Posts tagged ‘board member compensation’

Larry Bird For Board President

imagesA great piece of reporting by the Credit Union Times reveals that although the use and amount of board member compensation varies widely in those states in which it is authorized for state chartered credit unions, some board members receive payouts that could only be described as obscene and troubling.  For example, the paper reports that a board member at a credit union in Indiana received an annual stipend of $93, 109 for working two hours a week on board business.  Other examples of high pay cited by the paper range from $65,000 for a board treasurer in Pennsylvania to the $21,000 that a Wisconsin board chair receives for working ten hours a week.  Not bad for overseeing a not-for-profit organization.  The good news is that credit unions in many states where board member pay is authorized, such as Texas, choose to forgo the option.

Now, what kind of board member can you get in Indiana for $93,000?  I’m thinking of an all-Star lineup including Larry Bird, the venerable retired Senator Richard Lugar and perhaps even Latoya Jackson and some of her brothers.  This type of board would really spice up the annual convention but would do little to aid the credit union cause, and therein lies the dilemna.  Credit unions are not-for-profit member-owner cooperatives overseen by a volunteer board of directors, or so we tell our state and federal representatives.  However, the proliferation of board member pay has turned this truism into a falsehood.  Explaining that most credit unions are run by a volunteer board is kind of like arguing that someone is just a little bit pregnant.

These state level prerogatives make it more difficult for all credit unions, regardless of where they are located, to justify their tax exempt status.  If you don’t think this is true, when you’re gathered around the barbecue tomorrow ask your Uncle Charlie if he thinks it is right that board members of not-for-profits get paid.  Add in the fact that these directors oversee institutions that don’t pay a corporate income tax and see what he thinks about the credit union tax exemption then.

I know, I know.  Why let the white noise of banker opposition keep us from utilizing a tool to attract the best board members possible.  After all, our annual conventions could easily be mistaken for an AARP get together or maybe even a remake of the movie Cocoon in which a group of retired geriatrics suddenly burst to life and start dancing wildly courtesy of an alien life force.  (In my ever so humble opinion it is the great Steve Guttenberg’s best work).

But while it is fun to be cynical, the board members I have met are deeply committed to the movement, and stay informed about the latest trends in the industry.  Don’t mistake their age for lack of commitment or understanding about the importance of the industry as a whole.  No doubt the movement faces a challenge passing on that institutional knowledge and passion to younger generations; but the solution is not to throw up our hands and take away one of the most important distinctions between credit unions and their for-profit counterparts.

CFPB Releases List of Underserved Areas

Many of the key mortgage regulations, including the escrow rule for high cost mortgages which has already taken effect, include certain exemptions from regulatory requirements for mortgages given in underserved areas.  In an effort to help credit unions and banks quickly find out if a mortgage qualifies for these exemptions, the CFPB has released a list of underserved areas on which credit unions can rely when making this determinations.  Two thumbs up for this type of common sense assistance in implementing the mortgage regulations.

Have a Happy Fourth!

July 3, 2013 at 8:11 am Leave a comment

Paying Board Members Is A Bad Idea

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.

April 19, 2013 at 7:43 am 1 comment


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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