The Price of Integrity
By late 2011, Glacier Bancorp suspected it had a problem.
Its board of directors hired an outside consultant to review how much its executives were paid. They knew Glacier was an outlier when it came to executive compensation, but they didn’t know the full extent of it.
The consultant confirmed their suspicions.
Glacier is based in Kalispell, Montana — the biggest town in one of the most picturesque valleys in America.
For years, that part of Montana was known for mining and timber, rough and tumble industries that inured its residents to hardship. Nowadays, the valley's principal trade is tourism.
A 15-minute drive to the south brings you to Flathead Lake, the largest natural freshwater lake west of the Mississippi. A 20-minute drive to the north brings you to the tony ski resort town of Whitefish. A 45-minute drive to the east brings you to Glacier National Park, a stunning landscape even to those accustomed to stunning landscapes.
The review commissioned by Glacier’s board showed that its senior officers didn’t just earn less than their counterparts at similar banks, they earned A LOT less.
Glacier’s 2012 proxy discloses that all three of its named officers ranked in the bottom quartile of their peer group in terms of salary and total compensation.
Its chief administrative officer, Don Chery, earned 27% below the peer group median. Its chief financial officer, Ron Copher, earned 36% below the median. And its chief executive officer, Michael “Mick” Blodnick, earned 48% below the median.
Indeed, Blodnick was the lowest paid CEO in Glacier's peer group.
It wasn't even close.
The average CEO in the group earned $1.8 million in 2011 — five times more than the $361,000 that Blodnick earned that year.
Even the second-lowest paid CEO in the group made three times as much as Blodnick.
Of course, if Glacier’s performance ranked at the bottom of its peer group, then its executive compensation should too.
But that simply wasn’t the case.
Glacier ranked first among America’s 100 biggest banks on Bank Director magazine’s annual list of best-performing banks in 2008, the hardest year for banking since the Great Depression. It ranked fourth and fifth in 2015 and 2016. And last year it ranked third.
Glacier wasn’t just a well-run bank. Among industry aficionados, it was legendary.
It was so revered by analysts and investors that, in November 2008, just nine weeks after Lehman Brothers failed, Glacier raised $98 million in the public markets at 2.1 times book value. There was so much demand that Glacier increased the offering size from 4 million shares to 5.5 million shares.
By the end of 2016, when Blodnick retired, Glacier had earned a total shareholder return of approximately 30,000% since going public in 1984. That ranked second among every publicly traded bank in the country based on all-time total shareholder return.
The only bank to match Glacier’s performance was M&T Bank Corp., run by Robert Wilmers, which narrowly edged Glacier out for first place.
Like Wilmers, Blodnick wasn’t one to bask in glory.
He grew up dirt poor. His father drove a forklift for 40 years at the copper smelter in Anaconda, Montana. They lived in a federal housing project. When the union was on strike, the Blodnicks often couldn’t afford food.
“We didn’t have a pot to piss in or a window to throw it out,” Blodnick once told me.
But far from being a liability, his upbringing would prove to be an invaluable asset throughout Blodnick's career.
The more you study exceptional leaders, the more you appreciate the role that hardship and tragedy often play in success. They infuse a person with genuine empathy, enabling them to operate across multiple spectrums of conflicting qualities.
Accomplished leaders aren't just blessed with a serendipitous combination of finite qualities like patience, confidence and generosity. Instead, they're able to be patient and aggressive. Modest and confident. Generous and greedy.
"The test of a first-rate intelligence," F. Scott Fitzgerald once wrote, "is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function."
Blodnick personified this.
So, why was he paid so much less than CEOs of similar banks?
The answer is simple: He wouldn’t allow Glacier’s board to pay him more.
Its directors tried to raise Blodnick’s pay repeatedly through the years. They even wanted to buy a plane for the bank so Blodnick wouldn’t have to spend so much time driving his Chevy Suburban — his “Montana Maserati” — back and forth across the Rocky Mountains to visit Glacier’s banks.
But every time they offered to do so, he shut them down.
He earned more than enough, he figured. He didn't need more money. Even today, his primary residence is the same house that he and his wife, Kim, bought in 1980.
Blodnick finally relented, but only after the board insisted that they HAD to raise his salary if Glacier wanted to attract a qualified candidate to succeed him. So, to make his compensation competitive, over the next five years, the board increased it by a factor of five.
Where does a selfless philosophy like this come from? Why do so few people possess it? How can you identify those who do?
The answer lies in one’s background.
Their moral influences.
Their experience overcoming hardship and tragedy.
And in Blodnick’s case, it also came from his father.
“It’s never the wrong time to do the right thing,” his father would say, "and it’s never the right time to do the wrong thing.”
People talk about integrity all the time. But actual integrity is rare, because it often comes at a price.
Rare indeed.