The Michigan Credit Union League dropped its support of acontroversial amendment under consideration by its statelegislature that would have given state-chartered cooperatives anoption to pay board members.

Credit union leaders said the league's board of directorsrejected the amendment because it wasn't the right time. However,they also acknowledged it may be only a matter of time – perhapsover the next five to 10 years – before state-chartered creditunions will have the option to compensate directors.

The Michigan league is working with state lawmakers to make morethan 50 proposed changes to the state's credit union act. Some ofthe proposed amendments would allow credit unions to operate theirown trust services instead of working with an out-of-state CUSO, aswell as create examination fairness and clarity and make othertechnical fixes, Dave Adams, president/CEO of the Michigan league,said.

The board publicly announced in May that it decided to acceptall of the changes except the option for director compensation.Adams would not disclose the board's vote count.

“Our board decided the timing wasn't great in seeking thisdirector compensation authority because they didn't want tojeopardize the other important fixes that we are trying to make toour state act, such as trust power and regulatory reliefprovisions,” Adams said.

Gary A. Moody, president/CEO of the $890 million Credit UnionOne in Ferndale, Mich., agreed, stating that the league has done atremendous job of identifying real, substantive and importantissues confronting state-chartered credit unions.

“Director compensation is a potential lightning rod foropposition to the bigger bill,” Moody explained. “It has thepossibility of dividing credit unions at time when a unified voicefor regulatory relief and freedom to compete from all credit unionsis necessary. Including this issue would clearly slow down passageof a bill, and could become a poison pill for some lawmakers whoare otherwise inclined to support credit unions and pass thelegislation. I fear too much political capital might be used topush through a bill with that kind of baggage attached; or worseget defeated.”

But Michael Poulos, president/CEO of the $748 million MichiganFirst Credit Union in Lathrup Village, Mich. disagreed with theboard's decision.

He argued the purpose of the state act update should give creditunions more freedom and choice in how they operate.

“To not provide the option of paying board members is clearlyinconsistent with this approach,” Poulos said. “Whether or not anindividual credit union favors paying its own board members is not what's at issue. It's about promotinginnovation rather than stifling it.”

When Adams and other league officials met with credit unionsfrom around the state to discuss and gather input about theproposed credit union act changes, some large cooperatives saidthey would like the option of providing board compensation.However, league officials also said the vast majority of creditunion leaders favored maintaining the status quo of volunteerboards.

Dennis M. Hanson, president/CEO of the $1.5 billion Dow ChemicalEmployees Credit Union in Midland, Mich., said he's concerneddirector compensation would jeopardize the industry's taxexemption and erode another part of the cooperative'sdifferentiation business model from that of banks that do paydirectors.

Read more: The issue is likely to surface again in afew years …

Poulos, however, argued numerous states already allow creditunions to pay their board members with no negative effects.

“The concept has yet to show a downside,” he said. “I believecredit unions should be given the opportunity to make the choicethey want about their own governance.”

Adams acknowledged a few large credit unions are probablydisappointed in the board's decision.

Nonetheless, he said the league board is sensitive to the factthat at some point in the future, perhaps in the next five to 10years, the director compensation option will surface again and thatthe board will be open to considering it.

“I think at some point in the future Michigan state law willauthorize that [board compensation] for state chartered creditunions,” Davis said.

Hanson said it's appropriate for credit union leaders to revisitthe issue in the future, particularly if the supply of qualifiedboard members dwindles.

“But to me, as long as we are able to find qualified volunteers,I don't see anything on the horizon that would change my mind,” hesaid.

Though director compensation continues to be a highly sensitiveand contentious industrywide issue, 15 states allow directorcompensation. They include Indiana, Pennsylvania, Rhode Island,Maryland, Wisconsin, Georgia, Minnesota, Kentucky, Alabama, NewJersey, Nevada, North Dakota, Texas, Tennessee and Washington. InNevada and Wisconsin, only officers of the board and committeemembers are permitted to receive compensation.

In 2013, CU Times took an in-depth look at creditunions that do pay board members, which revealed that mostcooperatives pay small stipends that range from a few hundreddollars to $7,000 a year. And even in states where compensation ispermitted, some credit unions do not pay directors.

However, some board members received considerably higher annualcompensation.

Some state-chartered credit unions in Pennsylvania, RhodeIsland, Indiana, Maryland and Wisconsin tended to pay theirdirectors higher levels of annual compensation.

In Pennsylvania, for example, board compensation ranged from$4,000 to $65,000; in Rhode Island, from $300 to $39,000; inIndiana, from $750 to $93,000; in Maryland, from $1,000 to $29,000;and in Wisconsin, from $2,000 to $21,000.

Nevertheless, directors at some state-chartered credit unions inNorth Dakota, Texas, Georgia and Minnesota paid their directorsless annual compensation.

In North Dakota, director pay ranged from $2,000 to $5,300; inTexas, from $90 to $12,000; in Georgia, from $100 to $9,800; and inMinnesota, from $1,000 to $12,000.