Similar to trends in other industries, banks have been simplifying their director pay programs. Slightly more than half of publicly traded banks with $1 billion to $10 billion in assets increased cash retainers instead of offering board meeting fees. Board meeting fees are the easiest to simplify, given the generally consistent number of meetings and their applicability to all board members. Retainers are also the most common way to recognize committee chairs for their roles and compensate committee members.
Annual equity grants are also a core element of board member pay at public banks, while stock option grants remain a minority practice. Restricted stock is the most common form of equity.
The amount of time for directors’ equity awards to vest is also shortening. Of the banks we reviewed with $1 billion to $10 billion in assets, 73 percent of those using full-value awards were granted either fully vested or with a one-year vesting requirement.
This shortened vesting period for director awards parallels the declassification of board structure and use of one-year terms. Banks do not want to incentivize directors that would have otherwise resigned or not stood for reelection to remain on the board so their equity awards can vest.
Most public banks have share ownership guidelines, which often require that directors own three to five times the annual cash retainer. Most guidelines build in a fixed amount of time for directors to reach the guideline, like five years. Another recent trend is a stock ownership requirement, which requires directors to hold a certain percentage of vested shares until they reach the guideline and kicks in if they fall below the threshold.
Scrutiny and Oversight Director compensation has been in the spotlight because of recent litigation and increased focus from proxy advisory firms.
Institutional Shareholder Services (ISS) announced it will target board members who are responsible for setting director pay when levels are “excessive,” with adverse vote recommendations issued as early as 2020 where director or board chair pay is in the top 2 percent to 3 percent of a defined comparison group. This will not be an issue for most banks that pay within a reasonable range around market, but banks should be aware of this change. As a result, the industry is likely to see enhanced proxy disclosures that includes the board compensation philosophy, additional responsibilities of chair roles and communication of independent compensation reviews.
Delaware courts have recently issued a series of decisions limiting the extent that the business judgment rule protects directors when determining their own compensation. As a result, companies are being more thoughtful in establishing total limits on director compensation, establishing appropriate stock ownership guidelines and holding requirements, and closely reviewing the competitiveness of pay levels and structure. We recommend companies check their plans to ensure appropriate caps are in place.
Diversity Focus Large institutional investors, proxy advisory firms and legislators are putting significant focus on board diversity. BlackRock’s most recent proxy voting guidelines encouraged companies to have “at least two women directors” on their board. Vanguard noted that board diversity is “an economic imperative, not an ideological choice” in a 2017 open letter to public company directors.
Beginning in 2020, State Street Global Advisors, the asset management business of State Street Corp., will vote against the slate of directors on a company’s nominating committee if that company’s board does not include any women directors, and the company has not engaged in successful dialogue with the asset manager regarding board gender diversity for three consecutive years.
Proxy advisory firms will generally recommend voting against a company’s nominating committee chair if a board includes no women; Glass Lewis started in 2019, with ISS joining in 2020.
Outside of corporations, two states are looking into gender diversity mandates. California enacted legislation that imposes gender quotas on public companies headquartered in the state; New Jersey has proposed a nearly identical law.
We expect these issues to be top of mind for the boards of many banks in the coming 12 to 24 months, along with other concerns such as director tenure, retirement age and engagement. Banks should evaluate their programs and board composition in light of these hot topics.
A stagnant board is an ineffective one. While some directors can serve long tenures and continue to be actively engaged in the affairs of the bank, some directors grow less effective. What’s more, a board composed of directors who have served together for a number of years, or even decades, can grow complacent in their approach to bank strategy and oversight. This isn’t in the best interest of shareholders, employees or customers.
So how can boards fight complacency? Bring on some new blood. “That’s the attraction of bringing a young person in,” says Ben Wynd, a 40-year-old director at Franklin Financial Network, a $4.1 billion asset bank holding company headquartered in Franklin, Tennessee. He joined the board in 2015 and is an accountant with public company reporting expertise. “I have a desire to grow my practice. I have a desire to grow and become successful individually. I have energy, and I ask a lot of questions.”
