Executive compensation in credit unions isn’t just about financial data—it’s shaped by the personal experiences, values, and biases of board members. Understanding this dynamic is crucial for credit union leaders navigating pay discussions and structuring compensation in a way that supports long-term success.
In the latest episode of CU On The Show, host Doug English welcomes JP O’Connor, executive compensation consultant at Park Compensation Consulting, to explore the hidden influences behind CEO pay and share data-driven strategies for creating fair and competitive compensation structures.
Why Board Backgrounds Matter in CEO Compensation
Research shows that board demographics and financial experiences influence their compensation decisions. Studies from the Journal of Financial Economics highlight that directors’ personal backgrounds—whether they come from government, corporate, or nonprofit sectors—affect their comfort level with CEO pay structures.
In the credit union industry, where board members often come from the field of membership, their past professional and financial experiences shape their perspective on what is “fair” compensation.
JP O’Connor shares real-world examples, including:
- A credit union board hesitant to approve competitive pay because their personal salaries were historically lower.
- The impact of inflation-indexed pensions on board members’ perceptions of CEO retirement benefits.
- How adjusting pay discussions to account for generational differences in board experience can lead to better compensation alignment.
How Credit Union Executives Can Navigate Compensation Discussions
If you’re a credit union CEO or executive facing challenges in aligning compensation expectations with your board, data is your best tool.
- Use Market Data as a Benchmark – Objective compensation analysis can help bridge perception gaps and ground discussions in facts rather than personal biases.
- Engage a Third-Party Consultant – Compensation experts provide an unbiased assessment, ensuring decisions are fair, competitive, and aligned with industry trends.
- Frame the Conversation Around the Credit Union’s Long-Term Success – Executive pay isn’t just about the individual—it’s about attracting and retaining strong leadership to drive sustainable growth.
Want to hear real-world examples and actionable insights? Listen to the full conversation, where we discuss:
- The psychology behind board decision-making on CEO pay
- Best practices for credit union executives to start productive compensation discussions
- How to align executive benefits with organizational strategy
Listen now!
JP O’Connor is not affiliated with or endorsed by ACT Advisors, LLC.
Audio Transcription
[00:00:00] Doug English: J. P. O’Connor, welcome to CU On The Show. I am delighted you have joined me today, and I know you’re going to bring us a bunch of really interesting information.
[00:00:10] JP O’Connor: Yeah, thanks for having me.
[00:00:12] Doug English: So, J. P., tell us about how you got started working in the credit union movement, uh, and then, what kind of work you are doing today.
[00:00:23] JP O’Connor: So, growing up, I knew what credit unions were. Uh, but honestly I couldn’t tell you how they were different from big banks and then fast forward I took a consulting job at DDJ Myers and one of the first things that Deedee, the founder, emphasized was understanding the credit union movement, you know, not just the what, but the why, and it was a game changer for me, but the key moment I’d say was my first GAC governmental affairs conference.
[00:00:53] JP O’Connor: So, I walked into this massive event. And I just felt the passion. You know, I heard these incredible stories of what credit unions were actually doing for their members. And I met so many genuinely passionate people, yourself included, Doug, who deeply care about and protect the movement, it was like a light bulb that just kind of clicked, you know, this isn’t just an industry. It was a movement with a soul, and I wanted to be part of it.
[00:01:21] Doug English: Exactly. Yeah, there is definitely something special here. So, what do you, uh, what kind of work are you doing these days, JP?
[00:01:29] JP O’Connor: So right now, we’re, I’m specializing in executive compensation consulting with Park Compensation Consulting. And we, we really like to start with the compensation philosophy as the core of all the work and build off into conducting analyses, looking at executive pay packages. Provide retirement analyses and full-on compensation consulting services in general. We might dabble into whole org here and there, but specialties and executive comp.
[00:01:59] Doug English: Well, I know that’s kind of been part of our numerous discussions we’ve had over the years we’ve known each other, one of the things that you’d said one GAC, which was, that some data that you had looked at, uh, talked a little bit about how some of the background of the board, predicted CEO comp, which I thought I had never heard anything like that before.
Talk to our listeners about, you know, what, what was that data? Help us understand what you’re talking about and, uh, and what that might mean.
