Public Relations and Vote Solicitation: Credit Union to Mutual Bank Conversions
Getting a favorable vote for switching to a mutual bank charter
is one part of the conversion process. Success requires a cost-effective combination
of disclosure, public relations, and member solicitation. A sound business case
for conversion and the right conversion team provide the tools for motivating
members, addressing opposition, and setting the stage for solid post-conversion
The disclosure statement and supplemental Q & A address most
questions members have about conversion, and a favorable vote should be assumed,
if the member takes the time to vote. So, part of the solicitation process involves
motivating complacent members to vote. Less than 20% of the members typically
vote in these campaigns and so a large pool of members can be contacted using
various methods. Because opposition is usually concentrated in the hands of
a vocal minority, attracting a higher percentage of membership helps secure
a favorable outcome.
The public relations (PR) plan is closely aligned with the
member solicitation plan. “The PR plan must outline the objectives, target audiences,
key messages, and tactics for getting the membership out to vote and managing
the opposition,” said George Scott, principal and public relations specialist
with Toronto, Canada-based, Level Five Strategic Partners, Inc. “Front line
employees play a key role in reaching members, and successful campaigns are
both inclusive and fun. Care should be taken to ensure the management team sends
the correct messages to employees.”
Community leaders and the local press are quick to embrace
the entry of a new bank into the market, and can often be counted on to voice
public support for the conversion and help with the public relations, according
to Scott. In addition to the tax revenues and CRA obligations assumed, these
leaders recognize that community banks traditionally play a major role in funding
the local infrastructure. History illustrates that new banks are quick to make
the tough loan decisions and to execute fresh business plans that are critical
to a community’s growth, survival, and / or regeneration. For many community
leaders, the purpose of a credit union is sometimes fuzzy or misunderstood,
and most credit unions are seen as serving the needs of an exclusive segment,
not the community’s broader interest. Thus, a bank conversion sends a strong
and proactive message that the institution wants to become a more important
Conversion specialists agree a few critics should be anticipated.
The ones that contact the conversion information line or speak with management
personnel can often become supporters. Some, though, will never be convinced.
Not only will they be motivated to vote no, they will try to lead others
down that path. A few of these critics are well known to management since they
weigh in against almost every management agenda. Other vocal critics
could include employees of competing credit unions, disgruntled former employees,
jilted job applicants, denied loan applicants, CU trade association representatives,
and consumer activists looking for a cause.
In addition, the NCUA and credit union trade associations
are taking steps to make conversion more complex and expensive. You may discover
they are working under the radar to attack your messages and obscure the issues
in an effort to influence a no vote. In what looks more like an effort
to intimidate directors looking at the process, a few CU trade associations
have vowed to interfere both directly and indirectly in upcoming conversions.
So far, members of 27 credit unions have successfully obtained
the vote. In two instances, despite the fact members voted in favor, a politically
motivated regulator intervened and issued rulings that required a re-vote, which
turned out favorable. Voting participation varies, as does the final count.
Most credit unions should expect that 15% to 20% of the members will vote as
a result of the three statutory notices mailed first class to eligible members.
Current federal rules require 50%, plus 1, of those voting to approve
the deal. Some states require a higher percentage. By way of a scorecard, the
approval ratio for a couple of conversions, for unique reasons, was just over
the 50% range, while the rest exceeded a 60% or even an 80% vote in favor.
The most costly part of the conversion process involves the
printing and mailing of notices to members. Mailing just one notice and disclosure
under the onerous pre HR-1151 conversion rules could cost over $2, and reminders
were costly as well. Recently, we’ve budgeted around $2.50 per member for three
notices and solicitation. For the future, as a result of proposed NCUA disclosure
rules, proposed legislative quorum requirements, and the threat of more organized
opposition we plan to increase the solicitation budget. As a result of its involvement
with the majority of the conversions, CU Financial Services has identified various
indicators for determining the correct allocation of financial resources for
getting a successful vote. Like many business outcomes, the greater the investment,
the more predicable the result.
Visionary management teams have always faced resistance when
introducing change; consider checking accounts, government securities investments,
mortgage lending, business lending, investment services, mergers, and debit
cards. A few critics always surface. Change is difficult and requires investment
and effort, but the consequences of maintaining the status quo can be much more
costly, even leading to irrelevance. The conversion to a bank charter is both
visionary and strategic. Although converting to a bank is not appropriate for
every credit union, those who have made the move have harnessed powerful marketplace
and economic forces, and their growth and success since conversion have validated
the wisdom of the decision.
Across the credit union system today, there is an abundance
of news and comment about conversions past, present and future. Unfortunately,
there is much misinformation, some of it politically motivated. For any credit
union contemplating a conversion to mutual savings bank status, which I believe
is one of the most revolutionary and exciting opportunities ever made available
to CUs for achieving successful growth, it pays to deal with experienced professional
advisors. Call CU Financial Services at 800-649-2741
to get the facts about this strategic option.