The National Credit Union Administration’s May 7 proposal to revise the rules governing mergers of federal credit unions raises a number of challenges in its implementation. The two main components of this proposed rule—transparency of compensation for CU management and open member-to-member communication before the merger-related special meeting—are intended to address the perceived conflict of interest that arises between the best interests of the members and the financial stake that leadership may have in the merger.
In this advisor’s opinion, including these two components in the final rule could create the perfect storm for scuttling a merger that might have been in the best interests of the members and the respective credit unions.
The word on the street is that certain management officials have been persuaded to “deliver” their CUs to a merger in exchange for a handsome compensation package that is not disclosed to the members. As the owners of the institution in the minds of many, including NCUA, credit union members should be informed of such interests. This type of disclosure is, of course, required by the Securities and Exchange Commission for the shareholders of a public company.
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