Paid to Performance - Banks are Reaising Compensation for Ops Execes Who Deliver

The high demand by banks for chief financial officers, chief information officers, chief operating officers, and executives in risk and compliance is driving up salaries for operations professionals nationwide.
 
The total cash compensation for a chief operating officer at a bank was 12% higher in 2006, for example, while for a chief information officer it rose 9.9%, accourding to Compensation Resources Inc., a human resources consulting firm in Upper Saddle River, N.J. CFOs earned 8.8% more.
 
Experienced executive-level candidates are the ones being rewarded with higher pay packages, said Mark Reilly, a partner in the Chicago office of Compensation Consulting Consortium.  “There are many candidates who have some qualifications, but for a high-level executive job successful past experience is the biggest criterion,” Reilly said.
 
Employers want candidates that have produced sales turnarounds, created business solutions that address regulatory requirements, or made improved corporate valuations by increasing sharholder value, boosting revenue, or both.  When a hiring company is in dire financial stituation, employers are also interested in candidates who have helped their companies increase efficiency or save money by cutting costs.
 
Bolstering its private banking business in the Middle East has paid dividends for Sarasin & Cie AG, a Swiss bank.  A trio of hires, including a private banking executive from HSBC and two former Credit Suisse private bankers, has brought in more business.  Sarasin & Cie’s management anticipates higher revenue and profits when the bank reports 2006 earnings in March, despite increased costs from the expansion.
 
A dearth of qaulified private bankers in the Middle and Far East is driving up demand, but Sarasin is positioning itself as a “caual alternative” to the regimented environment of the big global banks, said CEO Joachim Straehle.
 
Since companies’ financial situations change over time, executives who can effectively shift focus between increasing sales and cutting costs are most valued, Reilly said.
 
“One big surprise we’ve had in the last two years is the demand for young, very talented people.  They don’t need to be as old as they once did,” said Alan Johnson, managing director of New York-based Johnson Associates Inc., a compensation consulting firm.  “They need to be as talented as humanly possible.”
 
Particularly for CFOs and compliance officers , experience with internal control and regulatory issues raised by the Sarbanes-Oxley Act is an added asset.  Passed in 2002, the Sarbanes-Oxley Act established rules for tauditor independence, corporate governance, and enhanced financial disclosure.
 
Banks, in particular, are tapping people who have worked for the federal government in compliance, said Rodney Cottrell, president of Corporate Compensation Partners, in Sewickley, Pa. Bank of America Corp., for example, hired a compliance executive last year who formerly worked with the U.S. Department of Labor.  It also hired Gregory Baer, a former assistant secretary for financial institutions at the U.S. Department of the Treasury, as deputy general counsel.
 
Consolidation in banking is also influencing hiring, but recruiters are split on its effects.  Kevin O’Malley, chief executive recruiter of Sterling Staffing, a Tampa, Fla.-based firm, said mergers and acquisitions may actually lower demand because a newly merged company does not need two COOs, for example.
 
On the other hand, Paul Dorf, managing director of Compensation Resources Inc. suggests that consolidation has increased demand.  “Executives are pensioned off or given a severance plan, and in many cases, they’re not ready to just go play golf,” Dorf said.  “So they’re starting up their own financial institutions.”  The startups are looking to hire, too. – S.K.