Forget The Gavel, Today They Hang A Sword Over Your Head

Imagine volunteering to take over the local Little League baseball program with the best of intentions and plans to clean up the fields and make sure all the kids have fun, thinking your only real worry is that enough parents sign up for the after-game snacks. And then in your first month in the post you discover other leagues say they have dibs on the fields, some parents (the ones who never volunteer their time) are planning to sue because Johnny isn't getting enough innings, and oh, one of the coaches' names just showed up on a list of sexual predators.

That's essentially what it's become like for credit union CEOs and others who volunteer their time to serve on the boards and as chairs of the national credit union trade groups. (I initially had written that at least they don't have to deal with the sexual predators, but with one CEO recently arrested on such charges and the employee of another credit union vendor nabbed by the FBI with allegations of being involved in similar activities, sadly, that's also true.)

Anymore, if you're elected chair of CUNA or NAFCU, prepare to tie yourself to the mast, because you have no idea what the seas are going to be like during your term, although you can safely assume "smooth" won't be an option. As if dealing with charter conversions and member democracy-related issues weren't sufficiently challenging, along comes the bid by Wings Financial FCU to the members of Continental FCU for a merger. NAFCU was quick to take a stance on the question, CUNA has been more measured. NAFCU, of course, only has to deal with federal charters; CUNA has the additional challenge of representing federal and state charters Both groups must balance the demands of large CUs (pay big dues, but could also pose "hostile takeovers" to other CUs) and smaller CUs (pay less in dues, but make up most of membership, also fear being targeted).

For chairs of both groups, the job no longer comes with a gavel. Instead, on Day 1, they hand you the Sword of Damocles. At least that's how it has to feel in part for Allan Kemp McMorris, CEO of Oakland County Credit Union in Michigan, who in February took over as CUNA's new chairman. By March, the previously unimagined concept of a "hostile takeover" was on his plate.

McMorris noted that in his home state he has watched as the Michigan league wrestled with two very large credit unions that attempted to convert to banks-Lake Michigan Credit Union and DFCU Financial Credit Union-and how to strike a balance between allowing members to control their own credit unions while also ensuring those members are informed about what it is they are voting on.

"Now with this whole issue of Wings Financial/Continental we are certainly discussing it and trying to get a handle on not just the short term implications, but the long-term implications," McMorris said.

He noted that what the Wings Financial bid for Continental FCU has also done is blown the dust off the issue of the "whole cooperative structure" and its assumed, innate aspects of governance. "This is not something we had really given any thought to until very recently," he said. When the matter was discussed it was typically with the assumption that if ever there was a hostile bid from an outside organization to a credit union's members that it would come from a for-profit institution, as has been seen in England and Australia. McMorris said that when Nationwide Bank essentially made an offer the board (and Nationwide employees) of Nationwide FCU in Columbus, Ohio couldn't refuse, it only reinforced the belief the other publicly traded players or Wall Street itself would begin to see credit unions as natural-and defenseless-takeover targets.

"We thought about it in terms of what would you do if approached by a for-profit institution," said McMorris. "I don't think we ever thought a credit union would do it. It truly is a paradigm shift."

It's a shift, he added, that he does not personally believe is a positive for credit unions.

When asked to step away for a moment from being CUNA chairman and instead think in terms of his own $125-million credit union becoming a takeover target, McMorris said it isn't something he has given a great deal of thought.

"I personally feel that if a credit union is meeting its members' needs, then for all of us, realistically, it should never get that far," he answered. He said he believes that if his own members received a solicitation from an outside credit union that most would reject it.

Just as is the case with presidential administrations, where the events in the news have a way of getting in the way of what the candidate had hoped to do prior to taking office, the Wings/Continental story and the related challenges from "hostile bids" vs. "credit union cooperation" has drawn away some attention, at least in the near-term, from the priorities McMorris had identified prior to becoming chairman.

"My issue, and I've thought about this a lot in recent years, is the slowdown in new member growth," he said. "For any industry, not growing is not a good thing."

McMorris has seen that upclose, pointing to the auto industry's travails in his home state of Michigan and the resulting decline in employment. He also hopes to keep the light on an issue championed by his predecessor as chairman, Juri Valdov, CEO of Northwest Credit Union. Valdov, along with much of CUNA, put an emphasis on financial literacy, and CUNA and the National Credit Union Foundation (McMorris is on the NCUF board) have put some big dollars into backing the NEFE financial literacy program. Reaching out to young members and helping them to make wise financial decisions is "truly impactful in their lives."

And perhaps best of all, if truly financial literate, they'll also know what it means when they receive a solicitation in the mail from another credit union or a letter from the board of directors saying there's no need to worry about it, everything's fine, and by the way, just check the box where it says you favor your credit union becoming a bank.

Frank J. Diekmann can be reached at fdiekmann<at>cujournal.com.