It is rare for a bank to bring on a director aged 40 or younger as Franklin Financial has done. The 2018 Compensation Survey, conducted in March and April, finds that a whopping 84 percent report their board lacks any directors in this age group.
But boards like that of Franklin Financial, as well as $1.8 billion asset ESSA Bancorp in Stroudsburg, Pennsylvania, and $2.4 billion asset Sierra Bancorp in Porterville, California, are finding a way to attract young professionals to their board. Here’s how.
Actively seek prospective younger directors. Your board can’t count on a skilled, young professional just falling out of the sky, so at least one director on the board should be advocating for the addition of younger perspectives and identifying potential board members. The more directors serving as advocates, the better.
Wynd says Paul Pratt Jr., a director who served on the Franklin Financial board since its 2007 founding, was just that sort of advocate. (Pratt’s term expired in 2018, but he continues to serve on the bank board.) “Any time I see a great talented young person, I try to engage them” and understand their goals, Pratt says. “There’s a lot of supreme young talent out there that needs to be on bank boards helping make critical decisions on how the bank grows.”
Board members can also leverage friends and family to identify prospective board members.
“A member of the board lived in my community and is friendly with my parents,” says Christine Gordon, 42, a director at ESSA since 2016, who has a background as a lawyer and experience as the deputy chief compliance officer at Olympus Corp. of the Americas, as well as deep connections in the community. “He approached me and asked whether I’d be interested in joining the board and talked to me a bit about what it would entail.”
Similarly, Vonn Christenson, a 38-year-old attorney who was appointed to Sierra Bancorp’s board in 2016, says he was approached by a Sierra director who was his parents’ friend and neighbor. “The bank had been expanding, had been acquiring other banks and was looking to expand more. Their board members were aging, so they were looking to add some members.”
Communicate the benefits of serving on a bank board. Prospective younger directors with the skill sets that bank boards need are in demand, and not just within the banking industry. “In all honesty, I probably have more opportunities [to serve on boards] than I have time and than my wife is willing to allow me to, so I’ve had to be selective in what I am involved in,” says Christenson. Make sure that the busy young professionals you seek as board members understand the benefits of serving on the board, as well as the bank’s growth trajectory.
And as much as long-term bank directors say that serving on a board is not about the money—just 14 percent of survey respondents indicate that offering a competitive director compensation package is a top challenge relative to their board’s composition—it could be the factor that leads an in-demand professional to pick your board over another.
Christenson says he had the opportunity to serve on the board of a local hospital but turned it down in favor of the bank. The bank “is a local success story in many ways, so there’s some more prestige that goes with it,” he says. Christenson also knew more members of the bank’s board, and “there’s compensation on the bank board, whereas it was voluntary on the hospital board.”
Ease the time burden. Juggling the professional demands of younger directors may necessitate rethinking how the board approaches meetings. Gordon has found web conferencing to be effective in allowing her to participate in ESSA’s board meetings when she’s traveling for work. And using technology like a board portal can help streamline board materials, making them easier to digest. “They’ve got a real nice platform to produce materials and keep them organized for future reference,” says Gordon. The board provided tablets to directors, so they can easily access the board portal.
Invest in creating a successful board. New directors, particularly younger ones, won’t be up to speed about the issues facing the banking industry, or even the fundamentals. “Educating new board members is very important. You join a bank board where folks have been there for years and years,” says Gordon. “I’ve been a board director for a couple of years, and I’m still learning.”
New directors should also meet with key members of the executive team, as well as one-on-one with board members. At ESSA, the management team teaches new directors about the bank and its primary areas of focus, says Gordon. The board also brings in speakers about specific topics, which can be vital to director education for old and new board members.
