ALEXANDRIA, Va. - Pentagon FCU became the first credit union in the country to formally swear off converting to mutual savings bank by adopting a Members’ Bill of Rights.
The Members’ Bill of Rights, adopted at Pentagon’s May 13 annual meeting, asserts that “the board remains committed to maintaining the institution as a credit union.”
The document does not completely rule out a switch to savings bank, but indicates it would only be done in extraordinary circumstances, like taxation, a risk to safety and soundness of the industry or to the National CU Share Insurance Fund, or a material change in business powers.
In adopting the Bill of Rights, the credit union giant noted that 33 credit unions have converted to mutual savings banks since 1995 and asserted that “the conversions have not always been in the best interests of credit union members.”
Any change to a mutual savings bank would only be recommended by the board after a full, fair and complete review by an independent third party who has no financial interest in the outcome, the Bill of Rights states.
Any conversion or organizational change would include provisions barring all directors and management executives from obtaining any financial benefit not available to general members of the $10-billion credit union.
It would also prevent any speculators from taking advantage of the charter switch by allowing only members who joined before the decision to switch to participate in any future stock offerings or other moves beneficial to member/owners.
Finally, in the event of a change on organization structure, the credit unions aid its board would also look after employees who would be impacted, with “financial protection against any adverse employment action.”
Though Pentagon FCU is the first to adopt a Members’ Bill of Rights, a number of credit unions have made changes to their bylaws to make it more difficult for a future board to convert to a bank. As reported by Credit Union Journal in December of 2003, Washington State Employees adopted a measure that would require at least 50.1% of the entire membership to vote in favor of a conversion. Similarly, Chocolate Bayou Community FCU amended its bylaws to require that any conversion away from the credit union charter must be initiated by the membership and then taken to the board and management instead of the other way around (CUJ, Aug. 29, 2005). More recently, Tower FCU took a similar tact, requiring any proposal to convet be requested at a special meeting upon the written request of at least 500 members, and a majority of the attendees of the special meeting would have to approve putting the question to the board (CUJ, Jan. 2, 2007).(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com http://www.sourcemedia.com
