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Defining Accurate Base Pay Compensation and Its Importance for the CEO

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BY JERRY P. NELSON

What are the components that go into a thorough CEO compensation strategy? If your credit union strives for a foundation built on soundness and value – to both members and staff – you’ll want to listen up. These three components will ensure the implementation of a compensation policy that yields such a structure.

In prior articles we have discussed the need, in fact the necessity, to articulate a thorough compensation policy. While it might be as simple as saying, “We want to pay at market,” in actuality, it requires drilling down much deeper to provide effectiveness, competitiveness and establishment of a sound and valued credit union structure (in all things). Let’s examine some of the components that fit into such a policy or strategy:

1)        Compensation Policy Specifics: While policies can be general, their impact is extensive. The challenge is to find the best fit for not only your credit union but also your CEO. Today we’ll break down one of the most common compensation policies (establishing fair CEO base pay) and provide some detail and analysis concerning how to deal with it.

  1. A)        Policy Question #1: In comparison to the marketplace, where should we index or link our CEO’s base pay? The choices are:
  • Base pay – lower than market
  • Base pay – at market
  • Base pay – above market
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