Investing in external training can be beneficial as well. But also expect to field a lot of questions from engaged new directors. And remember, those questions can benefit the board as a whole by leading if they lead to an examination of the bank’s practices and strategy. That’s the benefit of a fresh perspective, after all.
Ensure there’s a process to make room for new board members. Age diversity goes both ways—the board benefits from the views of young professionals as well as older, established directors who better understand the banking industry and have a historic perspective of their markets.
Establishing a mandatory retirement age can help cycle ineffective directors off the board, but some banks are uncomfortable with the possibility of losing engaged older directors. Providing exceptions for particularly skilled and effective board members, coupled with a mandatory retirement age, can be effective, as can term limits for banks uncomfortable with designating an age cap.
Conducting a board evaluation with individual director assessments and using a board matrix to identify knowledge gaps can be useful tools to create space on the board regardless of age. To be effective, a strong governance chair or similar director should be empowered to have conversations with board members who aren’t pulling their weight.
In the survey, 44 percent of respondents reveal concern about recruiting tech-savvy directors. While youth is no substitute for technology expertise, and technology expertise isn’t limited to the young, it’s important to remember that younger directors are more likely to have an intuitive handle on technology trends, particularly as relates to the bank’s retail and commercial customers.
But youth isn’t synonymous with engagement. New directors should “bring a vision and new ideas to help bring the bank into the future,” says Christenson.
Bankers are routinely inundated with “alerts” and “updates” from advisors setting forth current developments in the law as it applies to banks and their business. As authors and recipients of such updates, we understand your pain, but also believe the information conveyed is critical to making informed decisions. However, every so often (now for instance), it’s important to reevaluate established practices and procedures to make sure we’re not forgetting something important.
As we approach year-end, it’s time to focus on compensation-related matters (yes, it’s that time of year already). In just a few weeks, many of us will be gathering in Chicago for Bank Director’s annual Bank Executive & Board Compensation Conference. No doubt, there will be much discussion surrounding the ever-increasing depth and breadth of laws, rules and regulations applicable to the banking industry generally and, in particular, compensation arrangements for directors and executives. But after a few years of focusing on the concept of risk, in all its glory, it’s likely there will be a fair amount of focus on independence this year. Over the summer, the Securities and Exchange Commission (SEC) announced its rules under the Dodd-Frank Act relating to compensation committee independence and, within the last few weeks, the New York Stock Exchange and NASDAQ OMX issued their own rules on independence as required by the SEC.
Independence and Dodd-Frank
The concept of independence for compensation committees—which underlies Dodd-Frank Act §952—is not a new one. The specific Dodd-Frank Act rules might be new, and will require study and may result in changes to your existing practices and procedures, but the concept of independence is familiar and worth revisiting. The rules will require that compensation committee members be independent and have access to independent advisors. What is left unsaid is that the information garnered from those independent advisors should be the basis for—not the end of—independent thought by independent directors. Independent advisors are not a substitute for independent judgment.
Sarbanes-Oxley Act of 2002 (SOX)
This year marks the 10-year anniversary of the SOX. It was enacted in response to the corporate and accounting scandals that came to light around 2002 (Enron, Tyco and WorldCom, just to note a few). SOX focused on corporate responsibility and oversight of the accounting industry. At its root, however, were a few familiar ideas, that a public company have an audit committee, all members should be independent, should have access to independent advisors (auditors should be independent) and should exercise independent judgment.
Global Financial Crisis of 2008 & Risk Assessment
Six years after SOX, the world experienced the global financial crisis. One of the congressional reactions to this crisis was the enactment of the Dodd-Frank Act. The Dodd-Frank Act put the focus squarely on risk assessment of compensation plans. Bank regulators and the SEC reminded us that risk assessment in connection with compensation plans was not a new concept. Banks (and other entities) were directed to mitigate unreasonable risk in compensation programs wherever it was found. There was a focus on risk itself, risk mitigation, risk policies, claw-back of incentive compensation (incentive compensation that may have led to excessive risk-taking) and so on.
