Colorado and Arizona recently joined the growing number of states that allow state charted credit unions the controversial option of compensating board members.

Working with lawmakers in Colorado and Arizona earlier this year, the Mountain West Credit Union Association introduced bills that were passed by the legislatures in both states that give state chartered credit unions the option to pay their board members reasonable compensation. Arizona's law also allows credit unions to pay committee members.

What's more, since 2011, when a provision on board compensation was included in CUNA's Model Credit Union Act, three other states – Oregon in 2015, and Tennessee and Washington in 2013 – passed board compensation laws that were crafted and lobbied for by state leagues. Although the Michigan Credit Union League board considered board compensation last year, the proposal was nixed because it wasn't the right time, Dave Adams, the Michigan league's president/CEO, said.

Arizona's law was passed by the state legislature after a grueling 20-hour session that ended at 5 a.m. on May 7. Colorado Governor John Hickenlooper signed the state's bill into law on April 15.

The board compensation provision and many others in CUNA's 86-page document provided model language for leagues' proposed laws and their state charters. The Model Credit Union Act was compiled by the American Association of Credit Union Leagues with assistance from CUNA, according to CUNA Senior Media Relations Manager Vicki Christner.

This provision was added because credit union boards became more important as credit unions increased in size and regulatory complexity, Lynn Coard, CUNA's director of advocacy and counsel, explained.

“Compensating directors was a way for credit unions to ensure more competent directors at the helm,” she said. “It may be worth noting that even in states that permit director compensation, it is not widespread.”

An estimated 18 states now permit board compensation.

However, CUNA does not have an official policy on board compensation, giving the trade association a neutral stance on an issue that credit union leaders have been debating for years.

Board compensation has remained a controversy because the seven cooperative principles for credit unions posted on CUNA's website include the No. 1 principle that touts voluntary membership. The principle includes the statement that, “many cooperatives, such as credit unions, operate as not-for-profit institutions with [a] volunteer board of directors.”

However, according to the introductory statement in CUNA's Model Credit Union Act, “while maintaining the fundamental tenets of the credit union philosophy, the model act is intended to update the historical credit union model to meet current challenges and members' needs.”

Although credit union board members have historically served as volunteers, their challenges and the credit union industry have changed substantially over the years. These changes have given some credit union leaders a different perspective about the controversial issue of board compensation.

Scott Earl, president/CEO of the Mountain West association, said the trade group lobbied for board compensation at the request of credit unions.

“I don't know that there were any credit unions that were clamoring to compensate their board, but they all felt like they should have that option, that choice,” Earl said. “So, it was more about choice than anything else.”

Read what Colorado and Arizona credit union CEOs said about the new board compensation laws and how they may affect their cooperatives in the May 18, 2016 print edition of Credit Union Times. 

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