Paying Board Members Is A Bad Idea

April 19, 2013 at 7:43 am 1 comment

Against my advice (I’m devastated), Washington State is about to become the 11th state in the nation to authorize the compensation of board members. The legislation, which passed with unanimous support and according to the CU Times is expected to be signed by the Governor, would also authorize the compensation of supervisory committee members.

The good people of Washington State did much more harm than good with this legislation. Too many more credit union victories like this one and we will all be polishing our resumes or at least explaining to people that credit unions have gone the way of other not-for-profit financial institutions that lost their exemption when Congress decided that they were too much like commercial banks.

I understand the argument for the payment of board members. It is getting more difficult to find civic-minded professionals to sit on boards where they are responsible for overseeing increasingly complicated organizations at a time when increased regulations are putting both directors and institutions under greater scrutiny. We will get a larger pool of qualified applicants, so the argument goes, by giving boards the option of compensating community members for their time and effort. To me, this argument in tantamount to saying you support Democracy but just don’t think people are talented enough to decide who gets elected. The volunteer composition of all boards is the single most important component to ensuring that the interest of the membership is what guides credit union decision making. I don’t want someone on a board who is doing it for the money or, worse yet, is doing it because he or she needs the money. I want someone on the board because they believe in what the credit union stands for and want to help out their local colleagues, association members or community.

I would put the track record of credit unions and their volunteer boards in safeguarding the financial institutions they oversee up against those of for-profit institutions any day of the week. For example, where were the directors of community banks when the ground was being laid for the Savings and Loan crisis? Those directors of Enron sure did a bang-up job, didn’t they? And the compensation of directors at some of our largest banks responsible for causing the Great Recession has actually increased in recent years.

Just about anyone in our industry can repeat by heart that credit unions don’t pay corporate taxes because they are member owned, not-for-profit cooperatives that return profits back to their members in the form of better and cheaper financial products and services. This is all correct but ultimately credit unions don’t pay taxes because Congress decided a long time ago that it didn’t make any sense to make them both pay taxes and carry out the socially important mission or providing alternatives to commercial banks and helping people of modest means.

The more we willingly do away with fundamental distinctions between ourselves and our for-profit counterparts, the more we put our industry at risk.

Entry filed under: Advocacy, General, Regulatory. Tags: , , .

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1 Comment Add your own

  • 1. Keith Leggett  |  April 19, 2013 at 10:09 am


    CUNA testified earlier this month that federal credit unions should be able to reimburse directors for forgone wages. I have a hard time reconciling this with being a volunteer. It sounds like paying directors.


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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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