Academic journal article ABA Banking Journal

The Headache: Compensation during Changing Times

Academic journal article ABA Banking Journal

The Headache: Compensation during Changing Times

Article excerpt

Much has changed over the last few years in regulatory attitude, etc., about pay. Has your bank made any significant changes to officer or employee compensation? How has it worked out? Add your answers to these by emailing to

Remedy 1: Board's getting involved

Frank Campbell, president and CEO, Pilgrim Bank, $171.4 million-assets, Cohasset, Mass.

In recent years, our board has become more cognizant of the regulatory changes relating to compensation. The Compensation Committee initiated a project to revise the process and incorporate regulatory guidelines. They hired a consultant to help them develop policies and procedures as well as a new charter. They also revised the evaluation process for senior management. The next phase of the project will begin this year. The Committee plans to address short-term and long-term compensation by implementing specific measurements for senior management.

Remedy 2: If it ain't broke ...

Howard Jaffe, president and CEO, Inland Bank & Trust, $1.3 billion-assets, Oakbrook, Ill.

Ironically not much has changed with us in this regard. Our incentive plan is funded by a matrix of goals and objectives for the company. We have used that for about five years; everyone understands it, and that makes the overall process easier to understand.

Remedy 3: Cash incentives for corporate officers

Rudy Schupp, president and CEO, 1st United Bank, $1.6 billion-assets, West Palm Beach, Fla.

In the compensation area we have long had performance-based compensation for lending teams, regional field managers, and so on. Recently we developed a cash incentive program for our senior corporate staff-oriented officers that revolves around achievement of consolidated earnings, net interest margin objectives, efficiency ratio, and examination outcomes.

Remedy 4: Straight salary keeps right focus

Thomas H. Pohlman, president & CEO, Ames (Iowa) National Corp., $1.2 billion-assets.

"Customer First." This philosophy permeates our organization. It also holds true with our compensation plan. None of our staff is paid on commission. From personal bankers and tellers to mortgage lending officers and commercial lenders, we have made a conscious decision to pay salary. …

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