2021 Compensation Survey Results: Fighting for Talent

Did Covid-19 create an even more competitive landscape for financial talent?

Most banks increased pay and expanded benefits during the pandemic, according to Bank Director’s 2021 Compensation Survey, sponsored by Newcleus Compensation Advisors. The results provide a detailed exploration of employee benefits, in addition to talent and culture trends, CEO performance and pay, and director compensation.

Eighty-two percent of respondents say their bank expanded or introduced remote work options in response to Covid-19. Flexible scheduling was also broadly expanded or introduced, and more than half say their bank offers caregiver leave. In addition, most offered bonuses to front-line workers, and 62% say their bank awarded bonuses tied to Paycheck Protection Program loans, primarily to lenders and loan production staff.

And in a year that witnessed massive unemployment, most banks kept employees on the payroll.

Just a quarter of the CEOs, human resources officers, board members and other executives who completed the survey say their bank decreased staff on net last year, primarily branch employees. More than 40% increased the number employed overall in their organization, with respondents identifying commercial and mortgage lending as key growth areas, followed by technology.

The 2021 Compensation Survey was conducted in March and April of 2021. Looking at the same months compared to 2020, the total number of employees remained relatively steady year over year for financial institutions, according to the U.S. Bureau of Labor and Statistics.

Talent forms the foundation of any organization’s success. Banks are no exception, and they proved to be stable employers during trying, unprecedented times.

But given the industry’s low unemployment rate, will financial institutions – particularly smaller banks that don’t offer robust benefit packages like their larger peers – be able to attract and retain the employees they need? The majority – 79% – believe their institution can effectively compete for talent against technology companies and other financial services companies. However, the smallest banks express less confidence, indicating a growing chasm between those that can attract the talent they need to grow, and those forced to make do with dwindling resources.

Key Findings

Perennial Challenges
Tying compensation to performance (43%) and managing compensation and benefit costs (37%) remain the top two compensation challenges reported by respondents. Just 27% say that adjusting to a post-pandemic work environment is a top concern.

Cultural Shifts
Thirty-nine percent believe that remote work hasn’t changed their institution’s culture, and 38% believe the practice has had a positive effect. However, one-quarter believe remote work has negatively affected their bank’s culture.

M&A Plans
As the industry witnesses a resurgence of bank M&A, more than half have a change-in-control agreement in place for their CEO; 10% put one in place in the last year.

Commercial Loan Demand
More than one-quarter of respondents say their bank has adjusted incentive plan goals for commercial lenders, anticipating more demand. Ten percent expect reduced demand; 60% haven’t adjusted their goals for 2021.

CEO Performance
Following a chaotic and uncertain 2020, a quarter say their board exercised more discretion and/or relied more heavily on qualitative factors in examining CEO performance. More than three-quarters tie performance metrics to CEO pay, including income growth (56%), return on assets (53%) and asset quality (46%). Qualitative factors are less favored, and include strategic goals (56%) and community involvement (29%).

CEO Pay
Median CEO compensation exceeded $600,000 for fiscal year 2020. CEOs of banks over $10 billion in assets earned a median $3.5 million, including salary, incentives, equity compensation, and benefits and perks.

Director Compensation
More than half of directors believe they’re fairly compensated for their contributions to the bank. Three-quarters indicate that independent directors earn a board meeting fee, at a median of $1,000 per meeting. Sixty-two percent say their board awards an annual cash retainer, at a median of $21,600.

To view the full results of the survey, click here.