Was CUNA's rejection of its own task force's recommendation to remove the CUNA/league dual membership requirement a sign the trade group is out of touch and "a dead man walking," as one credit union executive put it? Or was it the only way to ensure the industry has a strong cohesive choice?
Opinions have been strong on both sides since CUNA announced it would maintain the size of its board and the long-controversial requirement that a credit union must belong to both CUNA and its state league, despite the trade association's System Structure and Governance Task Force recommending streamlining the board and nixing the dual membership rule.
As one credit union CEO, who asked not to be named, told Credit Union Journal: "Why ask the hard questions if you're just going to ignore the tough answers?"
Meanwhile, one league has already broken ranks, as the Michigan CU League announced it will allow credit unions in Michigan to have direct membership in the league without being required to join CUNA. Thus far, CUNA has refused to comment on this development.
The task force, chaired by Tom Dorety, CEO of $6.5 billion Suncoast CU, Tampa, Fla., consisted of representatives from institutions of different shapes and sizes, including one that is not affiliated with CUNA.
Dorety, who is a past CUNA chairman, said he was disappointed with the board's decision and the explanation he received gave him the impression the board felt as if "the direction it wanted to go was not the one" the task force recommended. "They obviously read the task force's report," said Dorety. "I don't really know why they made the decision, it was their decision."
Dorety said the Task Force came to the conclusion that having a membership option available would keep credit unions "more engaged and accountable throughout the system." "We believed it would offer transparency. We knew it might be disruptive and might take some resources out of the system, but felt it was the best way to go in the long run for the credit union system," Dorety said.
Asked his feelings after the board rejected the two major recommendations by the Task Force — making dual membership optional and reducing the size of the CUNA board — Dorety replied: "You work on something for nine months, make some recommendations, and have those politely declined, you feel frustrated. I was disappointed, but I knew the deal going in. The CUNA board was going to have to make the decision."
Patrick LaPine, president and CEO of the League of Southeastern Credit Unions, Tallahassee, Fla., became a member of the CUNA board on Jan. 1 of this year. In a statement he shared with his league's member credit unions, LaPine said that even though he, personally, believes the dual membership requirement should be done away with, he voted against eliminating it.
To explain his thought process, LaPine said when he joined the LSCU he learned the Alabama shared branching network had a bylaw provision that required CUs to be a member of the league if they wanted to be a member of shared branching.
"One of my first acts as chairman of CUSC of Alabama was to update the bylaws to remove this requirement," LaPine wrote. "Philosophically, I didn't believe it is right to force credit unions to be a member of the league in order for their members to have access to the many benefits of shared branching. In my mind, if the LSCU could not put forth a value proposition of why credit unions should be an affiliate of the league, then we didn't deserve their membership dues."
But rather than vote based on his personal belief, LaPine felt he should ask the people he represents for their opinions.
"After polling District 3 league presidents on the issue of membership choice, I did vote with the majority on the board to maintain the dual membership requirement, which properly reflected the view point of the majority of my constituent league presidents, but only after stating my personal position on the issue," LaPine wrote.
Though some CUNA Board Members contacted for this report declined to comment, one board member reached out to CU Journal wanting to talk about his decision.
John Sackett, director for $1.6 billion Royal CU, Eau Claire, Wis., made headlines in June by becoming the first credit union volunteer elected to the CUNA board since the 1996 Renewal Review recommendations changed the election procedures and composition of the board. Sackett previously served as a non-voting member of the CUNA board.
Sackett said he had read the Task Force's report prior to the most recent board meeting, but he tries "very diligently" not to make up his mind until the board has the opportunity to discuss an issue.
"I really wanted to hear all the pros and cons," he recalled. "There were a variety of opinions for a variety of reasons. In my opinion, a couple of issues really solidified the thinking of the board members."
At first blush, Sackett continued, it sounds like a good idea to have choice. "People want to pick and choose what they think is more valuable. But with advocacy being the No. 1 issue, it is hard to understand how dividing the system makes advocacy better. I think that swayed the folks who were on the line to vote for dual membership. We just couldn't come to grips with how it makes us better as an organization. Credit unions need to speak with one voice."
Therefore, Sackett said, "I voted to keep the system the way it was. It made sense to me to keep together and not split up."
According to Sackett, it was clear by the data the Task Force presented that small CUs value leagues more while larger institutions valued CUNA more. That makes sense, he said, because large CUs have less need for products and services from the leagues. "Large credit unions look to CUNA for advocacy on political and regulatory issues. Given the choice, too many smaller credit unions would have disaffiliated from CUNA."
As for the board size issue, being the newest member of the CUNA board, "I was hoping they wouldn't say 'last one in, first one out,'" he joked. "But seriously, how do you get down to 15? One-third of the board changes every year, anyway."
Sackett said board members "realized 24 seems like a lot from the outside looking in. But this is a national trade organization that represents thousands of credit unions and a large number of leagues," he noted. "One comment I made was I could not tell who was representing large CUs, small CUs or leagues. All were there to represent CUNA."
In the end, according to Sackett, "We felt 24 was perfectly doable and worked just fine. When I was on the outside I thought 24 was undoable, but being part of it totally changed my mind. I don't know if 24 is the exact right number, but I thought going to 15 would be a step backward."
Going forward, Sackett said CUs "by design or unintention" are going to be larger. "There are fewer of us, so few credit unions will be smaller. We are talking about going down to 5,000 credit unions and millions more members, so we will be larger, in members and assets."
Jim Blaine, president and CEO of $30 billion State Employees' CU in Raleigh, N.C., who very publicly disaffiliated from CUNA a few years ago, suggested the trade group's decision to reject the task force recommendations pushes the credit union movement closer to revolution instead of resolution.
"Remove the rhetoric and hyperbole and it may simply come down to the inescapable fact that the financial industry in the U.S. — including credit unions — is rapidly consolidating, and has been for more than a decade," he said. "That ineluctable certainty is and will continue to present a new set of challenges, problems, and opportunities."
Consolidation, Blaine observed, will force change in every single segment of the credit union movement, including at credit unions themselves, the trade associations, regulatory regimes, products/delivery channels, staff/leadership qualifications, structure/governance, and internal/external politics.
Blaine suggested the question becomes: will this inexorable change occur peacefully and in an orderly fashion, or in a more traumatic, chaotic manner. "History, including Syria and the recent Arab Spring, very much favors the latter," he observed. "Revolutions rarely occur quietly and calmly from within. As normal folks most of us prefer peace and the status quo, rather than the disruption created when the future uproots the existing order and overturns the apple cart. We like to believe that the future won't happen, but it always does."
Blaine noted the consolidation of credit unions in recent years already has placed 70% to 80% of CU assets and members within 500 of the remaining 6,000 CUs. Because of this, he asserted, "CUNA governance structures and operating costs no longer reflect the new and coming reality."
"CUNA and the leagues, as now constituted, are a dead man walking," Blaine declared. "But, given human nature and history, the 'established order' will not relinquish its perks and prerogatives cooperatively."