[00:02:33] JP O’Connor: Well, I think it goes without saying that our, our backgrounds as individuals shape our willingness to make certain decisions and relating that to CEO compensation. There’s a growing body of research that underscores the impact that board demographics, et cetera, have on how CEOs are paid. More specifically, there’s a study from the Journal of Financial Economics, and it reveals that director’s experiences and personal characteristics influence their decision-making processes regarding executive pay.
And in other words, we are who we are because of our experiences, and those experiences shape the decisions that we make, consciously or unconsciously. And that’s PSYCH 101 but applied to compensation here. And I see this all the time with credit union boards, you know, where they come from within the field of membership, their unique perspectives are going to be shaped by their industry and personal journeys.
[00:03:31] JP O’Connor: And that directly influences how they’re going to approach CEO compensation, executive compensation. And sometimes those personal influences are magnified, and compensation decisions are, they’re complex, you know, they’re more than just financial. They reflect the board’s values, priorities, even its comfort level with certain approaches.
[00:03:52] Doug English: So, if you are a credit union CEO, and you’re already in a position, um, your board is, is what it is, and you’ve got to kind of work with that. And I know that over the years, that of the credit unions that we work with, you often hear challenges about the difference between the comp level that you have to pay in credit unions to get talent versus what they were used to with the phone company or with the state government or with whatever the employer group may have been that the credit union was founded on.
What are the takeaways? Like, how do you, how do you deal with that? You know, how do you deal with if you’re a CEO in that situation, how do you deal with it if you are someone that is, uh, that is considering changing credit unions and how you, how you might evaluate what kind of credit union you want to partner with?
[00:04:47] JP O’Connor: That’s a really good question, and it’s one that doesn’t have a one size fits all to it. There are a number of ways you can approach that situation. I think it really starts with talking to the board and understanding their perspective, and that actually kind of brings another layer into play of, again, how directors and their personal financial experiences are going to shape their willingness to how they pay the CEO or other execs if they’re controlling that.
[00:05:19] JP O’Connor: And there are studies that examine wealth and decision making as well as my own personal experience. And I’ve seen that boards, for example, with wealthier directors or who come from higher paying industries, approve more generous compensation packages typically. And it’s not just about paying more, it’s about paying right. And regarding socioeconomic backgrounds, I found the opposite to be true as well. So, kind of like what you were saying, directors from more modest financial backgrounds are often less willing to pay at or above the market. And I think a good example actually, would be, I worked with a $600 million credit union, give or take, and their board was made up of, we’ll say, highly tenured individuals from modest financial backgrounds, and they were just convinced that paying the CEO above a certain number was excessive. And we explored that and where the number came from, it turned out to be tied to their own career experiences. Decades old pay levels that no longer reflect today’s market. And so, when I modeled the data, I actually backdated the final pay figures to around the time that most of the board was still working.
[00:06:32] JP O’Connor: And the numbers aligned much closer to what their imagined number was. I’m not saying this is necessary to do, but, but in this case, it really helped them to reach that “aha” moment and allow them to see that their assumptions were rooted in kind of personal experiences rather than current realities. So, using data to drive the reasoning, to, to drive the, we’ll call it the argument, uh, is really the best option because.
As far as a CEO or other executives know, it’s the data is the data. So, you might think that, oh, I’m, I’m underpaid or overpaid. A third party, for example, will have no stake in the game. You know, you do the analysis, you run it across a multitude of sources and the data speaks. So, in this, in that case, for example, it was just as simple as asking the board, where is your thinking coming from? Let’s look at some data, reevaluate our approach to compensation potentially.
[00:07:28] Doug English: So, if I heard you correct, I want to make sure our listeners catch this as the takeaway, is that you took you took the CEO’s comp and then you related it to where their comp was back when, uh, you evened the timeframes, right? Because they used to be working, now they’re retired. You took their CEO’s comp and inflation and, uh, you know, reduced it for inflation and then it made more sense to them. Is that the main change you made is time value of money?
[00:07:59] JP O’Connor: Spot on. Yep. That’s exact. And it’s something I would say I’ve actually done a couple times, but in certain instances, if there’s just a made up number and you’re just thinking, I mean, where do I even start with that? It’s just, I don’t know where the number came from. It just doesn’t seem right. You know, anything above that doesn’t feel right. You got to start and reason with that perspective. So,
[00:08:21] Doug English: Yeah, and then I’ve heard actually some, some guests on this podcast have talked about how do you talk to your board about executive benefits, because, you know, again, if they are, state government employees or, folks from, the airline industry, you know, they probably have pensions and those pensions, uh, maybe replace 50 percent or 60 percent or 70 percent of their working income, maybe inflation indexed for life. Uh, and then when they’re looking at the CEO’s comp, you know, it’s a much larger dollar figure, but they forget about that inflation indexed pension that they’ve got probably along with health care that, has a very, very substantial effect on their overall lifetime income.
