On the state level, Ottow told regulators at NASCUS' annual conference, "I think we're all going to be looking at some type of restructuring of the corporates. We're going to be pressed for some type of outside directorates. It's seen now as an inside club."

Credit union officials typically point to two concerns about the corporate system: the functional questions of management overlap between 19 corporates and their respective CUNA-affiliated state leagues, and the political peril of non-federally insured deposits at 15 corporates. There are 43 corporate CUs in the country, including the $27-billion U.S. Central CU in Overland Park, Kan.

For this report, nearly two dozen officials from regulatory agencies, trade associations, state leagues, corporate CUs and individual CUs shared their views on interlocking management.

NAFCU President Ken Robinson warned the practice may draw concern from the federal government. "Congress is generally sensitive to any situation where a trade association is involved in the management of a financial institution."

Although the government may take a stand on the corporate system, the bank lobby has not. Linda Rearick, a lobbyist of the American Bankers Association who has spoken at several CU conferences, told Credit Union Times, "If there is a movement among credit unions to change the corporate system, they don't need the ABA to convince them."

Within the movement, there is a broad range of opinions on the future shape of the corporate network. Former NCUA Chairman Ed Callahan, now president/treasurer of the $400 million Patelco CU, San Francisco, suggested there may be ulterior motives for integration. "Corporate credit unions and the leagues in their states shouldn't have overlapping boards. People should not be on a corporate board because of other positions they've held, but because of their expertise. Being purely political in this day and age is suicide."

Many have accused leagues signing contracts with corporate as being purely political. In Minnesota, a vote to appoint league president Gary Plank as CEO of Minnesota Corporate CU was carried by three corporate directors who also sit on the league board, alleged Marilyn Johnson, president of the $16 million Pioneer Press Dispatch EFCU, St. Paul.

Rod Lydon, president of the Corporate, has since resigned. However Minnesota Corporate Chairman Bill Winter (who abstained from the vote) cited two advantages of a contractual relationship with the league: less costly marketing and more effective human resource development.

In New York, another state where the league and the corporate have moved toward interlocking management, Empire Corporate FCU's former COO said the advantages are only theoretical.

"The potential positive of integration is that a myriad of service can be made available from one central point and there may be economies of scale in doing so," observed Ray Dowling, who resigned last November after the corporate became strongly integrated in the league's credit union center.

"In reality, because the league wants to control the corporate, the corporate is enjoined from progressing at the speed it needs to stay viable. It is impossible for one person to run both the league and the corporate, and that results in a breakdown of the management structure."

Other drawbacks invariably arise claimed Dowling, who began his 12-year corporate career as the first president of Capital Corporate FCU. "There are conflicts of interest. For example, Empire Corporate provides a line for the league's mortgage corporation at a preferential rate. There is ultimately a drain on the bottom line of the corporate, because of subsidies to the league and its affiliates. And it forces credit unions, whether or not they're affiliated with the league, to subsidize the league and in essence, pay dues." Dowling is now president of the $166 million IBM Kingston EFCU, NY.

As some corporate CUs move toward integration others are venturing in the opposite direction. Corporates in California, Maine, Michigan, Ohio and Tennessee have recently moved toward separation from their respective leagues. Currently, less than half of the nation's 42 corporate CUs have interlocking management pacts with state leagues.

In which direction does CUNA, a principal contributor to the leagues and the corporate network, want to see corporates move?

Toward integration, according to Director of Information Jack Blake. "Our System Planning Committee report of 1987, which is our planning document for the 1990s, says that to be perceived as one system, integrated management and policy setting should be the practice among the league, corporate CU and the league service corporation."

The CUNA panel's report concludes, "Where this is not possible or practical structurally, it should occur functionally in the short term, while full integration should continue to be a long-term objective."

U.S. Central referred CU Times' inquiries to CUNA, which in turn suggested that Pete Crear, the new executive director of the Association of Credit Union League Executives and former president of the Indiana and Connecticut leagues speak on behalf of U.S. Central. Officially, ACULE supports CUNA's goal of full integration.

However, Crear's sentiments may symbolize the diverse feelings on the issue within the movement. "Integration works in some states and doesn't in others. I've been in an integrated league and non-integrated league, and the relationship with the corporate was good in both cases. The key is having enough dialogue to resolve issues between the two organizations."