Every CEO should have a contract in place, not only to spell out how they will be compensated for their work but also to clearly define what is expected of them and their job performance.
Credit unions that don’t have a contract in place for the current CEO or are anticipating having to replace the CEO in the next few years should start crafting a compensation plan and contract now.
“Compensation is such a provocative conversation,” says consultant Deedee Myers. “We really are in the CEO changing mode. We have CEOs changing contracts, boards asking why we need contracts, and internal candidates being promoted. So there’s a huge push for professionalization on contracts and compensation.”
Myers addressed a webinar on employment and compensation pitfalls and benefits hosted by the CUNA CEO Council. She discussed why it’s necessary to have a compensation agreement, how to negotiate a contract, and what to include.
Having a compensation plan in place for CEOs allows the board and CEO to start their relationship off of the right foot with clear expectations, Myers says. It also allows CEOs to focus on doing the job they were hired to do and building a relationship with the board.
"We want to start from a place of trust,” Myers says. “This is a business deal, and we need to make sure there are no gray areas.”
Boards that know their CEO will retire within the next three to five years can start developing a contract for the incoming CEO as early as three years out, Myers says.
Determine details that make up the framework of the contract, including:
Research compensation and benefits that are offered at credit unions of a similar size to ensure the credit union is offering a competitive compensation package, Myers says.
“Show you’re a high-performing credit union by having a good outline before you get the new CEO on board,” she says.