[00:09:11] JP O’Connor: Yes.
[00:09:12] Doug English: Do you bring that into the conversation or have suggestions for how our listeners might do that?
[00:09:18] JP O’Connor: Absolutely. And I think this goes both ways for boards and CEOs. I’ll start with the idea that education in and of itself can be a game changer. So, understanding the norms and the trends in CEO compensation is going to help boards and CEOs see the big picture and it reduces the impact of those personal biases.
But then there is a multitude of surveys that have data on these different components like, is a pension plan common? Is it not? You know, what’s the targeted replacement ratio? Because you got to think about what the function of a SERP is, a Supplemental Executive Retirement Plan in the first place.
[00:10:02] JP O’Connor: And so, when you look at the holistic picture of what the CEO is getting paid, you have to consider every component. And if you can’t find data on dollar signs, you could definitely relate it to what’s affordable, what’s feasible, what’s part of our philosophy? And then, you know, where do we, where do we pull certain levers to make it all balance out?
[00:10:25] Doug English: Yeah. You know, there are CEOs possibly listening to this podcast that are in this situation already. You know, they work somewhere, the board is full of folks with, you know, the sort of a lower income, uh, middle income background. And they’re challenged to get that conversation going without seeming like it’s all about me, right? It’s it’s it’s really about, as you said, to let the data talk about what fair compensation is. What have you seen as far as best practices for how to get that conversation going and not have it just seem like it’s a self-serving conversation?
[00:11:06] JP O’Connor: So, I guess we could start with the reality that, in a way, it is self-serving, but it’s bare. You know what I mean, though? It’s like, you know that you’re underpaid, and it doesn’t feel, and we all know, or most of us know, it doesn’t feel good. You could imagine, if you can see 990s, for example, it’s public information. You know what your buddy down the road is making, and you can see what you’re making. If there’s that disconnect, for whatever reason, you know, the board may have lost sight of that. They might not even know that. And so, it’s different for every circumstance. I’ll just use the two examples, in which case. If there’s a board that is not aware of it, I think the solution is right there, is just figuring out, okay, well, what data do you need to see to start, to start to move that conversation forward?
[00:11:54] JP O’Connor: Because I’m looking at data that seems to support the idea that I am underpaid. There’s the other side of the coin where the board is aware of it. And for example, like the, uh, 600 million credit union I’d mentioned, they’re aware of the data. They just think for some reason that those figures either aren’t right, or they’re not fair, or they’re not affordable, or all of the above. Again, the data is the place to start or at least start the dialogue in terms of making a change, but getting in front of the board is going to be uncomfortable. You know, asking them, hey, can you look at this data? I think I’m underpaid for a lot of people is just uncomfortable, but it’s what it takes.
[00:12:36] JP O’Connor: You really do have to just say, can we, can we talk about this? I’m comfortable with using a third party or whoever you’re comfortable with. Here are sources I’ve come up with, here the sources they’ve come up with, let’s put something together and look at this objectively or as best we can, is really the way to take it.
[00:12:55] Doug English: So let’s pretend that you do that. Uh, you are, you think you might be in that situation as a leader. So you reach out to you, uh, and you say, uh, all right, JP, I want to have, I want to have this discussion. I want to have this discussion, uh, and education process with my board, uh, and just see where the comp is, how it fits with our strategy, and what adjustments, if any, we need to make. So, if that conversation starts, I assume CEO and you. What is, what are the next steps? What, where does it go from there?
[00:13:28] JP O’Connor: Kind of comes into governance. If you have a compensation committee, for example, which a lot of larger size credit unions do. You definitely wanna rally them together. You know, if if I’m on the board and I receive the message, I’m gonna try to gather the comp committee and, and open them to the same idea. Let’s assume that for whatever reason the board is closed off to the idea. That’s just the situation that again, it’s so contextual that the truth is there is a reason and addressing that reason with, and I’m going to say it time and time again, data is the way that we have to approach it. I think I think the example you’re asking is more along the lines of the board is open to it, right? Is that what your assumption is?
[00:14:16] Doug English: Yeah, it’s the CEO reached out to you and said, I want I want to engage in some kind of compensation consulting. How does this work? Uh, and and then what is an engagement look like? Like, how does it how does this work? How do you determine and then from how does it work to then what’s the next step is that then you’re initially engaging with the CEO. And then I assume you move over to the comp committee.
[00:14:43] JP O’Connor: So I actually like to start with the comp committee or the chair, whoever wants to be the point of contact and understand their point of view, because at the end of the day, it’s really, it’s the board setting the CEOs pay. So we’re conducting the analysis on behalf of the board, the credit union, the members, etc. And that’s the first insight that we want to have provided to us and so they’ll give us background. They’ll spill the beans. They’ll tell us all the history and their philosophy and what they’re thinking and where their expectations have been and why there might be a disconnect and what the CEO’s expectations are and then what’s being offered.
[00:15:25] JP O’Connor: And then we’ll move on to the CEO and kind of do the same thing and just ask, what do you think is going on? And then we plop this beautiful compensation analysis right in the middle and we start talking about it and we say, well, you think this and you think this. Here’s our, here’s our assessment of that, and here’s the report, and here’s what the data says, and that’s where the conversation obviously moves forward from.
[00:15:47] Doug English: And then I know you and I have had many conversations about the challenge of getting the value of executive benefits into that conversation because, you know, they come in different varieties and turning them into a present value can be, uh, somewhat challenging and then very difficult for folks outside of the industry to understand. How do you incorporate, uh, executive benefits values into those discussions?
[00:16:15] JP O’Connor: There’s a lot of different ways. Starts with survey data starts with a deeper analysis of the numbers where you can find them. Then you can look at what’s affordable to the credit union. If there is there a budget, is there, what constraints are there, right? You have to look at the boundaries and then we look at market practice. So we consider, okay, what’s most common. And to be honest, is a country club membership even a value to you? Just to name an example there. Um, you know, what’s a fair replacement ratio in the board’s mind? And then what is the market consider as fair when you look at that data? And that’s actually pretty easy to find right now. It’s typically around 60 to 70%.
[00:17:00] Doug English: That’s what I see, all very consistent. That’s what I see.
[00:17:04] JP O’Connor: And that’s that’s the at least one of the numbers we can all agree on is that’s right where the range is. And so, you just build maybe backwards from that. And you take what you already have in terms of the 401ks, the pensions, etc. And then you see, okay, well, what needs to be supplemented here? What do we need to add? And then also one thing I see run away sometimes is, is keeping up with the changing salaries. And that’s why it is actually very important to do a market analysis, especially in the midst of this. So you can see, okay, is a big adjustment already needed before we’ve put a plan in place, et cetera. So that’s a whole different rabbit hole right there too.
[00:17:43] Doug English: So , the fix, uh, if I can kind of go back to my question before you’re an executive and you’re in the credit union where you’re feeling like your board is is a challenge to open their eyes to adequate compensation for the market that we’re in today. You’re, what you want to do is get the conversation to a 3rd party consultant that can do, uh, to bring the data into the discussion, and the discussion isn’t about me. It’s not about you. It’s about what is the fair compensation data in this industry at this asset size in this regionality, and and that is where you start to, hopefully get the director’s economic background, at least not so much in the foreground of discussions. Is that right?
[00:18:34] JP O’Connor: Yeah, I’d say the only thing I’d add to it is the real value of of let’s just say using a third party comp consultant. It’s not that we can get data that’s different than what the credit union can get, boards can get, CEO’s can get. There’s just for one there’s there’s no bias. I don’t, I’m not advocating for higher or lower pay. There’s different methodologies is another one. It’s how you use that data. And then it’s also just the, the fact that we’re working with hundreds of other credit unions and have worked with and so there’s, there’s market trends that happen that aren’t on paper. And so we don’t necessarily want to be armchair, you know, consultants were actually in the field talking. We can see the intricacies of the conversations that lead into creating these pay structures. And so thankfully that that helps kind of trigger some model, some pay model ideas when we start to hear what’s going on in the background
[00:19:36] Doug English: In the data, have you ever seen, is there any correlation between, uh, the, the pay of the executive team relative to the industry, uh, and the growth of the credit union? Is there correlation there and it, is it a. Strong positive correlation or, or otherwise, you know,
[00:19:56] JP O’Connor: So, so to clarify, we were saying, is there a correlation between the overall pay dollar amount of the executive team and then the asset size?
