Pub. 4 2014-2015 Issue 5

12 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S FEATURE ARTICLE DAVID SHOEMAKER AND KEN DERKS EQUIAS ALLIANCE It is critical that bank- wide goals along with department and individual goals be linked to the bank’s budget and overall strategic plan. Performance-Driven Retirement Plans: Are They Right for Your Bank? B ank boards do not like to lose executive talent to competing banking organiza- tions. Developing a compensation plan that is alignedwith shareholder interests and retains key executives continues to be an im- portant objective for compensation committees. Compensation committees need to eval- uate a variety of compensation strategies to determine which will be themost effective at retaining and recruiting key high perform- ing lenders and executives. While offering competitive salary and performance-based annual bonus amounts are a given, provid- ing additional long-term incentives and/ or retirement benefits can be the missing component. Equity plans provide an element of longer-term compensation, but are not available in many privately-held banks and, even where offered, can be complemented by other types of long-term incentive plans. According to the American Bankers Association 2013 Compensation and Ben- efits Survey, 64 percent of respondents of- fered some kind of nonqualified deferred compensation plan for top management (CEO, C-level, executive vice president). (See our article, “Is Your Compensation Plan Generous Enough?”) Choosing the right retirement plan must incorporate the compensation committee’s overall compensation philosophy and bank ob- jectives. This ar ticle will focus on per for- mance-driven retirement plans, a type of defined contribution nonqualified plan. Long-term incentive plans that are perfor- mance driven are generally well- received by shareholders. When such plans are properly designed, if the bank’s shareholders do well, so will the executives.