My letter concerns Mike Welch's August 21st column referencing the article entitled "The CEO & Director Salary Imbalance is Corrected by Converting to a Mutual Bank Charter or a Stock Bank Charter" that appeared in the August 5th edition on Callahan's Web site. As an attorney who represents a number of banks, thrifts and credit unions and who has successfully represented more credit unions in the conversion process than any other lawyer in the United States, I am troubled by the theme of the article. As you know, a key concern of NCUA has been that a credit union would make the decision to convert based upon the self-interest of its board and management rather than in the best interests of the institution and its members. As Yogi Berra might say, "It's d'eja' vu all over again." Clearly, the article is intended to entice credit unions to convert so that management and the board can realize the type of benefits that the author implies are available at a mutual or stock institution, but not in some fashion available at a credit union. Conspicuously absent in the article is a cogent discussion of why a conversion might be beneficial to the credit union and its members. Also missing is a recognition of the special role that credit unions play in the financial services marketplace and that compensation is only one reason why people choose a place to work or to otherwise serve. A fundamental principal of corporate governance that the author conveniently overlooks is that a decision by a board and management to convert based upon their own self-interest is a breach of their fiduciary duty and should not be tolerated by the members nor the regulator. Clearly, there is no need to convert to a mutual or stock institution to obtain creative benefits for management should they otherwise merit such treatment (See article on phantom stock options in the September 26, 2001 edition of Credit Union Times). Converting to a stock institution is no cure-all for the director and management compensation issue. Unless the institution has a viable plan to deploy the additional capital it is just a sitting duck for activist shareholders (lest we forget IGA Federal Credit Union). The article also overlooks the fact that stock benefits come with a price tag and are an expense to the income statement (including options in the near future). The passage of the Sarbanes-Oxley Act is ironically timely given the theme of the article since the act was largely prompted by those placing their own best interests over the entity to whom they owe their fiduciary duty. The corporate landscape is littered with companies whose executives made the wrong choice in carrying out the trust placed in them by their owners. Will credit unions fall into this trap? Apparently not. If compensation was such a concern, wouldn't we be witnessing a gold rush among the industry rather than just the 20 or so that have converted to date? I believe that the industry will recognize that the charter option is intended to be a strategic alternative and that it will not be used to feather the nest of misinformed and misguided management. Richard S. Garabedian Partner Jenkens & Gilchrist, PC Washington, D.C.

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