Tennessee Gov. Bill Haslam this week signed a bill into law that provides state-chartered credit unions with the option to compensate their board members.
Tennessee has become the 10th state to break from the long-standing practice of only permitting volunteer board members to oversee credit unions. The Tennessee law was not controversial as it took less than two months to wend its way through the state’s legislative process.
Meanwhile, Washington may become the 11th to also break from the long-held credit union tradition of board volunteers.
Bills that would give state-chartered credit unions the option to pay board members are working their way through Washington’s state House and Senate. The bills, introduced in late January, also have not been controversial.
Georgia, Louisiana, Minnesota, Mississippi, New Hampshire, North Dakota, Pennsylvania and Texas permit state-charted credit unions to compensate their board members, according to NASCUS.
Rhode Island also allows state-charted credit unions to pay their board members, said Rob Kimmett, senior vice president of marketing and public relations for the Credit Union Association of Rhode Island.
Republican Tennessee Sen. Jack Johnson, a senior vice president and financial adviser for Pinnacle Financial Partners in Knoxville, said he sponsored the Senate bill version because of the growth and complexity of the financial services industry that is creating more time demands, expertise and deliberations among board members.
He said it is perfectly reasonable for credit unions to provide compensation in order to attract a higher caliber of board members who have expertise that can help credit unions make important decisions.
The Tennessee Credit Union League in Chattanooga supported the legislation.
“This is such new legislation. Our credit unions probably haven't had a chance to react to it,” said Trish Patterson, vice president of education and information for TCUL, said after Haslam made the bill law on Tuesday. “In the end, the decision as to whether they will remain volunteer-governed is the choice of each credit union.”
Though the Tennessee law does not require credit unions to pay board members, it will require credit union boards that decide to compensate board members to adopt a resolution that the credit union needs expertise among board members for the general management of its operations.
The board also will be required to adopt a policy governing the participation and attendance of board members in order to receive compensation, and that the board members’ compensation be published in the annual report.
The new law does not permit compensation for members who sit on a credit or supervisory committee.