California Regulators To Monitor Management Compensation At CUs
SACRAMENTO, Calif. – A recent spate of news coverage disclosing million-dollar pay packages at credit unions has prompted state regulators to take a new look at the compensation of credit union managers.
“Due to recent media attention regarding the total compensation of credit union managers, the Department believes it is important to reemphasize the relationship of the Board of Directors and Management of a credit union,” the Department of Financial Institutions said Friday in announcing its new initiative.
State examiners will be taking a closer look at compensation packages and at the boards’ processes for determining compensation, the DFI said.
The new initiative comes as NCUA and other federal regulators are poised to set new limits on executive pay that will bar compensation that encourages risky business practices and will defer half of cash bonuses for the largest institutions to determine the long-term health of the institution. NCUA, for example, claims in a civil lawsuit that bonuses tied to increasing risk helped sink WesCorp FCU.
In addition, recent news coverage in California disclosed large compensation for several credit unions, even while those credit unions were reporting big losses. Executive compensation at credit unions has always been a big secret, with only state charters required to disclose to their members the top executives’ pay and those disclosures are difficult to obtain.
“It is the responsibility of the Board to oversee the general operations of the credit union, to set policy with regard to the major aspects of the credit union’s business, and to act in good faith and exercise due care in making proper business decisions that are first and foremost in the best interest of the credit union and its members,” the DFI said Friday. “Oversight of management performance and the setting of management compensation are key elements of these responsibilities.”
“In determining the compensation of Management, the Department expects the Board to establish levels of compensation appropriate for the size, complexity, and attributable performance of the credit union,” said the DFI. “Moreover, the Department expects the Board to carefully consider and document the factors and considerations used to set compensation packages and to record its deliberations.”