Banks Beef Up Benefits Pack in Scramble to Get Top Talent
Nuccio, Sal, American Banker
The white gloves are off at major commercial banks in their drive to attract and keep the management talent required for success in the hotly competitive financial-services world, where traditional barriers separating industry segments are crumbling.
"The number of effective financial-service people is limited, so, if banks are to satisfy their crying need, they have no choice but to be competitive," said Alan M. Johnson, a principal at Sibson & Company, Inc., compensation consultants in Princeton, N.J.
But, before they get into the fray, "Commercial banks first have to define their competition for senior personnel, and then structure attractive compensation programs," said Kathryn A. Zeschin, compensation sepcialist and partner at Hewitt Associates in Chicago.
Many major banks apparently have done that, as indicated by the following trend-setting developments:
* Increasing emphasis over the last five years on short-term and long-term compensation incentives.
* Increases in the value of executives' total compensation.
* Creation of separate compensation systems for executives in different opperating areas, such as bonds, pensionfund management, mortgage banking, and the branch network.
Total compensation for senior officers of leading banking, diversified financial (investment and insurance), and industrial concerns is broken into component parts in the accompanying exhibits provided by Hewitt Associates. While base salary accounts for a smaller segment (38% of total compensation) for industrial executives than for those in banking and diversified financials, industrial executives none-theless are ahead of the pack.
Peter S. Egan, a Hewitt partner, said the median base salary was $250,000 for members of senior management in major banks, $240,000 in diversified financials, and $280,000 in the industrial companies. That puts the median value of the total compensation package at about $545,000 a year for the bank executive, $585,000 for the diversified financial officer, and $735,000 for the industrial executive. Moving to Industrial Mode
"Banks have moved closer to the industrial mode of compensation," Mr. Egan said, "and will continue to do so as they continue to put increasing emphasis on incentives, as against base pay."
He noted, for example, that 95% of the banks Hewitt studied has long-term incentive programs in 1983, comparet with 74% in 1981. Industrial companies, meanwhile, went from 90% to 93%.
A recently released study of the 50 largest commercial banks by Towers, Perrin, Forster & Crosby, compensation specialists, showed that 49, or 98%, had some type of incentive plan in 1984, unchanged from 1980. However, the number of banks with long-term incentives went from 37 to 48, and with bot short-term and long-term plans from 33 to 46.
Towers, Perrin also reported that the median amount of cash compensation (salary and bonus) for the five highest paid executives at the top 50 banks, with their increases over 1982, was as follows:
"Compensation factors have a good deal to do with the size and type of bank, and the attitude of its management," said Mr. Johnson of Sibson. "The aggressiveness of some banks in diversification and expansion is reflected in the sophisticated and competitive design of their compensation programs, which help build the teams essential to the accomplishment of their objectives.
Mr. Egan of Hewitt, in supporting his thesis that banks are "moving closer to the industrial mode of compensation," noted that banks are increasingly adopting supplemental executive benefits that are prevalent among industrial companies, particularly in retirement planing. …