Banks Using Commissions, Stock Options and Bonuses to Attract and Retain Employees and Directors

RMA Journal, The, Feb, 2001

Financial institutions in the Midwest are relying more heavily than ever on nontraditional pay structures to attract and retain employees and directors.

The "2000 Financial Institutions Total Compensation Survey," recently released from Crowe Chizek & Company. LLP, indicates that financial institutions are compensating employees, officers and directors with bonuses, incentives, commissions, and stock options in addition to base salaries. These types of benefits have been particularly helpful in recruiting individuals for hard-to-fill positions in the areas of technology, mortgage banking, and commercial lending.

"In today's economy, the intense competition among employers for quality employees and board members has forced banks and other financial institutions to come up with innovative ways to lure people," said Hugh Reynolds, partner at Crowe Chizek. "In many cases, people aren't satisfied with a base salary. They're looking at the whole compensation package, which includes not just health insurance and retirement plans, but also options for additional income."

The change in the number of banks offering stock options to directors reflects this trend. In 1997, 12% of banks participating in the survey offered stock options to outside directors. In the 2000 survey, the number nearly doubled, as 21% of banks now offer this perk.

The survey results, which represent responses from 493 banks primarily in Indiana, Ohio, Michigan, Illinois, and some surrounding states, revealed other interesting facts about compensation practices at financial institutions.

* Bank presidents are receiving a greater portion of their compensation through stock options and/or bonuses rather than from annual salaries.

* Nearly 100% of survey participants provide health insurance to their employees. The number that pay 100% of the premium, however, declined 7% from 1999 to significantly less than half (41.1%).

* The number of banks offering post-retirement medical coverage increased 5% since 1999, reversing a two-year trend toward eliminating this benefit.

* The number of banks offering dental and vision coverage increased by nearly 8% since 1999.

* While 74% of survey participants offer some type of pre-tax plan to their employees, only 35% offer a full flex plan consisting of pretax premiums and flexible spending accounts for healthcare and daycare.

* The-average annual total compensation for outside directors in all banks is $10,208; that amount continues to grow each year.

* Life insurance is a popular benefit at banks, with 97% of survey participants offering it. Smaller institutions (under $50 million) offer an average of $23,429, while larger institutions (over $1 billion) offer an average of $43,750.

* Nearly 41% of banks still offer a defined benefit pension plan.

First-quarter U.S. Hiring Seen at Record High

More than one in four U.S. companies expect to hire more workers in the first quarter of 2001, a record high for first-quarter employment expectations, according to a survey by Manpower, a leading employment agency.

Its quarterly employment, outlook survey, which polled nearly 16,000 firms, said 27% of the companies surveyed predicted they will take on new employees in the first quarter of next year, down from a record 32% of those surveyed in August about expectations for fourth quarter 2000.

Milwaukee-based Manpower Inc. conducts the employment outlook survey on a quarterly basis.