Pub. 11 2021-2022 Issue 3-1

coloradobankers.org 20 Bank Board of Directors Pay, Policies, and Practices By Jordan Gagnon and Rhonda Snyder, Pearl Meyer I n May of this year, Pearl Meyer published the 2021 Banking Board of Directors Compensation and Governance Practices Survey. With a more than double increase in participation, from 69 participating institutions in 2019 to 172 in 2021, it’s clear that board of directors’ compensation and the associated pay practices and governance issues are at the forefront. This year’s survey provides data on current practices for compensating quality board of director leadership as institutions work to maintain profitability and support their customers’ businesses during difficult and unprecedented times. The 172 institutions that participated are comprised of stock/ public companies, stock/private companies, mutual savings banks, and credit unions. Below are a few highlights from the report. Board Compensation Most institutions establish director compensation programs by reviewing and benchmarking to peer market data. It has become a challenge to determine the proper compensation mix to attract board members and compensate them properly for their service (for the risks they take and the time commitment they make) while also aligning with shareholder interest. In our survey, director compensation is broken down into the following components: annual retainer, board and committee meeting fees, equity, and benefits. Typically, a cash retainer and/or cash meeting fees are the core compensation elements for directors, although we are seeing an increasing prevalence of equity awards. More than half of all institutions pay the chairperson and/or members of the institution’s board both a retainer and a per-meeting fee for service. The survey offers additional detailed, in-depth data on board retainers, meeting fees, and committee compensation broken down by asset size, form of ownership, and board structure. In this year’s report, the average cash compensation pay per director ranged from $21,263 to $50,833, and the average total board cash compensation ranged from $171,817 to $512,666, depending upon asset size. Board Evaluation In today’s climate of increasingly complex compliance and regulatory guidelines, boards are under pressure to be effective and achieve a multitude of goals. Board evaluations are a tool designed to review corporate governance practices and the effectiveness of the