By Frank J. Diekmann
Here’s a suggestion for a topic of discussion at one of those new NCUA board briefings. Or a trade group meeting. Or any credit union get-together: Shouldn’t CUs proposing a merger be required to disclose to members any golden parachute-like compensation, aka “sweetheart deals,” being paid to the CEO or board of the acquired credit union?
The practice is anything but uncommon; it’s also anything but talked about in the credit union community. And since hardly a press release goes by without someone in CUs, most especially in the trades, extolling the virtues of “transparency,” then I say it’s time to be transparent.
As CUToday.info reported extensively in a series of articles here, it isn’t just compliance overload + cybersecurity costs + lack of succession planning that have added up to convince so many small CUs to file their final 5300s; it’s been some pretty sweet incentives for managers and even some board members at the smaller shops.
The deals can include a comfy six-figure salary and few duties beyond monitoring drive-through traffic until retirement for the CEO of the acquired CU, plus a nice budget for travel for some if not all of the members of the acquired board. And, hey, grab a couple of boxes of golf balls on your way out, too.
For the acquiring CU it’s an almost no-cost acquisition strategy, with the salary and bonuses coming out of the typically robust capital of the smaller, acquired CU, and the members basically coming for free (minus legal costs).
It’s all on the up and up, more than a few will say. Great! Then why hide it? Include it prominently in the disclosures provided to members when they are voting on the deal (and not buried in the lawyer-ese). Those members are voting, after all, because credit unions are democratically run, financial co-ops, of which CUs are rightfully proud. Secrecy is typically the opposite of democracy.
Here’s a chance to put both transparency and democracy into action, credit unions. Sounds like one of those win-wins.
Who’s going first?
And In Other News
CUToday.info had extensive coverage of NAFCU’s annual meeting in Nashville last week in our Fresh Today, Feature and Boost sections. And we have a few additional items to come.
In the meantime, here are a few odds-and-ends notes from the meeting:
- Did you share your “vision” thing with your staff after your last strategic planning meeting and then call it a year? You may need to pick up the pace. David Horsager, a business strategist and best selling author, told the NAFCU meeting, “If you’re not sharing the vision every 21 days, no one remembers or understands it.”
- NCUA Chairman Rick Metsger turned the tables a bit in his remarks by joking that he was there to announce that “NAFCU members will no longer have to pay your dues on an annual basis. Now you can pay them every 18 months.”
- Metsger also said that many within credit unions “are under the mistaken impression that the exam overhaul is about length of the exam cycle; but that’s not the most consistent issue I hear. What I hear about most is reducing our on-site presence, and doing a better job of coordinating with exam supervisors. coordinating with state examiners, and coordinating with subject matter experts.”
- A new acronym for you from one speaker: CFPB–Clerks Focusing on Petty BS.
The Viagra Of Discussion Subjects
Perhaps it was just the weather in Nashville, but one hot-button issue with credit union board members and volunteers shows no sign of cooling. One day after a session on internal fraud at the NAFCU meeting that was for board members netted not a single question from the audience, board members could hardly control themselves when it came to raising their hands on the issue of term limits and age limits for board members.
During a session led by Filene’s Tansley Stearns, one show of hands showed relatively few in attendance had a policy limiting terms for volunteers. And as most of the room made clear, most see no reason for any kind of limit even as Stearns pointed out that only 2% of CU board members are under age 50, and the first thing every credit union will say when asked about its strategic imperatives is getting younger members.
“I am of the opinion we have term limits—they are called elections,” said one person on hand, and with a bit of a huff. (How aggressive his CU is in making members aware of the elections, he didn’t say.)
“I am 85 and now the oldest on the board. I was the youngest when I joined,” another person stood up to say. What that had to do with the issue at hand, he didn’t say.
At the same session, which was 99% white (and mostly men), when Stearns asked how many boards had a “diversity policy”—and you will be stunned at this revelation—no hands were raised.
Frank J. Diekmann is Cooperator in Chief at CUToday.info. He can be reached at Frank@CUToday.info and followed @FrankCUToday.