<p>A financial industry regulatory relief bill (H.R. 3951) appears to be making it through the complex law making process unscathed. That should be good news for all financial institutions including both credit unions and commercial banks. However, the American Bankers Association recently withdrew its support even though the proposal contains 30 regulatory relief provisions for banks and only eight for credit unions. Unlike bankers, can credit unions be expected to support everything in the proposal? Maybe not! I have little doubt that credit union volunteers will also find at least one provision not to their liking once it dawns on them that buried in the bill is a provision to establish limits on their board terms. Say “term limits” in a room full of mostly credit union volunteers and you risk being tossed out of the room. When the topic comes up, the results are absolutely predictable. “How many in this room are in favor of term limits for credit union board members?” The hands of a few brave CU CEOs usually go up, but not very high. The reverse question, “How many oppose term limits?’ produces a sea of hands flung skyward from virtually every volunteer in the room. To put it mildly, term limits for credit union directors is one of the most controversial topics to be addressed by both volunteers and CU CEOs. An untold number of volunteers have told me in no uncertain terms that they are adamantly opposed to any type of term limit. In contrast, hundreds of CU CEOs have confided to me in hushed tones, or in confidential letters and e-mails, that they want desperately to see term limits (three consecutive, three year terms) put in place for the good of the credit union as well as their own sanity. At many credit unions, the average age of directors is often in the 70′s, or higher and over half of them are retired. There is little or no turnover. At many credit unions, directors no longer represent the membership. This is particularly true at credit unions that have added dozens of SEGs (Select Employee Groups) and/or converted to a community charter. Credit union CEOs see a big advantage to the CU if the board gets some new blood and becomes more diversified in terms of age and gender and from a minority and overall member representation standpoint. Long term directors say they have tried but just can’t get “young” people interested in volunteering their services to the credit union. To which the CEOs say privately, baloney. Many boards, they add, do everything they can to keep the good old boys club intact. Many board members protest loudly that credit unions do in fact have term limits. For example, the nominating committee can control who sits on the board for how long by establishing a policy not to nominate any candidate for more than a third consecutive term. Also, there’s the actual annual board elections by members. This comment is not uncommon: “If the members didn’t think we were doing a good job, they wouldn’t keep re-electing us.” Not really. The average member doesn’t usually know (or care) who is on the board. As long as the credit union is doing well, members are satisfied. They aren’t interested in who sits around the board room table every month. But let the CU mess up, and members will want to know who is responsible. Some boards also point to the ongoing success of the credit union as proof that the present system isn’t broken and thus needs no fixing (term limits). These boards are quick to take all the credit for the CU’s success, as though the CEO and his or her professional staff just went along for the ride. Does it follow then that the blame at those credit unions that have been less than successful also belongs to the board of directors? Several board members have commented to me that maybe there ought to be term limits for CEOs. Of course, there already are. It’s called the board’s ability to hire and fire the CEO. If the CEO doesn’t do his or her job effectively, the board is in a position to say sayonara. If a director doesn’t perform, so what? Nobody is going to fire them. So, am I for or against term limits? As I have said many times, as long as any director is making a meaningful contribution, their age or time on the board shouldn’t matter. However, the rub comes in when CEOs and fellow directors have a completely different definition of “meaningful contribution.” That’s the real problem. The more immediate term limit question to me becomes, why would someone include something so divisive to credit unions and their management and policymakers as the credit union term limits provision in a comprehensive regulatory relief proposal? And who is that someone? A major reason for credit unions’ lobbying success has always been the ability to generate impressive grassroots support. Term limit advocates would seem to be risking a loss, or at least a weakening, of some rather important grassroots support for passage of the overall regulatory relief bill from credit union volunteers by tackling the term limits controversy in this fashion. Granted that FCUs are currently prohibited by regulation from imposing term limits. Nevertheless, does including term limits in an important regulatory relief package make a lot of sense? Is it really the proper or only vehicle for tackling an age old internal politics controversy head on? Once again, here’s my definition of a credit union. Note that it doesn’t address term limits although volunteer is inherent in both “not-for-profit” and “cooperative.” A credit union is a not-for-profit financial cooperative organized to serve the changing financial needs of all the members who own it. Comments? Call 1-800-345-9936, Ext. 15, or Fax 561-683-8514, or E-mail email@example.com.</p>
This is part three of CU Times' request of CUNA and NAFCU to answer the same questions concerning a housing bill's impact on CUs. Both groups have differing views.
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