In becoming one of the nation's largest community credit unions, greater demands and expectations have weighed heavily on the $17.1 billion BECU's board of directors.

So in 2014, the Seattle-based credit union broke decades of industry tradition and decided to pay board members because they are essential to its current and future growth prospects.

Because board compensation appears to be gaining broader acceptance but remains controversial, CU Times looked at how many credit unions are compensating directors in Washington, how much they are being paid, how credit unions determine what reasonable compensation is and why they decided to pay board members. Credit unions were also asked whether offering pay makes it easier to retain and attract directors, and whether they have experienced any positive or negative outcomes as a result of compensating board members.

Since it became legal to pay board members in Washington and Tennessee in 2013, CU Times found that only seven credit unions in the Evergreen State are paying board members with compensation levels that range from $8,400 to $50,000 annually.

In the Volunteer State, however, board directors have remained volunteers, maintaining one of the seven cooperative principles that distinguish credit unions from banks.

The decision to allow board pay in Washington and Tennessee sparked an industry-wide debate about board compensation that nevertheless seemed to reveal a change in the attitude of credit unions about director pay. The Northwest Credit Union Association in Oregon in 2015, and the Mountain West Credit Union Association in Colorado and Wyoming in 2016, backed and lobbied for legislation that now allows credit unions to pay directors.

In addition to these five states, 10 other states permit board compensation, which include Georgia, Indiana, Kentucky, Maryland, Minnesota, North Dakota, Pennsylvania, Rhode Island, Texas and Wisconsin. In most of these states, board compensation has been in place for decades.

This shift of support for board compensation seemed to have come a few years after the devastating effects of the 2008 financial crisis and the subsequent Great Recession, which brought on a flood of new financial regulations along with slow but steady economic recovery.

The expectations facing boards have evolved, Matt Fullbrook, manager of the Clarkson Centre for Business Ethics and Board Effectiveness at the University of Toronto, noted in a 2015 Filene report that examined board compensation.

Back in 2009, Fullbrook was teaching a class of credit union board members at the CUES Governance Leadership Institute.

When the class discussed board compensation, one side said it was more trouble than it was worth, while the other side found the topic offensive, he recalled.

Then during a CUES summer program Fullbrook was teaching in 2014, every single board member in the class supported the idea of compensation.

Nonetheless, the fact that just 13% of Washington's 55 state-chartered credit unions and not even one state-chartered credit union in Tennessee provides director pay indicates most credit unions oppose paying directors or at least don't feel comfortable with the concept.

“The board has elected not to financially compensate board members because they are philosophically against it at this point. They maintain that volunteer governance is still a strong pillar of the credit union movement,” Carla Altepeter, president/CEO of the $1.8 billion Numerica Credit Union in Spokane Valley, Wash., said. “No, we have not had difficulties finding qualified board members to date. Those interested in joining our board have hearts of service and believe in giving back to their communities.”

Fred Robinson, president/CEO of the Tennessee Credit Union League, said as residents of the Volunteer State, most credit union board members feel their service is a commitment to the community and membership that elected them.

“Volunteer board members see their service as an opportunity to help improve the community's financial lives,” he said. “To my knowledge, we don't have any Tennessee credit unions paying their members for service on the board, unless that board member is the treasurer of the board, or the board member provides the credit union assistance within their area of expertise.”

Scott Adkins, president/CEO of the $1.2 billion Inspirus Credit Union in Tukwila, Wash., whose credit union began paying board members this year, believes we will see more credit unions in Washington offer board compensation.

“I would suspect there's probably as many [credit unions] vetting the idea right now as there are that have actually implemented it, but it also depends on the credit union and their philosophy,” he said. “Some are very opposed to the idea. Others, like Inspirus, think that it's an important tool for attracting and retaining the right kind of board members. I don't think either philosophy is inherently right or wrong. It depends on the institution.”

In addition to Inspirus and BECU, five other credit unions in Washington that pay board members are the $2.5 billion STCU in Spokane, the $1.5 million HAPO Community Credit Union in Richland, the $1.4 billion Sound Credit Union in Tacoma, the $1.2 billion Columbia Community Credit Union in Vancouver and the $955 million iQ Credit Union in Vancouver.

According to Washington's regulator, compensation is reasonable considering the financial condition of the credit union, proportional to the services provided by board members, and comparable to compensation paid by comparable organizations of similar size, location and operational complexity.

In 2015, the BECU board chair was paid a quarterly stipend of $6,250 or $25,000 annually. In 2016, that quarterly stipend increased to $12,500 or $50,000 annually. In 2015, BECU's vice chair and committee chairs were paid $5,000 per quarter or $20,000 a year, and in 2016, the stipend increased to $11,250 or $46,000 a year. For board directors, the 2015 quarterly stipend was $3,750 or $15,000 annually. That stipend went up to $10,000 per quarter or $40,000 a year in 2016.

BECU's 2017 quarterly stipend schedule remained the same as last year.

Even with this substantial increase in board pay, BECU SVP of Human Resources Melanie Walsh said the credit union met the state's reasonable compensation standards by benchmarking the credit union's stipends against those paid by other comparable for-profits, not-for-profits and cooperatives.

“We believe that the payment of stipends to board members enhances the credit union's ability to attract and retain well-qualified individuals for these positions and compete with other successful businesses that are also seeking highly qualified individuals for board roles,” Walsh said.

BECU, Washington's largest credit union by assets and members by far, competes for qualified board members against some of the state's multibillion asset banks and other large companies.

HAPO Community also increased board compensation. It currently pays an annual stipend that ranges between $18,000 to $23,000 for board members and leadership positions. The credit union was paying board members $15,000 to $20,000, according to its 2015 IRS 990 document.

HAPO Community did not respond to CU Times' request for an interview.

Other credit unions have kept their compensation levels the same since offering board pay three years ago.

The $1.4 billion Sound has paid its board members $15,000 to $25,000 a year. Don Clark, president/CEO of Sound, said the board saw that in order to recruit new directors it would need to offer compensation to attract busy professionals with certain skills and experience.

“For example, right now we are searching for somebody with an extensive IT background,” Clark said. “Technology is crucial to the future of credit unions, so it would be helpful to have somebody on our board with significant IT experience who could ask good questions and be a good sounding board for us to make sure we are staying current and relevant for the future expectations of our members.”

Clark also believes compensation helped recruit a young CPA with audit experience and a commercial broker to serve on the board.

“One of the areas we're focusing on is business lending, so it's nice to have a board member who has a commercial real estate background who can review loans over a certain amount presented to the board, and who knows what's happening in many of the markets we are active in,” he said.

Since 2016, the $955 million iQ has paid its board members between $9,000 to $17,000 a year. The credit union declined a CU Times interview request.

Inspirus, STCU and Columbia have recently begun to pay their board members.

Starting in January, Inspirus board members began receiving a stipend of $700 per meeting. With 12 regularly scheduled meetings, board directors can earn up to $8,400 a year.

STCU pays its board chair $10,806 a year and directors receive $9,100 annually. The credit union also requires board members to become certified, and they can serve four, three-year terms. STCU also reduced its number of members on the board from 13 to nine.

“We've always had qualified and dedicated board members, but now the job is getting so much more complicated,” Dan Hansen, STCU's media and communications manager, said. “It's not the same job it was 20 years ago, by any means.”

Columbia Community also pays board members, according to Washington's Department of Financial Institutions. However, the credit union's publicly available IRS 990s documents do not show any compensation information and there is no information on the credit union's website. The credit union also did not respond to CU Times' request for an interview.

Instant Insights /

Board Pay Gains Acceptance but Remains Controversial

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