MADISON, Wis. – Compensation for credit union boards of directors divides many in the CU movement – it was part of an extensive CU Journal Special
The study, titled, "Should Credit Unions Pay Their Directors?" was performed by Matt Fullbrook, from the Clarkson Centre for Business Ethics and Board Effectiveness, University of Toronto.
Filene acknowledged that many feel paying directors is "anathema to the cooperative spirit of credit unions," while others feel it will improve director accountability. Ben Rogers, research director for the credit union think tank, said one major goal of the study was to quantify existing director compensation rates in the United States.
"It is a benchmarking report, and it is also a pros and cons report," Rogers said recently when Credit Union Journal made the study one of its Stories of the Year for 2015. "We realize there are opinions on both sides. Some think paying board members attracts better directors, while others think it might lead to entrenchment of board members you want to get rid of, or even threaten the credit union tax status. We just put facts out there to let people make their own decision."
Because the study just came out five months ago, Filene has not updated the data. Rogers said when the study commenced in late 2014, at that time the most recent data available was 2012. In December 2015, he said anecdotal evidence, and a very small sample, seems to show credit unions are starting to use compensation as an attraction and retention tool.
"The outliers in the study were really interesting, so when we update our findings in a few years we expect to see those credit unions that are compensating their board members raising their compensation," he predicted. "I think we will see a split between the larger credit unions and the smaller ones. The larger credit unions are interested in putting together packages that are attractive enough to catch the attention of highly talented directors.
"With that said, I don't think they will be publicly traded company type of packages. I don't think we will ever see credit unions paying the type of compensation you see at a Fortune 500 company," he added.
No Negative Feedback
Shortly before Filene published the study, many people knew it was coming out. Rogers recalled those involved in the study were worried because it was the first time anyone had done a quantitative look at director compensation, and they feared getting some negative feedback. But there was not any.
"I think if we had done the study 10 years ago people would have said compensating directors was absolutely against the ethos of credit unions, but today it is much more acceptable," he appraised.
According to Rogers, one reason for this acceptance is an ongoing "generational change" in boards. In general, older generations see paying directors as a negative, while the newer generation thinks of it as acceptable.
"The other reason is with the financial crisis and Dodd-Frank, there is an acknowledgement that boards have a lot of responsibility – and even personal responsibility," he said. "Boards recognize the need for compensation to attract and retain quality directors."
Compensation or Pay?
The study made a careful distinction between "compensation" and "pay." Rogers noted it did not include travel for conferences or educational sessions, or equipment reimbursement, in its figures for director compensation because those types of expenses were seen as a part of training.
In addition to cash stipends, some credit union directors are offered health insurance. Other forms of compensation include: meeting fees, chair fees and committee fees.
"In many cases you see a one-off fee awarded to someone for serving on a committee or being a chair," said Rogers.
What was the most surprising finding? To Rogers, it was how widespread director compensation was.
"I did not realize there were several hundred credit unions that compensated directors. Also the variety: how much and how little."
In Tennessee, for example, the average board pay is $150 – and that is for the entire board ("Hardly worth talking about," Rogers said); while in Rhode Island the average is $9,000 for the board.
"That is not life-changing money, but it is a lot more than Tennessee. We see this report as a benchmark so people can see some examples of the types of compensation that are out there. It is the start of a conversation. As compensation becomes more socially acceptable, people can look at what is out there to determine what and how boards should be compensated."
Facts and Figures
When performing the study, Filene scoured state laws across the country and examined IRS Form 990 filings for every state-chartered credit union in the states that allow director compensation.
According to the research from 145 credit unions in 12 states, directors earn somewhere between $60 and $37,597. Federal credit unions are allowed to compensate a single board officer, but are expressly forbidden from paying other directors. Otherwise states are free to write their own rules.
For more information and to download the report:
