Board Due Persistence: Official Pay and Advantages.

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Wellbeing And Life Employee Benefits. Bunch Health, Life And Disability ... The credit union ought to comprehend contractual dangers of an advantage arrangement ...
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Board Due Diligence: Executive Pay and Benefits NAFCU Volunteers Conference 2010 Presented by: Chris Burns-Fazzi (BFB) and Loretta Dodgen (HCSGroup)

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Board Due Diligence "The board, CEO, CFO and senior HR official need to guarantee arrangement of hierarchical frameworks (work configuration and responsibility, execution estimation, pay for execution, and ability administration) to make the initiative determination and improvement arranges that will drive reasonable development… and capital-productive business brings about the long haul. This hierarchical capacity is the fundamental driver of development in (part) esteem and the board needs to guarantee this ability is set up." Mark Van Cliafe

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Board Due Diligence Three inquiries should be tended to: What ought to administrators be considered responsible for? What measurements of execution ought to be measured & reported? Over what period would it be advisable for them to be measured? By what means will we make up for that execution? Sets up: CEO\'s responsibility How CEO and credit union execution will be measured How execution will be tied into pay

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Board Due Diligence: Strategic Questions 1. Do we have the right individuals in the right positions doing the right things? What abilities will we anticipate that our workers will have in three years? Carry out our occupation execution assessments impart desires and advance responsibility? 4. Do our impetus arranges address all key execution objectives? 5. Do we have a satisfactory progression arrangement in key ranges of duty?

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Board Due Diligence: Strategic Questions Compensation reasoning Framework Decision criteria Compensation system tending to present and future needs and adjusting to corporate technique Focus for activities and choices

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Board Due Diligence: Compensation Policy Board Oversight for Compensation approach Procedures to set remuneration for the association\'s CEO, officers, and "key representatives" Review and endorsement by governing body or pay advisory group barring those with irreconcilable circumstances Application of information for practically identical pay for also qualified people in practically equivalent positions at correspondingly arranged associations Documentation and recordkeeping of the consultations and choices in regards to the pay Assurance that exercises and operations of branches or offshoots are steady

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Board Due Diligence: Compensation Policy Operational adequacy Legal and administrative consistence Risk shirking

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Measuring Performance Set clear desires Connect pay to execution Use Human Capital measurements

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Strategic View Human Capital Human Resources Personnel

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Measuring Return Traditional HR Metrics • Turnover Rate • Average time to fill positions • Compensation Costs/worker • Benefits as % of Compensation Human Capital Metrics • Operating Income/worker • Comp and Market Ratios • Human Capital Efficiency Ratio • Human Capital ROI • Total Realized Value 11

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Sample HC Metrics Study

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HC Metrics Sample Comparisons

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Challenges Today 75% of officials recorded official progression as their essential concern Gen X (1963-1981) "Me Generation " – independent – purchase them or test them – relationship situated. Gen Y (1982-1993) – Life, Balance & Environment critical – all around arranged. Adaptability imperative, challenge administration ideas. Society of Human Resource Management (2007) " Strategic arranging, progression arranging and part development are all interlaced… pulling in the cutting edge to participation and vocation must be a compulsory activity for now\'s credit union pioneers. Inviting and empowering new faces and thoughts is an imperative part in the development of the credit union industry." Michael Fryzel, NCUA Board Member SERPs are not only for CEOs any longer. Credit unions are utilizing them to deal with their progression arranging process. By giving senior officials a SERP, the board places "brilliant cuffs" on them to urge them to stay to give a smooth move to the new pioneer. Credit Union Times (September 2009) 14

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A Competitive Compensation Program Competitive Salary – contrasted with • Peer Group – Other Credit Unions – Use Of Surveys And Other Market Data Health And Life Employee Benefits • Group Health, Life And Disability • 125 Plans Perquisites (Car, Club Dues, Etc.), Executive Disability, Additional Life Insurance , Education, Conventions Qualified Retirement Plans Incentive Compensation Plan • Bonus – Annual Or Rolling Nonqualified Benefit Plans • SERPs – 457(b) And 457(f) • Pay For Performance • Post Retirement Medical • Split - dollar 16

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What Others are Doing

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A Question of Fairness According to monetary organizers workers will require around 70-80 percent of pre-retirement pay to appreciate an agreeable retirement. Normally retirement salary sources incorporate Social Security and qualified retirement arranges. For workers with higher pay rates a crevice is made because of IRS confinements on qualified arrangements and yearly absolved sums with Social Security. The chart beneath demonstrates the salary substitution at retirement gave by Social Security and qualified arrangements for various wage levels. Suspicions Years to Retirement 20 years Annual Salary Increase 5% Current 401k Balance half of Current Salary Employee 401k Contribution 10% of Salary 401K Interest Rate 6% Social Security Full Benefit in Future $ * Subject to qualified arrangement limits 18

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Constructing An Executive Benefit Plan – A Roadmap According to inspector\'s aide pay should be reasonable and sensible What is all out remuneration - a deficit investigation What are others doing - an aggregation of reviews Compensation rationality + reasonable & sensible = A Competitive Package Roadmap to develop an arrangement distinguishing and evading dangers Third Party Relationship Vendor Selection Risk Analysis Legal and Product Ongoing Board Due Diligence & Administration

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Example of "Hole"

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Vendor Selection Guidelines Vendor Selection - Three Key Considerations: Evaluate the merchant\'s experience and skill History Endorsements Weigh the seller\'s business notoriety Clients Examine key operational issues Online organization Compliance reporting SAS70 Field faculty

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Assessing Risk: Safety & Soundness The Vendor ought to direct a Pre-Purchase Analysis of all items used to guarantee credit union comprehends dangers, prizes and special attributes. Hazard Management Analysis of Permissible Product – comprehend and address potential casual subsidizing dangers, which include: • Liquidity Risk – how does the item influence the Credit Union\'s main concern and accounting report • Market/Transactional Risk – full comprehension of how the item functions • Interest Rate Risk – danger to profit or capital when item neglects to execute not surprisingly • Credit Worthiness – audit of transporter appraisals and financials • Diversification – examination and utilization of a few bearers • Compliance/Legal Risk – consistence with state and government laws

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Assessing Risk: Safety & Soundness ( proceeded with ) The credit union ought to comprehend authoritative dangers of an advantage arrangement Risk Management Analysis of Legal Obligation which incorporates: Type Of Promise Nonqualified Welfare Benefit Events That Trigger Payments (Cash Flows) Payment Date/Retirement Death Disability Change of Control Termination – Voluntary, Involuntary

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Ongoing Due Diligence & Administration Implementation Ongoing Administration System Financial Reporting/Compliance Annual Review • Plan • Product

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Summary Develop a pay reasoning that is in arrangement with the technique of the Credit Union Analyze and Review the measurements to figure out whether pay and methodology are working legitimately Perform Due Diligence on the accompanying: Benefits for Key People Vendor Selection Risk Management Ongoing for Plan Performance

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Board Due Diligence Questions?

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