[00:20:07] Doug English: Uh, I was thinking rate of growth, uh, asset size I, I know the answer to that one. That’s a strong yes.
[00:20:13] JP O’Connor: Right. I would, I would say without actually doing the analysis, I would assume that there is, I’d say slightly positive correlation. Um, keep an eye out. I’m actually writing an article as we speak about something like that. And it is interesting how, you know, executive pay is going up and up and up. But it’s not just executive pay. It is everybody. It’s middle management, entry level, pay is just moving around. It’s Acting in different ways than we’ve seen it act.
[00:20:49] JP O’Connor: And so what for credit union is growing and they have a strong growth, I would say the best practice would be for the executive compensation to, to track that, um, and tie into that, but that’s not always the case. So I think it’s different.
[00:21:08] Doug English: It depends on if that’s what the board is after, right, if they’re driving for exceptional growth, then they’re going to have to have means of increasing comp in, in, in leaps and bounds, acquisitions, which we talk a lot about on this podcast, you know, cause the, the assets of the credit union to explode potentially, and with that, uh, the normal comp systems are just not going to keep up.
[00:21:34] JP O’Connor: Right there, yeah, we just want to be able to see the data and see, is this fair? Is it not fair? And that’s again where we can sometimes run into disagreements of, hey, we’re, we’re killing it. We’re top of the percentile of our peer group, and we are getting paid, you know, below the median of the peer group. You know, that’s Those two things don’t add up. So it is best practice to align the performance of the organization with the way it pays.
[00:22:01] Doug English: Now I, another, another thought I had, I wondered if you had, uh, seen sort of a philosophy around board makeup. To try to reduce biases of this sort where you know, if everyone is from, the same employer group, then, you know, you would have, you would think a similar bias based on their economic experience versus kind of diversifying that employer group, which I recognize that may or may not be possible if that’s who’s there. But, uh, have you seen any kind of board governance, designed sort of board makeup to diversify that, that background.
[00:22:43] JP O’Connor: I, from what I have seen, I would say that diversity on the board is always a good thing. It always adds perspective in terms of compensation. Um, I will just say as well, I’m not an expert in, in, you know, board boards as a, in general. So I I’m hesitant to answer because that’s not my area of expertise per se, but I do know. That’s a
[00:23:08] Doug English: That’s a good answer, JP. That’s a good answer.
[00:23:11] JP O’Connor: But in terms of compensation, I have, from just recalling, you know, some of the most recent clients. And I would say the more diverse boards, they do have more meaningful discussions, especially when you’re putting together a philosophy of why do we pay this way? What are we paying? I have noticed that more diverse boards, they go deeper, you could say.
[00:23:37] Doug English: Yeah, it would make sense. Less groupthink, potentially.
[00:23:40] JP O’Connor: Less groupthink. Yes, exactly.
[00:23:41] Doug English: Very good, JP. As, as expected, I always enjoy our conversations at whatever credit union meetings we’re attending. And when you, you brought up this correlation, you’d seen in the data between, boards, a historical comp when they’re working, uh, and, executive comp. I thought we should, should grab that and talk about it on this podcast. So any final thoughts for our listeners, uh, about this topic?
[00:24:09] JP O’Connor: Yes, I, I would say at the end of the day that objectivity is the goal, uh, recognizing that there are psychological factors at at play, and it’s not just dollar signs and data on a paper is a person behind it. So balancing that, that psychological background with the data is really going to help towards creating fair compensation practices. Yeah, when boards focus on the data, they can create pay structures that don’t just reward the CEO, but they support the credit union’s long-term success. I think that’s the real takeaway is, is using data, data, data to drive those decisions.
[00:24:51] Doug English: You recently had a child, JP. Did you name your child Data by any chance?
[00:24:57] JP O’Connor: Surprisingly, no. In hindsight, I think I should have at least snuck it into his middle name. But yeah, I think it’s a little too late for a name change. I guess we just have to have another. I’ll tell you..
[00:25:10] Doug English: maybe a tattoo, maybe a tattoo
[00:25:13] JP O’Connor: Yeah, those could work, yeah,
[00:25:15] Doug English: JP O’Connor. Thank you so much for joining me today. Thank you for your work in the credit union movement. We will look forward to our next conversation.
[00:25:23] JP O’Connor: Fantastic. Thanks for having me.