Lack of independence on the compensation committee was rightly perceived as a potential risk. To mandate the mitigation of this risk, the Dodd-Frank Act directed the SEC to enact rules, through the exchanges, that would require public companies to ensure their compensation committees are independent with uninhibited access to independent advisors to assist them in the discharge of their duties. Again, the rules may be new, but they are focused on a familiar concept—independence.
This brings us back to the alerts, updates, conferences, seminars and the seemingly infinite sources of industry information. All of the information you obtain, regardless of the source, is of no use unless it’s put to work in an independent decision-making process. Advisors will help to educate you, but it’s up to your board members to exercise independent judgment.
Bank Director asked speakers at its upcoming Bank Executive & Board Compensation Conference November 5-6 in Chicago to answer a question lots of bank directors want to know: Is it time for a raise? Even if the industry’s financial performance is still lackluster, do bank directors deserve a raise?
Yes, if performance is good.
Bank Directors deserve a raise if the bank performs benchmarked against industry peers. Performance should be an obvious consideration. The regulatory burden and expectations of serving as a director has exponentially increased. Regulators expect directors to be capable, competent, knowledgeable, engaged and responsible and they are increasingly held to those standards. Our performance is directly related to the economy which is a complex challenge for our industry. This demands more of our directors. Finally, regulation has diminished our revenue and increased our costs. All these things require directors who need to be compensated appropriately so banks can acquire and retain capable talent to represent shareholder interests and provide advice and counsel to management.
– Ed Balderston, former executive vice president and chief administrative officer, Susquehanna Bancshares, Inc., Lititz, PA
Director work load and risk has increased significantly as has the need for continuing education.
– James C. Bean, Principal, McLagan, An Aon Hewitt Company
I think the answer could be yes or no, depending on how current director compensation is positioned in the marketplace. If a bank has a median market compensation (not too high or too low), I would recommend that the board should increase pay as the common philosophy is “pay for time” rather than pay for performance and many directors are working harder than ever in these tough times. Of note, if the bank has frozen salaries for all employees or executive officers, I wouldn’t recommend the pay raise for the board, as it wouldn’t look good for the organization.
– Mike Blanchard, CEO, Blanchard Consulting Group
Each compensation situation for bank directors is unique. In general the expectations, involvement and liability of being a bank director has increased substantially over the last several years. In order to attract high quality directors, the overall compensation package for a bank director needs to be commensurate with those responsibilities and expectations. Bank directors need to be held accountable for a high level of engagement and should be compensated for that engagement.
– Daniel E. Bockhorst, executive vice president and chief risk officer, CenterState Banks
This question does not have a simple yes or no answer. I certainly believe directors have seen their workload and responsibility increase in recent years and this may very well warrant a raise. Market data trends in recent years have not shown an increase in director compensation, but I do believe we will see that change in the near future. So, if the bank is performing at an adequate level and the directors have been working harder than in the past, I think it certainly might be time to give the directors a raise.
– Matt Brei, senior vice president and partner, Blanchard Consulting Group
While all corporate directors are facing increased responsibilities, the demands on bank directors have particularly escalated. In light of the expanding requirements, the need for more diverse skills and expertise on boards has never been greater. Meanwhile, surveys show director compensation at banks continues to lag other industries. While financial performance and affordability are both important for banks to consider when evaluating director compensation, the following factors should also be assessed:
competitive positioning of director compensation against industry peers;
changes in board structure, such as the creation of a lead director position;
historical frequency of changes in director compensation at the company (many companies consider changes to director compensation every 2-3 years); and
consistency with employee pay decisions (e.g., have employee salaries been frozen?)
