Optimism Reigns as the Banking Industry Faces Technology Challenges and New Regulation

October 25th, 2017

compensation-10-25-17.pngThere was a lot of optimism among the crowd of more than 200 during the first full day of Bank Director’s 13th annual Bank Compensation & Talent Conference Tuesday, which included bank CEOs, board members and human resources executives. It was almost as if the prior day's rains had passed and the day’s breeze and sunshine at The Ritz-Carlton, Amelia Island, lightened the mood. For instance, a full 95 percent of the audience in a poll felt that a bank can create a culture of innovation.

Here are a few takeaways from the conference to consider:

Culture is key to one’s future success. Regardless of size, bank executives and board members exert tremendous influence on the long-term culture and success of an institution. Culture manifests in various ways. It may be the board asking challenging questions. It might be figuring out the right incentive structures to encourage growth without undue risk.

Doug Kennedy, president & CEO of Bedminster, New Jersey-based Peapack-Gladstone Bank, a $4.7 billion asset bank, talked about organic growth, while Frank Leto, president & CEO of Bryn Mawr Bank Corp. in Bryn Mawr, Pennsylvania, which has $3.48 billion in assets, explained his approach to growing through a combination of organic growth and targeted acquisitions. His bank has done eight deals in nine years. Juxtaposing their leadership styles reminded the audience that there is not a one-size-fits-all approach to scaling a company.

Having talked with both Kennedy and Leto onstage and off, I’m impressed with their commitment to their teams, communities, investors and clients. Determining the right pay structure for the CEO is not a routine exercise, so I’m sure I’m not the only one apprehensive about the soon-to-be-disclosed CEO-employee pay ratio for public companies. Specifically, this Securities and Exchange Commission (SEC) rule requires companies to include in the proxy statement the median employee’s total compensation, the CEO’s total compensation and the ratio of the two.

I can see the unfortunate headlines in local markets when news comes out. Susan O’Donnell, partner with Meridian Compensation Partners, stressed the urgency for banks to begin the process of collecting relevant data and developing communication plans if they have not already started, given the rule goes into effect for proxies filed in 2018. Don Norman Jr., partner with the law firm Barack Ferrazzano Kirschbaum & Nagelberg in Chicago, worried that this new requirement may inadvertently punish those banks that hire a lot of entry-level positions, as such salaries will increase the ratio.

Another challenge ahead for banks is the need to recruit tech talent. I was a bit perplexed to see that in our audience poll, 44 percent still cite finding commercial lenders as the top recruitment challenge for their banks. I would have thought that tech talent—which received a mere 9 percent of the vote—would have dominated the poll given the accelerating pace of change driven by the digitization of financial goods and services.

Another result that surprised me? Sixty-six percent believe their bank has the right executive-level talent in place to guide the bank’s technology initiatives and implement innovative solutions throughout the organization. Given how much angst exists for the future of banking—and the supposed lack of next generation leadership, 66 percent aren’t worried about having the right people in place at all. It might be true that the current generation of banking executives will be able to lead the way in finding and recruiting new talent, but still, I wonder this may be easier said than done.

Still, I remain optimistic about the future of the banking industry as a whole. This conference has always been a meeting ground for the banking industry's key leaders to meet, engage with one another and learn. Indeed, most of the speakers talked about culture and growth along with compensation, recruitment, training and development. Programs like these help bank officers and directors to think about the challenges ahead and how they might solve them. While sunny days will not be on every day’s outlook, I do sense a true note of optimism.

adominick

Al Dominick is the Chief Executive Officer of DirectorCorps, Inc., which includes Bank Director and FinXTech. He writes about bank M&A, growth, fintech and key industry events. You can follow him on Twitter @aldominick, connect via LinkedIn and follow his About That Ratio blog.