plans.
- An emerging trend among many banks is to have an independent compensation consultant attend the committee meetings. While there are no hard stats on file to date, this process may be looked at more favorably by shareholders.
- Before developing compensation plans, do your homework by researching what your peers and public banks are doing with their incentive packages.
- Private banks under $1 billion are more at an advantage than disadvantage with regulation requirements, but every institutions should be prepared for regulatory reviews.
It was clear throughout this session that being prepared and ready to tell your story was the best approach when dealing with the new regulations. Knowledge is power and having the right team on the board and in management will go a long way in staying ahead of the curve.
Extra Credit: If you need a place to start, download this eight point checklist, courtesy of the Center on Executive Compensation, for help planning a pay structure for your institution. You may even gain some inside knowledge on what the regulators will be looking for during their reviews.