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If a credit union's success is based on increases in CEO total compensation, then 1993 could be described as a great year for credit unions with assets of more than $70 million -- and not a great year for credit unions with less than $70 million in assets.
But we all know better. There is often more to the economic picture than meets the eye. As is postulated in the 1994 CUES Compensation Manual, the smaller credit unions "may be focusing on product leadership through developing and offering services which are innovative, different and better, and are instead using limits on CEO compensation to support short-term financial success."
Whether economic gain should be sought at the expense of CEO compensation is open to debate. Still, in 1993 only one asset category under $70 million kept pace with the 2.5 percent inflation rate.
"It's so inexpensive to match the inflation rate. The fact that it's not happening is surprising," says Gary Morehead, vice president of Southfield, Mich.-based Koch-McNabb Resources Inc., the firm that conducts surveys and analyzes the results for the CUES Compensation Manual.
"What's happening is that some of the smaller credit unions are not finding the same advantage of size that the larger credit unions have," explains Morehead. "They're not able to pass benefits on to their CEOs. When they turn around and boost pay by less than the inflation rate, that puts smaller credit unions behind the eight-ball when trying to compete with other credit unions. How will they manage to keep up and innovate when larger credit unions are at an advantage?"
The slinky effect -- the pattern of alternating good and not-so-good results from year to year -- didn't bear out in 1994 for credit unions with assets of less than $70 million (see Figure I).(Figure I omitted) In last year's report on 1993 CEO compensation (Credit Union Management, August 1993), it was remarked that "if the slinky effect does appear in 1994, then CEOs in credit unions between $10 million and $50 million in assets and those with more than $100 million are likely to see larger increases."
The first part of this projection did not materialize. Credit unions in the $10 million to $50 million asset range averaged...