Bankers increasingly are attacking credit unions, and one of their latest strategies is to publish what they claim is “excessive” CEO compensation at individual institutions.

A 2017 op-ed criticized credit unions for paying employees “more than $100,000 a year… while working at a ‘non-profit.’”

Another highlighted “jaw-dropping” CEO salaries as a reason to eliminate the “unfair and indefensible corporate welfare big credit unions receive as a result of their non-profit status.”

As you might expect, these criticisms lack important context.

First, credit unions typically are much bigger than other nonprofit organizations. The average nonprofit, for example, has $3.5 million in assets versus $246 million in assets at the average credit union.

And large, complex organizations simply need to pay more to attract and retain qualified employees, especially CEOs. This is true for both for-profit and not-for-profit organizations.

For example, The NonProfit Times reports that the largest nonprofit organizations with more than $50 million in operating budgets pay their CEOs five times as much as the smallest nonprofits, and these CEOs command average annual salaries of well over $300,000.

Second, academic studies confirm that nonprofit and for-profit salaries tend to be similar. In fact, in competitive markets, researchers often find zero differences in pay at nonprofits and for-profits in similar industries.

But this shouldn’t be terribly surprising. After all, basic economic theory suggests that in competitive markets with scarce talent, organizations will be forced to offer similar wages for similar work.

This holds for everyone from a frontline teller to the CEO. Intuitively, one can simply imagine what would happen if bank tellers were paid $20 per hour while credit union tellers were paid $10 per hour.

So, due to competition, we shouldn’t expect huge differences in total compensation between bank and credit union employees, including CEOs.

However, we do expect big differences in the types of compensation at credit unions and banks.

Economic theory suggests that executives at nonprofit organizations with multiple objectives, pro-social missions, and goals that are difficult to measure will receive relatively less performance-based incentives relative to similar for-profit companies.

The higher fixed salary allows nonprofit CEOs the flexibility and creativity to focus on intangible goals—such as financial education, community development, or economic and democratic participation.

CUNA’s analysis of credit union and bank executive compensation—from IRS 990 and SEC filings—reveals that credit union CEOs earn roughly 10% less than bank CEOs at similarly sized institutions.

We also find that bank CEOs receive about one-quarter of their income from performance-based compensation (bonus, stock, options), while credit union CEOs receive only 9% of their income from performance-based compensation.

That’s important because evidence suggests that compensation structures at financial institutions and other companies can have important consequences for consumers.

Many academic studies demonstrate that equity-based incentives (i.e., stock and option holdings) in bank compensation packages promote short-term planning and greater risk-taking by bank executives.

Furthermore, large variable or performance-based compensation is shown to increase the likelihood of unethical behavior, such as earnings manipulations, shareholder lawsuits, fraud, misreporting, product safety problems, and uncooperative behavior and sabotage between workers.

It may have also contributed to the financial crisis of 2008 to 2009, when bank delinquency rates rose to three times that of credit unions.

In fact, Wells Fargo was just fined another $2.1 billion for misrepresenting the quality of tens of thousands of mortgages packaged and sold to investors leading up to the crisis—mortgages that led to large bonuses for employees and executives.

This is in addition to numerous other settlements with the Justice Department over mortgage-backed securities, including $16.7 billion with Bank of America, $7 billion with Citigroup, and $13 billion with JP Morgan Chase.

Total bank fines have now reached $243 billion since 2009, the equivalent of roughly 17% of the assets of the entire credit union industry.

While bankers try to attack “excessive” compensation at larger credit unions, the data shows that credit union CEOs earn significantly less than comparable bank CEOs, despite competitive pressures.

What’s more, credit union CEO compensation packages are structured in a way that allows them to focus more on member services, long-term planning, and sound risk management.

The outcome is that consumers have an option that considers their best interests’ first, instead of short-term profits and bonuses.

JORDAN VAN RIJN is a senior economist for CUNA. Contact him at 608-231-4286.