5 minutes
The recent "Chairman's Corner" article by Debbie Matz in February's installment of The NCUA Report was very enlightening. According to Matz's article, volunteer directors are integral to the proper functioning, direction and control of credit unions. She rightfully calls it "a mighty responsibility."
Indeed, the efforts of the volunteer credit union director have significantly grown over the past decade and there is every reason to believe that that role will increase. However, compensation for volunteer directors has not changed, at least not for federally chartered credit unions.
It's time.
Currently NCUA expects volunteer directors to be familiar with financial statements; receive training each year to maintain their currency in the regulatory environment; discuss and establish policy for areas of operation; understand and act upon such concepts as interest-rate risk, third-party risk, concentration risk and general risk management--to include growth and mergers; expanded fields of membership; and mobile banking, among a plethora of other issues. Directors are charged with selecting the CEO, and monitoring and assessing his or her performance. And they are to do all this while ensuring the interests of the members are maintained.
The introduction of technology to board operations has meant some efficiencies, but at the same time requires more time training in that technology's use. For example, having iPads and other electronic devices has saved on postage and labor costs in assembling board packets and, when used properly, increased communications and coordination; but it has also increased the time needed to become a fully functioning board member.
We are constantly looking for potential volunteers who can give their time for free. That has usually meant retired individuals. Younger members that show an interest and desire to serve as volunteers are still in the workforce, and must choose between maintaining their hours for their jobs, their families, other volunteer commitments and the credit union volunteer requirements.
While retirees bring a wealth of knowledge from a multitude of different professional backgrounds and experiences, they are becoming less representative of the membership in terms of financial situations and needs, as well as demographic strata, not only within our field of membership, but across society as well.
NCUA rules allow boards of federal credit unions to have one compensated position. In the past it was understandable that one volunteer, who by position had to put in long hours to prepare reports for action by the rest of the board, should be recognized. Traditionally, that one director allowed compensation was the chairman or the treasurer.
However, today, no one position is any more critical to the proper functioning of the board than the others. Most of the treasurer’s report is (or can be) automated and is less labor intensive than in previous times. From the directors appointed to serve on board committees performing such crucial tasks as technology policy review to those serving on the Supervisory Committee, all have the responsibility to ensure the soundness of the operation. Every one of a credit union's volunteer directors serves a needed purpose.
To get sufficiently motivated candidates for possible volunteers, we must be able to offer more than just travel to a conference or two for training, and some level of expense reimbursement (at over $4 a gallon for gas, mileage reimbursement to attend meetings becomes more critical).
Compensation does not have to be salary, nor should it be. The obvious problem of volunteerism vs. getting paid for a director position is that such payment could complicate the relationships of the board to the CEO and others who are paid within the organization. Yet, the commercial sector has had paid boards for years, in the form of stipends for their board members, with success. Further, the use of stipends could be tied directly to the performance of individual board members. Benefits in the form of participation in health programs, life insurance, or other indirect compensation elements could also be considered as incentives to serve.
The NCUA examiners already review the proper functioning of the board and supervisory committee and could add any compensation system to the list without taking away from the other areas.
There appears to be a wide disparity regarding the true value of volunteers within the credit union movement. NCUA expects boards to perform at a high level in many areas. Yet , by regulation, we collectively do not have sufficient maturity to decide if compensation for volunteers is a valid and allowable action, let alone what level of compensation is adequate.
An increasing number of state legislatures have begun to discuss the issue of director compensation; some have passed laws allowing compensation for board members of state-chartered credit unions. These actions clearly show that recognizing the services of volunteers requires compensation in some form. The credit union associations need to make this one of their agenda issues, and NCUA needs to start addressing the issue.
Anthony E. Steigelman is chairman of $476 million CBC Federal Credit Union, Oxnard, California.
