Tennessee has become the second state in the last two months to consider a proposed law that would give state-chartered credit unions the option to compensate board members.
The proposed law has been recently approved by committees in the Tennessee House and Senate. House Bill 258 will be introduced to the state’s House of Representatives on March 7. Senate Bill 587 has yet to be scheduled for consideration before the full Senate.
House and Senate committees in the state of Washington have also recently approved bills that would give state-chartered credit unions the choice to compensate board members.
The Washington Senate unanimously approved its version of the bill Feb. 26. The Washington House version of the bill may be introduced for consideration before the full House next week, said Democratic Rep. Cindy Ryu.
Current Tennessee law allows credit unions to reimburse board members or members of credit or supervisory committees for any loss of (job) earnings caused by time spent in the service of the credit union in an amount that the board of directors may determine.
The proposed bills, however, would provide an alternative to this reimbursement by compensating board members if the following conditions are met:
- Adopt a resolution that the credit union requires expertise among board members for the prudent management of operations,
- Pay elected board members only after the resolution is adopted by the board,
- Create a policy governing the participation and attendance of board members to receive compensation, and,
- Report board members’ compensation as a specific expense item in the credit union’s annual report.
The proposed legislation does not allow compensation for members who sit on a credit or supervisory committee.
“I think credit unions are a very valuable part of our financial fabric, and I say that as an employee of a bank,” Republican Tennessee Sen. Jack Johnson said during a committee hearing last month.
He also is the prime sponsor of the Senate bill. Johnson is a senior vice president and financial adviser for Pinnacle Financial Partners that serves Knoxville, and central Tennessee, including Nashville.
Because of the growth and the increasing complexity of the financial services industry and the fact that there are large credit unions responsible for loans and deposits worth hundreds of millions of dollars, Johnson said it is perfectly reasonable for credit unions to provide compensation in order to attract a higher caliber of board members.
However, Johnson noted that the proposed bill would not require credit unions to pay their board members.
David Wilson, executive vice president of the Tennessee Credit Union League in Chattanooga, said the league’s board supports the proposed legislation.