– Michael W. Brittian, partner and senior consultant and Daniel Rodda, senior consultant, Meridian Compensation Partners LLC
I hate to look at shareholders who have entrusted their ownership stakes to me and tell them I should be paid more as they see the value of their bank diminish. Directors should feel the pain as shareholders. Perhaps rather than cash, perks or restricted stock (which is real economic value today), the best way to compensate directors for the added time is through option grants. At least through this, directors will make more only if the shareholders make more. It’s called alignment.
– Frank Farnesi, compensation committee chairman, Beneficial Mutual Bancorp Inc., Malvern, PA
Bank directors’ fees like everyone else’s compensation are driven by a number of factors. The first is performance of the director. If the director performs in a manner that enhances the operation of the bank and its profitability, then an increase may be in order. The second is performance of the bank. If the bank is performing favorably against its peers in meaningful ways, an increase is not unreasonable. However, if stock prices are at disappointing levels, it is not always effective to point to the bank’s or director’s above average performance. Stockholders in most cases will have the ability to vote against directors at least every three years.
– Douglas P. Faucette, partner, Locke Lorde LLP
The answer is not an easy one. Responsibilities for directors dealing with compliance requirements, time commitments and personal liability have significantly increased. Recent studies suggest non-executive directors are not compensated adequately relative for their role. What is also clear is the expectations of directors have increased significantly and include a greater time commitment, exposure to legal liability and scrutiny by the public. Director pay is not simply an honorarium; it’s one the most difficult issues to assess. For a director to deserve a raise, they should be able to answer “yes” to these questions:
Has the board performed a self-assessment as recommended by regulatory agencies?
Are all directors performing at a satisfactory level?
Is shareholder value increasing?
Have peer evaluations been conducted?
Finally, pay should be commensurate with the time and expertise required. Shareholders should recognize that without qualified individuals, it is the company and eventually the other shareholders who will suffer.
There is certainly no question that bank directors are spending increasing amounts of time in the performance of their duties. Most bank directors have a “day job” from which they take time to perform bank business, which creates an additional expense relative to lost time. In addition to the time requirement is the potential risk of personal assets. The short answer to the question is “yes,” but the reality is “not really.” The current environment makes it difficult to justify raises when the full-time employees are asked to sacrifice raises or additional benefits. The bottom line is to improve performance, which will result in better financial footings, improved stockholder relations and conceivably more satisfied employees.
– W. Scott Gallaway, compensation committee chairman, Millington Savings Bank, Millington, NJ
Directors’ compensation at any bank can only be evaluated against the specific performance of that bank. The compensation committee needs to weigh both the performance of the bank for all of its stakeholders (shareholders, customers, employees and communities) and compensation for directors against market. In difficult times like these, banks need to seek out the best talent when searching for a new director and can’t afford to be less competitive than other industries when searching for talented and experienced directors. While raises are probably not on the table this year, each committee needs to thoughtfully evaluate its package for directors each year.
– Barbara Jeremiah, compensation committee chairman, First Niagara Financial Group, Inc., Allison Park, PA
Yes, more challenges should mean more pay.
The overall financial performance of the industry is not the only determining factor when considering whether bank directors deserve raises. Directors must work harder than ever to fulfill their duties in these times of shrinking margins, deteriorating asset quality, lackluster growth and increased government regulations. Because of these challenges, assessing risks and creating policies responsive to those risks is increasingly difficult and now requires extra diligence and continual education. Our shareholders deserve directors who commit the additional time, energy and effort to fulfill their fiduciary obligations. Likewise, bank directors fully engaged to these tasks deserve to be fairly and adequately compensation for their effort and experience.
– Dallas Kayser, compensation committee chairman, City Holding Company, Point Pleasant, WV
No, pay should match the bank’s performance.
Industry performance good or bad should not be a major factor in setting director pay. Far more relevant is the performance of the director’s bank. The current climate for pay raises is negative because of generally lackluster industry performance. In a back drop of significantly increased regulatory burdens, director workload and responsibility, there is some justification for adjusting director pay to compensate for these factors. In the current industry situation however, it is my opinion that director pay increases should be undertaken with great reluctance and only after careful study. The optics of increased director pay in the current environment can be negative from an investor’s point of view.
