2017 Compensation Survey: Procrastination About CEO Succession

June 5th, 2017

succession-6-5-17.pngForty-eight percent of bank directors and executives—including chief executives, human resources officers and chief financial officers—say their bank does not have a successor to replace the CEO when the top executive retires or leaves, according to Bank Director’s 2017 Compensation Survey, sponsored by Compensation Advisors, a member of Meyer-Chatfield Group. Yet, just 17 percent say that developing a CEO succession plan is a top compensation challenge.

Twenty-nine percent of respondents expect their bank’s CEO to retire within the next five years. The median age for bank CEOs is 57 years, with 58 percent between the ages of 50 and 61, 26 percent between 62 and 73 years old, and 2 percent aged 74 to 86 years. Thirty-eight percent of respondents whose CEO is aged 62 or older have not identified a successor.

The 2017 Compensation Survey was conducted in March and April of 2017, and surveyed 286 independent directors and senior executives of U.S. banks. Compensation data was also collected from the proxy statements of 108 publicly traded banks. The survey provides detailed information on CEO and board compensation packages.

Banks below $5 billion in assets are less likely to have designated a successor or identified potential successors. Eighteen percent of respondents whose banks haven’t identified a successor—all from institutions below $5 billion in assets—say they lack the internal talent to take the place of the CEO.

Just 12 percent are willing to consider a candidate from outside the banking industry to replace the CEO. Respondents from publicly traded banks above $5 billion in assets are more likely to consider this type of candidate.

Key findings:

  • The vast majority—91 percent—believe the bank’s CEO compensation package is competitive enough to attract future CEOs or retain the current CEO. The median CEO salary for fiscal year 2016 was $366,250, with a median cash incentive of $131,697.
  • Of those who see room for improvement in the CEO compensation package, 67 percent say the bank needs to offer equity, and 22 percent say the bank should offer equity at greater levels. Fifty-two percent of all respondents say their CEO was awarded equity grants in FY 2016, at a median of $240,160.
  • Sixty-four percent believe that their bank’s compensation plans are not competitive with technology companies, but 93 percent believe they’re on par with other banks, and 70 percent believe they are competitive with other companies outside the banking sector.
  • Fifty-two percent say the bank offers both an in-house training program and external training options to develop executive-level skills. Eleven percent offer neither option.
  • One-third of respondents report that their bank has no women serving on the board, and just 13 percent have three or more female directors. Fifty-one percent say that their board seeks to be more diverse over the next two years.
  • Seventy-three percent believe that the board’s compensation structure is attractive enough to bring in new directors. Non-executive chairmen received a median of $50,782 in total compensation paid in FY 2016, and independent directors were paid a total median of $38,610. Forty-six percent report that outside directors receive no additional benefits or perks.

To view the full results to the survey, click here.

emccormick

Emily McCormick is the Director of Research for Bank Director, an information resource for directors and officers of financial companies.You can follow her on Twitter at twitter.com/ehmccormick or get connected on LinkedIn.