Insights
Occasional papers from Western CUNA Management School

Accounting Issues

When considering an executive compensation package, the Board should also take the time to obtain the advice of its outside accounting firm or other qualified accounting professional. This will assist the Credit Union in evaluating the accounting effects of the compensation package and to determine the appropriate means of booking the expenses related to the executive compensation package as well as any investment in a life insurance, mutual fund annuity or other vehicle that the Credit Union may have undertaken related to the compensation package. The key here is to work with the consultants and accountants to avoid any accounting "surprises." Ideally, if compensation is due to an executive or the executive's beneficiary(ies) under the terms of a Plan (e.g. retirement, termination without cause, total disability or death), the compensation will have already been expensed over time such that the payment will not be a "big bath" expense for the Credit Union in any one year.

Conclusion

Credit unions can use different methods to compete for executive talent. The use of non-traditional executive benefits is increasingly being used to recruit, retain and reward credit union executives. The combination and integration of qualified and nonqualified plans and programs can be quite useful in developing a compensation program that meets the goals and needs of both the credit union and its executives. Credit unions have a wide selection of opportunities to address their interests and concerns. As always, a main issue will be the reasonableness of the executive's overall compensation and, separately, the quality of the legal and regulatory compliance of the compensation package. The use of a team of competent counsel, consultants and accounting professionals should greatly assist a board of directors in exercising its due diligence in providing for a compensation package that works for the credit union and its executives.

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