As the financial services industry overall has evolved, so too should some of the things credit unions were built upon. What many have widely considered one of the underpinnings of the industry, volunteer boards of directors, is a thing of the past. Credit unions' organization and products are not as simple.
Mortgage-backed securities and 401ks were not even conceived of when credit unions were formed in the U.S. These are just a couple of the things of the 21st Century that are far more complex than 100 years ago. It's a huge undertaking to serve on a credit union board.
Take, for example, the Declaration of Independence. It outlines all the things that no one can take away from Americans: life, liberty and the pursuit of happiness. Following on this, the Constitution very clearly explains the philosophy of the U.S. government and its people.
But even the founding fathers realized that this very open and empowering document might need amending from time to time for unforeseeable circumstances. The Bill of Rights drills down a bit to define in broad terms what is meant by those three rights. This document and its meaning changes with significant shifts in the times. Two hundred years ago the founding fathers couldn't imagine the Internet was in the offing, but it intended bloggers to be covered under freedom of speech. The Bill of Rights highlights what Americans can do which cannot be taken away from them.
In 200 years there have been just 27 amendments to the Constitution; it has been long lasting precisely because it is an enabling doctrine. In fact, the only amendment that has ever been repealed was the one that told American what they could not do, the infamous Prohibition.
So return to 2010 and credit union volunteers. Life and financial services have evolved. Most recently, there's an evolution of regulation afoot. The NCUA and other regulators are zeroing in on what it means to serve on the board of a financial institution and other companies.
Fiduciary duty and duty of care have been a matter of theoretical debate. In the wake of international financial crisis, regulators are looking to define more clearly for financial institutions and create a measurement for what these terms mean. Minimum financial education standards must be set. We've seen this with the NCUA's move toward basic financial education requirements for credit unions.
It's difficult to recruit board members for credit unions. Serving on a credit union board is a big time commitment and personal liability to take on as a volunteer, which is precisely the argument some are making. There's an attitude from some portraying, 'we're volunteers, so what do you want from us?'
Another complaint I've heard is that the NCUA is getting too involved in credit union operations by requiring financial education. This is absurd in this instance because the agency's most basic mission is the safety and soundness of credit unions. At the same time, the credit union board's most basic mission is the safety and soundness of their credit union. The two are inextricably intertwined and appropriate.
All the responsibilities put on a credit union board necessitates that regulations should allow for credit unions to have the option to pay their board members. For their work, qualified board members should have the option to be paid.
The word qualified is important. I'm not saying credit unions should just start paying their board members. Credit unions need the right board members, who may very well be existing board members, and then they should pay them. That would go a long way to attracting knowledgeable and effective board members.
The credit union philosophy is not for profit, not for charity, but for service. Credit union board members take on a lot of work and responsibility and it is completely justified that they should be compensated for that.