Letter: Are Paid Directors Best for the Industry?
Regarding Editor-Chief Sarah Snell Cooke’s column in the May 1 issue: Attracting and retaining qualified board members are critical challenges for credit unions. Similarly, board members deserve recognition for their responsibilities and also for their time, work and contributions. There is no debate about these points.
The payment of board members for their time, as the states of Washington and Tennessee now permit, is one method of addressing these issues. The Tennessee law’s requirements–a board resolution about the need for expertise, a board policy on eligibility for compensation and publication of board compensation in the annual report–are both sound and obvious.
Paying board members as a means of recognizing their contributions and their duties may have merit. But whether paying board members is a necessary method or, as Cooke states, a “wise move” to address other issues, such as, for example, underperforming board members and diversifying board composition, is arguable for the following reasons.
First, paying board members is not necessary to end or, more likely, try to end “mediocre or even lower performance.” Unless a board is willing to hold its members accountable for their performance, whether the board members are paid or unpaid will make no difference. Obtaining acceptable performance by board members is a matter of effective internal governance and collective will, not a matter of compensation.
No board should condone or tolerate mediocrity or worse from its members merely because of their volunteer status. To the contrary, it should police its own members. A board should establish and enforce the expectations for its members’ performance and attendance. A shared acceptance of those expectations, by itself, can create peer pressure to satisfy them. The use of peer reviews of board members on a regular basis is another method that employs the power of peer pressure. If necessary, intervention by board officers with underperforming board members can help ensure that they fulfill their obligations.
Second, paying board members is not essential to recruiting the right people and to diversifying a board. Credit union boards already recruit members with specific skills or backgrounds. The ability to pay board members may facilitate that kind of recruiting, but qualified candidates also can be recruited as volunteers.
Third, paying board members a stipend would not end or even curtail educational conferences in attractive locations. Continuing education is essential for board members and attending out-of-town conferences can be an appropriate use of a board’s education budget if it is done in a cost-conscious way. Credit union boards that abuse their education budgets by attending conferences “on an Amazon tour or aboard an Alaskan cruise ship” should be ashamed of themselves. But that kind of abuse does not lead to the conclusion that paying board members will end such abuse. Nor is it fair or accurate to say that such abuse afflicts all or even most credit union boards. In any event, both paid and unpaid board members would still need continuing education and would still attend out-of-town educational conferences.
Fourth, paying credit union board members could end their traditional role as credit union members who volunteer to serve their credit union and their fellow members. It could change them into hired outside experts whose relationship to the credit union and its members is not organic, but pecuniary. That is how outside directors of for-profit corporations function, and there is nothing wrong with it for those companies. But would that change really be in the best interests of individual credit unions and the credit union movement as a whole?
Community Choice Credit Union
Farmington Hills, Mich.