At December 31, 2023, there were 2,280 federal credit unions and 1,724 chartered by 45 different state authorities.
The broad operating authorities are similar. However, there is one major difference in the transparency of the two systems. This difference was noted in a NASCUS comment to NCUA on August 15, 2022 on bank conversions and mergers:
All FISCUs must complete annual Internal Revenue Service Form 990 filings. Part VII of those filings is public and requires FISCUs to disclose any compensation paid to directors and officers; the compensation paid to “key employees” (employees earning more than $150,000.00 in reportable compensation; and “highly paid” employees (the top 5 employees earning more than $100,000.00 in reportable compensation).
Transparency and Accountability are Inseparable
Without timely information member-owners cannot make reasonable decisions about the board’s role overseeing CEO and senior staff compensation.
Disclosure is required for all state charters as part of their special status as tax exempt organizations. Quarterly 5300 call reports provide only general corporate trends and broad dollar totals of some compensation programs.
Transparency of leader’s pay is an essential aspect of the member-owners’ governance role in cooperative design, via the election of directors. Full disclosure is standard operating practice in the public sector.
The value of reporting is not just the current level of compensation. Tracking trends over several years can show how pay correlates with the credit union’s financial performance. Unlike their competitors, there is no daily stock price passing judgement on management’s responsiveness to members or shareholders.
Moreover, the uniform reporting standard of the 990 is specific, by name and position. It is more useful than generic salary surveys in which asset classifications or by position and other criteria provide only general ranges.
“A Leadership Requirement”
When individuals aspire to positions of senior leadership in the management of other person’s financial resources, their own disclosures demonstrate their responsibility for the trust members have in their credit union.
The time to make this change is now, voluntarily showing proactive leadership, not after a law or regulation requires this level playing field.
Otherwise, the absence of comparable data may give an impression that senior leaders of federal credit unions are unwilling to be as accountable as their state counterparts. Which will just beg the question, why?
Change before you have to is a maxim FCU CEO’s should follow in this basic issue of transparency. It communicates basic respect for the member-owners’ role.
Frank Diekmann, CUToday Cooperator-in-Chief, described the benefits of transparency in a different context this way:
“Not only would disclosure be the right and ethical thing to do, it would make for an effective response to critics. . . that claim credit unions are just “profit-seeking enterprises masquerading as tax-exempt non-profits.
Transparency is a leadership requirement. It creates trust and confidence even when things go wrong. Doing the right thing should not require a rule or reg. It is a character trait. “