A couple of state legislatures have recognized the value ofcredit union directors' work toward maintaining a safe and soundcredit union. Washington state and Tennessee credit union regulators recently permittedstate-chartered credit unions there to compensate board members for their time. This was a wise move for a numberof reasons.

First, as I said, it recognizes the value of the board members'time and expertise. And it is not as if directors are doing warmand fuzzy things like candy striping or walking dogs at the HumaneSociety. They are crunching numbers and approving audits for ITsecurity and ensuring Bank Secrecy Act compliance – all at a hugepersonal risk.

Sen. Jack Johnson, a Republican from Tennessee who also happensto be a senior vice president and financial adviser for PinnacleFinancial Partners in Knoxville, said as much when he sponsored thebill in his state senate. He cited the growth and complexity of thefinancial services industry that is creating more time demands,expertise and deliberations among board members.

The new law does require credit union boards that decide tocompensate board members to adopt a resolution that the creditunion needs expertise among board members for the generalmanagement of its operations. The board also will be required toadopt a policy governing the participation and attendance of boardmembers in order to receive compensation, and that the boardmembers' compensation be published in the annual report. It doesnot permit paying credit or supervisory committee members.

Another benefit to paying board members is that there are nomore excuses to accept mediocre or even lower performance justbecause they're volunteers. If board members are paid X, it means they shouldperform up to that value, however the credit union wants to measureit.

I attend many conferences and inevitably you hear, “What can youexpect? They're volunteers.” The risk to the institution and theindividuals is no less than a comparable bank. Credit unionmanagement, directors and members must accept nothing less than afull effort to keep up to date on the financial services industry,their members, technologies and governance issues.

The new authority will also help credit unions in these statesdiversify their boards. Credit unions opting to use this new powerwill be able to attract people with specific skills to the boardthat might currently be lacking.

Directly compensating board members is also clears up a messyambiguity. Credit unions already compensate their boards witheducational conferences that are held on an Amazon tour or aboardan Alaskan cruise ship. Setting a stipend and paying it forperformance is much more ethical and transparent.

Take for example the $1.4 billion Trumark Credit Union, whichpays its board members between $30,000 and $60,000 each per yearfor an aggregate of approximately $450,000. Sounds like a lot ofmoney for an industry that prides itself on the volunteerleadership.

If you look more closely, Trumark earned $14.5 million in netincome last year and appears to be on track to exceed that in 2013.According to the NCUA's financial performance reports, the creditunions in the peer group over $500 million in assets in the capitalregion averaged $2.5 million in net income last year. However,return on assets was in line with this group of peers. Didcompensating board directors contribute to Trumark's high netincome? It's definitely a matter to explore.

On the other hand, I know a board chairman who won't even acceptpersonal mileage reimbursement to attend board meetings afterretiring from his job and moving more than two hours away from thecredit union.

What does bother me about these two pieces of legislation is whythe bankers didn't bother to oppose them. They seem duty-bound tofight any new authorities credit unions try to obtain yet theymaintained a cacophony of silence.

American Bankers Association Senior Economist Keith Leggettexplained that the association viewed the issue as a mere internalgovernance issue, and that perhaps it would attractbetter-qualified credit union board members.

Particularly as the tax exemption issue raises its ugly head yet again, why aren'tbankers attacking this “power grab?” Credit unions often point totheir volunteer boards of directors as one of the justificationsfor their tax-exempt status. Do the bankers see this as anopportunity to weaken credit unions' case for maintaining the taxexemption?