There is a growing groundswell to compensate credit union board members brought to the forefront by recent legislation in Tennessee and Washington. A number of other states already have this as part of their state credit union act. I can see a number of positive and not so positive results in this trend. In this post I will address the positives and I will cover the negatives in my next post on Thursday.
The board is ultimately responsible for what happens in the credit union. In the words of President Harry Truman “The Buck Stops Here”. The regulatory environment of credit unions is increasingly onerous causing many credit unions to have board members who do not clearly understand the requirements within which credit unions must operate. Many do not understand the financial statements, audit reports, the types of investments, consumer vs. commercial lending, required disclosures, human resource issues, etc.
Recruiting board members with the skill levels needed is difficult when there is no actual compensation for the increasing demands on their time for serving on the board. Compensating board members will allow the credit union nominating committee to recruit individuals who have the knowledge and experience in at least some of the above areas.
A key component of a board compensation program will be the establishment of standards of performance for the board members. Mere compensation does not guarantee that a board will be diligent in its duties. One only needs to look at the losses incurred by several for profit businesses and banks to illustrate this point.
The membership will benefit from having a board that understands the business of the credit union, that the credit union needs to operate like a business, and that their interests are better protected as a result.
What other positives can you think of?