Obviously, an involved director of any board will spend more time, energy and will be subject to more stress during times of adversity. However it is rare that all members share equally in the process of problem resolution. Therefore it is difficult to recommend blanket increases for all board members. How to financially recognize the ones heavily involved and critical to success would be a good topic of discussion.
– E. Lyle Miller, compensation committee chairman, Ouachita Independent Bank, Monroe, LA
That would depend on the circumstances of the individual bank. First, if the bank’s performance exceeded peers and met or exceeded expectations for return on equity, return on assets, adequate capital ratios, etc., a raise for directors might be in order if the directors’ compensation remained within its peer group. Secondly, if the bank was having difficulty attracting qualified directors, a raise would most likely be in order unless the compensation was deemed unreasonable by best practices of the industry. Thirdly, for individual directors who had certain expertise (i.e. financial experts) who carried additional responsibilities, an increase in compensation would be justified and prudent. To base directors’ compensation solely on the industry’s overall performance would be counterproductive.
– John Mitchell, compensation committee chairman, NBT Bancorp Inc., Ithaca, NY
Since the financial crisis, the role of a bank director has become increasingly demanding as the industry faces economic uncertainty and an expanded regulatory environment. Bank directors must practice a delicate balance of executing their duties, while allowing bank management the latitude to do their jobs as experts in a complex, heavily regulated industry. The progress an institution makes against its strategic objectives, combined with a strong link to long-term incentives, should also be factored into the decision.
– Cathy Nash, president and CEO, Citizens Republic Bancorp, Troy, MI
Whether compensation should be “raised” depends on each bank’s current pay levels, program structure and unique requirements. While the financial crisis brought several years of flat /modest increases, many banks recognized additional [board responsibilities] through increased retainers for board and committee chairs as well as meeting fees for key committees. Public banks tended to make increases in the form of equity, to reinforce shareholder alignment. With further regulations and a spotlight on the banking industry governance, we expect board pay will continue to evolve and increase to meet demands.
– Susan O’Donnell, managing partner, Pearl Meyer & Partners
There is no one answer to the question of whether or not bank directors as a group deserve a raise in the present environment. Treating all directors as a class would be manifestly unfair; each bank has faced different challenges and boards have reacted to these challenges in significantly different ways.
Pay raises need to be reviewed for boards while concentrating on the individual circumstances of each bank. Pay raises need to be reviewed on a case-by-case situation to determine if the appropriate strategies and tactics were put into place.
– Dave Payne, senior vice president, Meyer Chatfield
I think bank directors are deserving of consideration for raises, even despite lackluster industry performance, based upon the increased workload and accountability board members are facing. Whether members of any particular bank board are deserving [of a raise] depends on the each bank’s unique circumstances, such as the bank’s long term shareholder return performance relative to peers, the bank’s status with regard to regulatory compliance issues and, of course, the current board member compensation relative to peers. So, the direct answer to your question is “maybe.”
– Kent L. Roberts, executive vice president and human resources director, Columbia Bank, Tacoma, WA
According to a recent survey performed by a well known executive search firm which used National Association of Corporate Directors data, bank directors in smaller publicly traded banks (market capitalization under $1 billion) are currently paid less on average than directors in other similarly sized public companies. Given the greater responsibilities and regulatory requirements imposed on banks and bank directors, if we are to continue to attract the quality of directors we need, I do believe bank directors should be paid competitively with those in other public companies. Do we “deserve” it? That’s more subject to personal opinion and a good topic for cocktail discussion!
– Charles Schalliol, compensation committee chairman, First Merchants Corporation, Indianapolis, IN
Tell us what you think in the comments section below.
