CHATTANOOGA, Tenn.-A new law set to go into effect on July 1 will allow credit unions in Tennessee to pay their board members, and the law had a surprising backer-a $490-million credit union.
Fred Robinson, president at the Tennessee CU League, said the league had been fighting such a bill in the state legislature since 2009, but the bill has had the consistent support of Southeast Financial CU, which is unaffiliated with the TCUL. The measure would have allowed CUs to compensate their board members, but it was never able to get a vote in committee, let alone make it out of committee and to the floor of the legislature.
Robinson told Credit Union Journal that after some credit union-friendly legislators lost their primary elections and changes were made to committee structures, however, it became clear that the bill was going to move forward in some form.
"Like all leagues, we work for our board, and we asked our board to give us some latitude and let us amend the bill, since we saw that this legislation was going to move," he said.
The new law allows credit unions in the Volunteer State to compensate board members or reimburse them for lost wages, but not both. In order to pay its board, a CU must follow four specific steps:
* Adopt a resolution stating that the CU requires board members with the expertise for prudent general management of the institution's affairs, funds and records;
* Compensation can only be paid to board members elected after adopting the above resolution;
* The CU must set policy guidelines governing participation and attendance, and the board member must comply with those rules in order to receive compensation;
* A CU's annual report must include board member compensation as a specific expense item.
The league has surveyed members on board compensation, and Robinson said that league-affiliated CUs had said they did not feel it was something they needed to do. "We work for them and they basically wanted us to oppose it, and we opposed it," he said. "It's something that (Southeast Financial) felt they needed."
Throughout the process, Robinson said that both sides kept their interactions as civil as possible, though the wording had to be hammered out within a matter of days.
Most Don't Plan To Pay Directors
Robinson conceded that inserting new language into the bill was the league's way of making the most out of a bad situation. While a similar measure is under way in Washington State, Robinson said that he doesn't believe this is the beginning of any large-scale trend.
Other than SFCU, Robinson said that he expects few CUs in Tennessee, if any, to adopt the practice of paying board members.
"From what I've been told by our credit unions, I think it will be the one credit union," he reported. "I've talked to several, and everyone I've talked to has told me that they make the choice to be volunteer board members and that's what they're going to stick with."
Attempts by Credit Union Journal to reach Southeast Financial CU for comment were not successful.
