5 minutes
Credit union boards are facing a wave they didn't see coming—not because it was hidden, but because it was decades in the making. The last generation of long-tenured baby boomer CEOs is retiring, often after 20, 25, even 30 years at the helm. According to the 2026 CUES Compensation Survey, 30% of CEOs intend to retire within the next five years.
For many boards, this is the first CEO search in a generation, and it lands them in a paradox: the instinct to protect the credit union's resources by paying conservatively often puts it at greater financial and operational risk.
The Sticker Shock Problem
Boards that haven't hired a CEO in fifteen or twenty years are opening compensation surveys for the first time in a long time—and flinching. The market has moved. Total compensation for credit union CEOs looks nothing like it did when the outgoing CEO was hired. The board's first reaction is often not "is this competitive," but "is this reasonable for a member-owned not-for-profit."
That reaction is understandable, and it's where the paradox begins. A credit union that balks at a market-rate offer isn't avoiding cost—it's trading one kind for another.
Underpaying a critical leadership role doesn't eliminate the price of talent; it changes its form. The credit union pays later, in turnover, a longer and more expensive search, a rocky transition, or a thinner candidate pool than the board realizes. The safe-looking choice is frequently the more expensive one.
The Internal Candidate Trap
On paper, most credit unions are ready: the same survey found that 85% have a succession plan for their CEO. But a succession plan identifies who might step up, not what the CEO seat should pay. That gap is where a second, quieter version of the paradox appears when boards promote from within. Boards that take a do-it-yourself approach to setting pay may find it reasonable to take the internal candidate's current salary, add 15% or 20%, and call it a competitive CEO package. It isn't. A 20% bump on a COO or EVP salary is an increment on a different job, not market-rate CEO compensation.
In this case, the board did increase compensation, but still ended up underpaying because it benchmarked against the wrong reference point. If the package lands 20–30% below what the market pays for that CEO seat, the credit union has installed a leader with a market-rate mandate on a below-market contract. That gap doesn't stay invisible for long. It shows up the first time a recruiter calls or the new CEO benchmarks their own pay.
Why "Paying Less" Isn't the Safe Choice
At its core, the paradox is this: the choice that feels most careful with the credit union's money is often the one most likely to cost it. Underpaying a CEO—through a lowball external offer or an internal promotion priced off the old job—exposes the institution. It raises flight risk when stability matters most, in the first 18–24 months of a new CEO's tenure. It weakens succession planning by signaling that the top role isn't compensated as a top role. And it puts the board back in the market sooner than it should be, with less credibility.
Meanwhile, the choice that feels risky—a genuinely competitive, market-benchmarked package—usually reduces risk. It retains the leader, signals seriousness to the market and to internal successors, and ties the credit union's biggest single point of leadership risk to a structure built to keep that leader in place and performing.
Where the Paradox Resolves: Start with Data, Not Assumptions
Both traps come from the same root cause: the board is making a compensation decision without current, credible data about what the role requires and what the market pays. That's not a governance failure so much as an information gap. A healthy CEO tenure means this decision comes around only once every decade or two.
A formal compensation study closes that gap before negotiation starts. It benchmarks the actual position—asset size, complexity, strategic objectives, competitive status, and more—against real market data, not the outgoing CEO's legacy salary. For an external hire, it turns sticker shock into an informed decision: the board can see whether an offer is rich, fair, or below what comparable institutions pay. For an internal promotion, it separates the value of the new role from the salary history of the person stepping into it, so the board isn't anchoring a CEO package to a COO's paycheck.
Used this way, a compensation study isn't a formality. It's the mechanism that turns a paradox into a plan, replacing a board's instinct (which tends to run conservative, for good reason) with evidence about what the role is worth to the institution's future.
The Bottom Line
Paying top dollar isn't automatically the right move—pay should be tied to strategic metrics such as scope, complexity, and performance. But exceptional talent, in a role a credit union may fill only once every decade or two, is an investment, not an expense. That investment starts with a strong, competitive cash offering grounded in real market data rather than guesswork or legacy numbers.
The paradox boards need to sit with is uncomfortable but simple: the frugal-looking decision is often the expensive one, and the expensive-looking decision often protects the credit union. A compensation study won't make that tension disappear, but it will ensure the board resolves it with facts instead of assumptions, for a decision the credit union may make only once in a generation.
Liz Santos consults on executive pay matters and compensation studies at The Sheeter Group, a firm specializing in executive benefits and compensation for credit unions since 2004. The Sheeter Group is the CUES partner for compensation consulting. Liz helped prepare this year’s CUES Compensation Survey Report and CEO National Executive Summary. She is based in Washington, DC.
