Reasonable Compensation

Earlier this year, Washington state enacted legislation that allows a state chartered credit union to pay its directors and supervisory committee members reasonable compensation for their service as directors and supervisory committee members.

The Washington Division of Credit Unions is now in the process of trying to define what constitutes reasonable compensation.

A first draft of a rulemaking document defines what reasonable compensation is not.

"Compensation is not considered reasonable if it is disproportionate to the services provided by the director or supervisory committee member, unreasonable considering the financial condition of the credit union, or is not comparable to compensation paid to organizations of a comparable size, geographic location, and operational complexity."

The Washington Division of Credit Unions further notes that reasonable compensation should not lead to a material financial loss to the credit union.