Credit Unions Should Reconsider Travel as Board Payment

I think it is time that credit unions reconsidered the whole issue of conferences. Many of the trades have become dependent on conference income, CUES not the least of them. Credit unions have used conferences as a form of director compensation. Directors and often their spouses are reimbursed for attending conferences at luxurious resorts. It has not been uncommon, too, for credit unions to attend conferences overseas in Europe, Asia and Africa. As of the third quarter 2008 call report data, California credit unions had spent about $35 million in travel and conference expense. That represents about four basis points of average assets. Some credit unions, like Continental Credit Union, spent as much as 19 basis points of average assets. That level of spending in a year when average return on average assets is well below 100 basis points raises the question of whether travel and conference spending is reasonable.Whether it is good times or bad times attending conferences in luxury resorts raises questions for nonprofit, member-owned institutions. Many of these conferences only have half-day sessions spread across two or three days in paradise. The agenda for the conference seems to take a back seat to the location, golf and other extra curricular events.We need to educate our volunteers and it is appropriate to send them to conferences to do that. It is however clear that conference attendance is being used as a form of director and volunteer compensation. Ironically, one of the comments that was used to justify the trip to St. Kitts was that the volunteers were using vacation time from work to attend the conference. In fact many of these conferences are paid vacations for the directors and spouses. Credit unions don’t pay directors for their board service, but it is more than coincidence that many directors have about $12,000 a year in travel and conference expense-which is about what banks pay their directors for serving on the board.I think we have too many credit union conferences. Many of our organizations have turned their annual meetings into conferences. Every league, every major credit union, CUSO and the sundry trade organizations all host conferences. There seems to be a conference somewhere every day. Not only volunteers but also credit union executives are frequent attendees at these conferences. Judging by the number of conferences, I would not be surprised to find out that some credit union executives attend as many as 10 conferences a year. Are they really necessary?The question of whether all this conference expense is necessary can’t be a clear yes or no, but let’s put it all in perspective. There are about 27,000 FTE in all California credit unions. If you annualize the travel and conference expense, it works out to about $1,700 per FTE for 2008. Most of the conference expense is for board and management so that the amount per director and manager is probably closer to four times that. The new reporting requirement for IRS form 990 will ask credit unions to report expenses for the top five management employees. I think that will increase the scrutiny that is applied to how much travel and conference expense management employees incur.At SAFE, our travel and conference expense is three basis points of average assets, about 25% less than the average California credit union and one sixth of what Continental Credit Union spent. In 2009, given the difficult budget, we have cut all travel and conference expenses in half. We have moved our board planning session to a no-cost classroom at a local college.I would recommend that credit unions find a better way to compensate directors for their service. I would recommend that boards carefully review how many conferences management attends and consider whether that money is well spent. I would urge leagues, trade associations and CUSOs to consider whether their conferences are adding value to the credit union system or whether they are offering services that resemble a tour operator. It may be that ABC has done us all a favor.