What if your board expenses were to end up on the front page of your local newspaper?
That uncannily prescient question was asked by an NCUA examiner in an exam report that red-flagged the board perks at Hawaii State FCU in Honolulu. The examiner raised concerns over extensive travel by board members, paid travel for board spouses, and reimbursements for health care costs, among other issues.
Whether or not the credit union took any major steps internally in response is unknown. But what is known is that the examiner seemed to have a crystal ball, because just a few weeks ago those board expenses were featured in an
Also unknown is who leaked the regulator's reports to the press. What is known, however, is that the newspaper's report was accurate. Credit Union Journal
The List of Perks
• The use of a travel agency owned by a member of the board to book official trips, with the exam report saying the travel was often at higher prices than available elsewhere. HSFCU said it no longer uses the agency.
• The acceptance of free rooms at a Waikiki hotel where the annual membership meetings were held, which the credit union said it has ceased accepting over concerns related to federal regulations. (And setting aside potential violation of federal regs, this doesn't seem that serious an abuse, frankly. First, it's great to go to Waikiki, unless you already live in Honolulu, and then you tend to avoid the swarming tourists there like residents of Las Vegas avoid the Strip. And it's also not uncommon for hotels to throw in hotel rooms if you rent a meeting facility.)
• Reimbursement for up to seven business trips, annually, including up to four to the mainland. HSFCU also covered "reasonable" costs related to a director's spouse or companion attending a conference.
• Reimbursement for directors' out-of-pocket payments for health insurance premiums. (Were this in vogue at every credit union, I am guessing board turnover would occur even less frequently, if that were possible.) Hawaii State FCU told Credit Union Journal that only two directors have accepted a portion of the reimbursement, and that five have not accepted any.
• Reimbursement of the cost of a computer, printer, ink cartridges and Internet access at a director's home. (Other credit unions do this, too.)
The Star-Advertiser quoted a December 2009 NCUA report as raising concerns over governance issues. "Questions have been raised regarding the competency of the board and the intentions of management," NCUA wrote, according to the Star-Advertiser.
Perhaps the situation would be getting even more ink were it not for two other factors: first, it's likely most members of the billion-dollar CU have no idea that CU board members are typically volunteers who receive few perks. Second, Hawaii State FCU's financial performance has been good. While ROA has declined along with every other CU, HSFCU has remained in the black, even after its NCUA Stabilization expense. HSFCU has seen a 50% hike in membership since 2001, and paid more than $37-million in bonus dividends and rebates since 1996.
Still, at least a few members aren't happy, with the Star Advertiser story reporting, "the incidents underscore what some HSFCU members say is an entrenched board that continues to act as if it is accountable to no one and is driven as much by self-interests as by protecting the interests of the organization."
An effort is underway to get at least two new directors elected during April elections. The newspaper's report labeled those pushing for change as "dissidents," which always seems to me to imply these are somehow disgruntled folks. I don't know them, but people pushing for change and getting involved in democratic organizations are the lifeblood of democracy; even if they lose in elections we need more of them.
No Complaints Heard
CEO Deborah Kim told Credit Union Journal the credit union has not been contacted by any members unhappy with the board, and said it is the policy of HSFCU to listen to all complaints, investigate them and reply in writing within 36 hours.
"The board members and management staff are strong, accomplished, successful people who at times will have real disagreements about what is best for the credit union and its members," Kim said, adding that HSFCU's performance makes a "compelling argument" that the board and management are doing their jobs.
Former NCUA Chairman Dennis Dollar used to make frequent references to the sanitizing benefits of sunshine, and I have argued before that every credit union should be required to list board expenditures in their monthly newsletter and online. If the expenses are reasonable, then why not?
After all, what would you think if they suddenly were on the front page of your local newspaper?
Frank J. Diekmann can be reached at
