CCU Members OK Conversion
Community CU's proposed conversion to a bank charter passed with a whopping 71% of voting members favoring the move, not including ballots that were returned at the special meeting on the night of June 21.
CCU CEO Gary Base expressed satisfaction with the outcome and said he hoped NCUA would take note of the hefty majority that supported the conversion, though that still represented a small minority of the CU's total membership.
With approximately 36,000 votes cast before the meeting ever started and only some 150 people in attendance-just a smattering of whom indicated they hadn't already voted-it was mathematically impossible for votes cast at the special meeting to affect the final outcome.
The $1.4-billion credit union did give those in attendance ample opportunity to comment, with most comments being critical of the conversion. But CCU chose not to follow Robert's Rules of Order, which meant that motions for changes to the conversion plan itself, which an opposition group had hoped to make at the meeting, were not allowed.
The result: plenty of impassioned talk, but no ability to take any sort of action beyond voting.
If there were any surprises, it was the lack of rancor to be found between CCU officials and members of the opposition group, the Coalition of Credit Union Members (formerly known as the Coalition for Member Trust). But the outcome itself was no surprise to anyone.
"We're very appreciative of the vote of our members, and we are looking forward to submitting our certified vote tally to the NCUA," CCU Chairman John McCarley told The Credit Union Journal immediately following the meeting. "We knew that there were a number of members who were opposed to the conversion and that they would voice their opinions tonight."
The Coalition for Credit Union Members, the group opposing Community CU's conversion to a bank charter, were "disappointed but not surprised" that the $1.4-billion CU's membership voted in favor of the move and suggested the primary battle now is between Community CU and the NCUA, which has already said it will not validate the vote.
"This is probably done if NCUA doesn't stand firm," said Mark Arnold, a CCU member who helped found the coalition and a former CCU employee who now serves as VP of Neighborhood CU. "We have encouraged the NCUA to stand firm."
While the coalition may look into other legal recourse available to members of CCU, Arnold noted the group simply doesn't have the funds required for legal action.
"The board and management team of Community Credit Union will claim victory, but since NCUA has already said this vote is invalid, they really shouldn't," Arnold commented.
The coalition praised CCU CEO Gary Base and the board for allowing the opposition group to set up a table just down the hall from the meeting room to gather signatures for a petition effort to call another special meeting to amend the conversion plan. The CU also allowed the coalition to hand out and wear pins against the conversion.
But even as the coalition had praise for these acts of generosity, members of the opposition group were also frustrated that the board and management summarily rejected any attempt at compromise or change to the conversion plan.
The coalition had banked on CCU following Robert's Rules of Order, which would have allowed the group to make motions from the floor to amend the conversion plan, but the CU didn't follow Robert's Rules of Order. As a result, the coalition never had a chance to put forward its proposal that the conversion plan be amended to prohibit former directors, volunteers, officers or employees from receiving any stock options, purchasing stock during the first 24 months after the institution's initial public offering or receiving any non-cash compensation or benefits exceeding those previously awarded to such individuals in the calendar year preceding the conversion.
The group had also hoped to amend the conversion plan to retain the one member, one vote provision post-conversion.
Prior to the meeting CCU officials noted they expected the majority of those in attendance to oppose the conversion, since they assumed that those who favored the move would simply return their ballots by mail and not attend the meeting.
Even so, not all of the members who attended Community CU's special meeting were against the move. Indeed, one long-time member was enthusiastically applauded for voicing his confidence in the board and senior management. "I've been a member since 1956, back when the credit union was one little room on High Line Drive, and over the years the credit union has moved along, and now we're here today to decide if we should change the character of this credit union," said Jim Laird. "The credit union has changed a lot over the years to meet the changing economic conditions. We had to change so we could reach out to more people to have more economic stability so that we weren't dependent on the fate of one company. We have changed the character of this credit union before, and I think we should do this. In the long run, we will benefit from this. I put my confidence in the change in structure. I have confidence that the board will do the right thing."
Though Laird's impassioned statement drew applause, the vast majority of comments made at the meeting were against the conversion, as had been expected, and many of those comments also drew enthusiastic applause.
Critics of the conversion to bank charter honed in on several themes, including the $1.4-billion CU's continued success under the credit union charter, the expense of the conversion, the potential for rates to rise once CCU is a taxable entity, and the loss of both member equity and control.
Several members suggested that under the bank charter, 14% of the CU's approximately $100 million in equity can be distributed among the board and senior management as stock options if the would-be mutual later changes to a stock institution.
"I just don't see how this benefits the members," said Catherine Butschek. "In fact, everything I have seen appears to be negative for the members-extra taxes, higher rates, less control. But I do see how the board benefits. You make about $400 or $500 per meeting now, right? Well, you'll make a whole lot more than that once we're a bank. If I wanted to join a bank, I'd have joined a bank."
Both sides of the Community CU conversion argument wanted to stress the openness-or lack thereof-at the special meeting on the plan to turn CCU into a mutual bank. "I hope you'll note that everyone was given an opportunity to speak their minds tonight," said Bob Freedman of Silver, Freedman & Taff, attorney for CCU.
And after having been criticized for shutting out members who arrived late at CCU's annual meeting earlier this year, supporters were quick to point out that the doors weren't closed on the 7 p.m. meeting until well after that time.
Moreover, CCU hailed the special meeting as being its most widely publicized meeting and pointed to the more than 36,000 ballots cast-possibly the most votes ever garnered in the CU's history-as evidence that it had done as much as it could to encourage as much participation as possible in the vote to convert to a bank charter.
Community CU also pointed to the $20,000 in cash prizes offered up as indicative of its efforts to get members to participate. But for all that "openness," critics suggested there were far more closed aspects to the meeting than open. One CCU member who was also a member of SharePlus CU when it converted to a bank charter noted that the other former CU videotaped the proceedings so that anyone who couldn't attend could still learn about the meeting by watching the tape.