The May 13 Denver Post has an interesting follow up article on whether Public Service CU's board was a rubber stamp of the pay package for Public Service's CEO David Maus.
Raymond Lopez, a professor of finance at Pace University in New York, called the contract "over the top" and "ridiculous."
While Robert Wilson, an attorney with Berenbaum Weinshienk in Denver, defended the expertise of credit union volunteer boards saying that "[t]he directors in the big credit unions are sophisticated."
Read the story.
The Denver Post article draws attention to how exclusive CU boards really are. Nominating committees are just one of the barriers. Another is the election process. Most members who even bother to vote just check the box of incumbents. Employees and their families make up a significant percentage of the voters, which usually leads to incumbent reelection. Directors rarely choose to not run for reelection. Instead, they resign mid-term, leaving their unused term to be filled by board appointment. This hand selected board member then runs as an incumbent, and usually wins.
ReplyDeleteA perfect case study of this cycle is America First CU in Utah - a $5 Billion institution. Several current directors were first elected this way. The last person. I can recall who was elected without mid term appointment was a very popular retired executive.
This seems like a lot of effort to protect an "unpaid" and "volunteer" position. Why are the road blocks thrown up? Why are "volunteers" so protective of their positions. I suspect that it is because these "volunteers" who serve their fellow members receive perks far beyond the imagination of the fellow members they claim to serve. As I understand it, board members are reimbursed mileage to attend any CU function. Board meetings are normally catered with nice meals and the fridge is stocked. "Director Retreats," "Seminars" and "conferences" are strategically held in desirable travel destinations. All expenses are paid for, and the work portion of the trips leaves something to be desired of one who "serves his fellow members."
I believe the board rubber stamp is alive and well, but not because management overruns the board. I believe it is because of the arrogance of board members. Their egos are fueled by the success of their CU. Rapid growth and high returns lead to praise from their peers at the national board junkets.
David Maus didn't overrun the PSCU board. They were happy to pay him. He took his board from a size where they meant nothing, to being members of the board for a $1.1 Billion CU. He gave the board clout and made ordinary people into legends in their own minds.
This arrogance and "grow at all costs" mantra of the billion dollar CU board member is why the regulators issued directives reminding boards that their job is to serve members and not to grow exponentialy in size and assets.
Keith, I believe if you took a look at the boards of mega-sized CUs and the former boards of failed CU's like Norlaco or Texans, you'd find these blood thirsty boards partnered with executives to take risk in the name of growth, profit, and personal egotism. The CU board - members selflessly serving their fellow members - is a crock. Come to think of it, I think the concept is a fraud. I'd love to hear Keith's take on this topic.