Press
New research from Filene Benchmarks Director Compensation, explores pros and cons of compensating credit union boards
MADISON, WI (June 22, 2015) — Director pay is a complex issue. Many feel that paying boards is anathema to the cooperative spirit of credit unions while others feel it will improve director accountability. A new report from Filene Research Institute, Should Credit Unions Pay Their Directors?, acknowledges the dilemma and quantifies existing director compensation rates in the United States. The report sheds light on the current state of credit union director compensation and considerations credit union leaders should keep in mind when exploring the prospects of paying board directors.
“It will likely surprise many that some credit union directors are not technically volunteers,” said Matt Fullbrook, from the Clarkson Centre for Business Ethics and Board Effectiveness, University of Toronto and lead researcher for the project. “However, the amount most directors receive is quite modest and pay is never the primary motivator for serving.”
The report takes a closer look at trends such as: How prevalent is director pay? What does it look like? And how does it affect the performance of credit unions that use it? Researchers scoured state laws across the country and examined IRS Form 990 filings for every state-chartered credit union in the states that allow director compensation.
According to the research from 145 credit unions in 12 states, directors earn somewhere between $60 and $37,597. Federal credit unions are allowed to compensate a single board officer, but are expressly forbidden from paying other directors. Otherwise states are free to write their own rules. Tennessee, Oregon, and Washington recently joined 10 other states that have long allowed compensation in various forms. Research found that credit union board pay is still, on average, modest. Most credit unions that could compensate their boards do not, but compensation is more prevalent among larger credit unions.
“This board compensation research is intended to foster productive discussion,” explains Ben Rogers, research director for Filene Research Institute. “For each argument, for and against compensating directors, the report offers discussion questions.”
The board compensation research project was made possible by support from Credit Union Executive Society (CUES), DDJ Myers, and Quantum Goveranance.
“We felt it was important to support this research so that we, as an industry, have a clearer understanding of the strategic decisions credit unions are making and what inputs leaders are using to make those decisions,” said Dawn Poker, Interim CEO and SVP/Chief Sales & Member Relations Officer of CUES.
For every argument in favor of compensation, there’s a corresponding caveat. This graph illustrates some pros and cons to consider.
About Filene
Filene Research Institute is an independent, consumer finance think and do tank dedicated to scientific and thoughtful analysis about issues affecting the future of credit unions, retail banking and cooperative finance. Founded over 25 years ago, Filene is a 501(c)(3) nonprofit organization. Nearly 1,000 members make the nonprofit’s research, innovation and impact programs possible. Learn more at www.filene.org.