Bank directors face familiar compensation challenges this year, but frustration with the board’s ability to handle these challenges appears to be increasing. That is according to the results of Bank Director’s 2012 board compensation survey co-sponsored by Meyer-Chatfield Compensation Advisors, which included nearly 550 CEO and director responses.
This year, only 58 percent of respondents feel their board is managing executive compensation well or very well, compared to 63 percent last year and 74 percent in 2010. Similarly, only 53 percent feel director compensation is being managed well or very well, compared to 56 percent last year and 68 percent in 2010.
Meyer-Chatfield Compensation Advisors President Flynt Gallagher says that some of this dissatisfaction is the result of increased scrutiny from shareholders, regulators and the market.
In some cases, this increased scrutiny may be translating to increasing workloads for directors. The median hours spent on the job for institutions of all asset sizes remained the same this year as last year at 15 per month, but there were large changes in the hours reported by banks in the highest and lowest asset categories. While directors from the largest banks reported working fewer hours this year, the opposite was true for their small counterparts. Directors at banks with under $100 million in assets report working 20 hours per month this year; that is 5 hours more than they reported working last year and double the year before.
Justin Heideman, a director at Town & Country Bank in Saint George, Utah, a de novo institution with less than $70 million in assets, says he has no doubt directors at these smaller institutions are putting in more hours. He says the main reason is compliance. “We have the same requirements on the [information technology] side in terms of safeguards that a major bank has,” says Heideman. “It’s nonsensical the amount of time that is required to make sure that compliance is appropriate and to make sure we do all of our training. We have to do pop quizzes like I was in second grade during board meetings to make sure our training is done and to prove we are being trained. It’s ridiculous.”
On a positive note for directors, more respondents (32 percent) expect director compensation at their banks to increase in 2013 than in 2012 (28 percent). Only 1 percent of respondents expect a decrease in compensation in 2013, and 67 percent expect director pay to stay the same.
Gallagher says the financial performance of many banks is showing an improvement after struggling with asset quality issues, lower margins and lower profits in recent years. With this improvement some banks are feeling relief and even optimism.
The median board meeting fee for outside directors stayed the same this year as last year at $600 per meeting, while the median meeting fee for a chairman rose slightly from $600 last year to $675 this year.
And yet, even as compensation holds steady or even increases, benefits for directors continue to erode. The number of banks offering zero benefits to outside directors has significantly increased—46 percent this year compared to 39 percent last year and only 28 percent the year before.
Making cuts to benefits while keeping compensation steady might make sense for many banks, as it seems to align with what directors find most important when considering a new board seat. When asked to rank the importance of types of benefits and compensation when considering a new board seat, 51 percent of directors assign little or no importance to retirement plans while only 27 percent find them important or very important. Similarly, 44 percent of directors assign little or no importance to insurance benefits, while 28 percent find them important or very important.
It is important to note that many respondents report liability and potential growth of the institution are even more important factors when considering a board seat than the compensation or benefits package. Clyde White, chairman and CEO of Ouachita Independent Bank, a commercial bank in Monroe, Louisiana, with $570 million in assets, had this to say: “If I were considering joining a bank board, I would want to know what investment opportunity I would have and what the potential for growth is of that investment. I would also want to know what value I would be expected to bring to the table [i.e., business development activities, business acumen].”
The compensation survey was emailed throughout April and May to CEOs and directors at banks ranging in asset size from under $100 million to more than $5 billion. The response rate was 5.7 percent, with 549 responses. Of the banks represented, 9 percent have less than $100 million in assets, 25 percent are between $100 million and $250 million, 24 percent are between $251 million and $500 million, 17 percent are between $501 million and $1 billion, 18 percent are between $1.1 billion and $5 billion and 6 percent have more than $5 billion in assets. Of the respondents, 40 percent are publicly traded, 56 percent are private and 4 percent are mutual. Only 14 percent are de novo banks.
For the survey report including committee fee pay breakdowns, click here.