Imagine for a moment your local school board has announced a plan to somehow compensate themselves, but they decline to provide further details, saying only that everyone will just have to trust them. Or, let’s say a local government agency is pressed to be a little more forthcoming on what that budget line item “management rewards” might entail, but it, too, says there is just no need to do so, arguing it would invade some people’s right to privacy.
In both cases the school board and the local government agency may be acting completely on the up-and-up, but let’s face it, your first (and second and third) reaction is to be suspicious, and that’s only if you didn’t immediately skip right to “foregone conclusion” that something sneaky is going on and insiders are benefiting at your expense.
That type of perception is just the tightrope credit unions are going to have to walk in fighting both NCUA and the IRS on their various plans to expand disclosures of CU executive compensation. It’s one thing to have salaries discussed as part of a peer group average, quite another to have the Average Joe peering at your pay.
As Credit Union Journal’s Ed Roberts reported June 9, CUNA has told the IRS credit unions are opposed to any proposal that would increase disclosure on the annual Form 990, which would expand public access to executive compensation at state-chartered credit unions. CUNA’s argument is that nontaxable expense reimbursements and fringe benefits should not be included as compensation, and that the IRS proposal also includes way too many executives. Similarly, for the past year, CUNA (and credit unions in their own comment letters) has been objecting to plans by NCUA to require disclosure of executive compensation, saying such disclosure would add to credit unions’ regulatory burden and is unnecessary.
With the exception of very few CEOs and other senior exec team members at credit unions, it seems a pretty safe bet CUNA has the backing of all its members on this one, and that leaders at federal charters are for once telling their state-chartered counterparts, “We stand behind you, brother.”
Should credit union members know how much their CEO is making? With the exception of those managers at smaller CUs who make the kind of salaries that have teachers remarking, “Wow, how do you get by on that?” these are seat-squirming proposals for CEOs. The idea makes many uncomfortable, but perhaps not for the reasons many would think. I’d be willing to wager that as many who would be distressed at having members know their W-2, far more would be troubled to have other CU CEOs and senior execs know the same information.
While the trade groups are busy answering “why” salary and compensation should be kept private, the credit union community needs to prepare itself to adequately answer the “what” question, as in “What have credit unions got to hide?” Who doesn’t believe that bank execs, who already have their compensation released every quarter as part of filings with the SEC, won’t be asking just that, and in doing so insinuating there are some nefarious things occurring; otherwise, why all the “secrecy?” It doesn’t matter whether it’s right or wrong to suggest credit unions are up to no good–when has it ever mattered?–this is too good a PR opportunity for the bankers’ trade group to pass up.
“Hey, credit unions, we thought you were ‘democratically’ run organizations,” the banks will bleat. “Shouldn’t everyone have ‘equal” access’” Or, “We thought you said you were ‘member owned?’” they will certainly slyly provoke. “Shouldn’t the owners know where their money is going?”
Credit unions may not–in fact, will not–enjoy what’s being alluded to, but you should be prepared to answer. What do you think? I look forward to hearing from you.
Frank J. Diekmann is publisher of Credit Union Journal and can be reached at fdiekmann<at>cujournal.com. (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com