What Is the Member’s Right to Know?

Disclosing executive salaries is not a regulatory issue; rather, it can be a marketplace advantage. Keeping compensation private only suggests that credit unions have something to hide.


My former partner, Bucky Sebastian, used to counsel us when we worked in state or federal government, “Don’t do or say anything you don’t want to read about on the front page of tomorrow’s newspaper.”

This caution was not just about embarrassment for some deed, but recognition of the accountability that public disclosure can bring.

Today credit unions are subject to many disclosures mandated by law, including the terms on loan and savings accounts, member information management (privacy) and even check-hold policies. But many aspects of a credit union’s most important activities are not subject to public disclosure, unless voluntarily done.

The most sensitive issue for many CEOs and senior managers is the publication of their salaries and benefits. Federally chartered credit unions do not have to report this information. Those state charters that file their own 990 Return for Organizations Exempt from Income Tax (not all state charters) do disclose the compensation of officers and directors. This return is “Open to Public Inspection,” as stated on the form itself.

Transparency and Accountability
Companies that sell their shares to the public are subject to a much wider range of legal disclosures than are credit unions. They must report total compensation for senior executives in the 10K form, plus their assessments of business risk factors, including market concentrations and profitability across lines of business.

For example, in the Annual Report for JP Morgan Chase there are extensive discussions of capital, liquidity risk, off balance sheet arrangements, risk management in general, market risk, private equity risk, operational risk, and reputation and fiduciary risk.

The salaries of many CEOs are routinely published in local business publications and newspapers, and also in the national media from Parade magazine to the American Banker and The Wall Street Journal to name a few.

The compensations of the CEOs of both CUNA and NAFCU, as well as the pay of all senior officials at NCUA, appear annually in the credit union press.

The fundamental assumption underlying disclosures is that this will promote ethical behavior, good performance and accountability. If the facts aren’t acceptable to customers, shareholders or the public, then other governance or media publicity can hold management to account. The current World Bank controversy is only the most recent example of private activities undergoing public review.

So where do credit unions stand on this process? Because they are cooperatives owned by the members should they have a higher standard, or not? Do the member-owners have a more comprehensive “right to know” than shareholders in a public company?

Transparency and Competitiveness
Disclosure covers more than institutional practice and compensation. Every communication to customers can be a valuable way to “disclose” the credit union advantage compared with other options. If a credit union just uses “marketing” messages encouraging members to buy this or that product, the approach may miss the most important advantage of all. For if members are never told why they have a good deal, how much harder will it be to convince them that someone else is offering a bad deal?

For example, just think about the 0% car loan for a car financed at the dealership that misled members into thinking they were getting a better deal than from the credit union. Today the veiled fees built into otherwise seemingly good-deal credit card programs, overdraft protection and even some kinds of mortgages can easily morph into an exploitive outcome.

Proactive, thorough disclosures of business practices, beyond what is required by regulation, tradition or market practice can build trust and become an important competitive differentiation.

An Era of Disclosures
The Internet has made information easily and widely available—on almost any topic! On April 20, the House of Representatives passed a bill by a vote of 269-134 that would let shareholders of public companies cast nonbinding up or down votes on executive compensation. An identical bill was introduced in the Senate by Barack Obama.

Rather than resisting this increased openness, credit unions can use candor to their advantage. Disclosures beget dialogue that can build trust. Credit unions are organized on democratic governance principles, and, like all democracies, information is necessary for responsible decisions.

There is no question but that many credit unions are delivering extraordinary member value; but ironically, members may not see this from their limited perspective—unless the credit union presents the message. Not all members will want to analyze a balance sheet, but they will all have an opinion about salary!

This is not a regulatory issue. No rule making is desired or required. This is a marketplace advantage. Keeping compensation private only suggests to the GAO, Congress and the critics that credit unions have something to hide.

Proactive disclosure says we have something you should want to know about—even more important than CEO pay. That something is how we are creating member value, nothing more and nothing less.

Chip Filson, President of Callahan & Associates, will host the webinar, Full Disclosure as a CU Advantage: The Risks and Gains from Transparency. Featured speakers include Mandy Jones, CEO of Oregon Community Credit Union ( $761M in Eugene, OR) and David Doss, CEO of Arizona State Credit Union ($1.1B in Glendale, AZ).




May 21, 2007


  • We have a couple of groups in the Washington, D.C. area that are working on democratizing credit unions. Last weekend we attended an annual meeting, and this issue was raised. There was intense pushback by board and management, with board alleging that they themselves don't even know the top salaries. I've been on a food co-op board, and have seen this separation of board and management used to push owner/members farther and farther away from involvement. At the credit union meeting, the only vocal opposition from the floor was from an angry employee who, I suspect, were in fear of losing his job. I like the approach in this article - knowledge can lead to an increased competitive edge. I know I'd feel more comfortable knowing what the top brass makes. Not knowing makes me want to find a credit union that is more open.
    Dan Robinson
  • Our CU management doesn''t even let the Board know what management salaries are.
  • If there was not such a big jump in compensation from frontline employees to managers then managers to VP''s and finally VP to CEO -- then it should be disclosed. Unfortunately for those who would like to continue having these salaries/benefits remain transparent-- with large pay comes accountability! How many CEO''s of credit unions live in houses supplied by the CU and are privy to other benefits unimaginable to staff or members. It should be known to each member where their share money is going. “Compound interest – the only thing that Einstein could not understand!”
  • Credit unions are behind the times in "hiding" management salaries. All publicly owned companies are required to advise their owners of the "Top 5" salaries. Why not credit unions?
  • Transparency on this issue is needed. It is another incentive for senior management to earn their keep.
  • I didn''t realize that CU managers'' salaries and member knowledge thereof was an issue, and, in fact, of course, it is not. But put them out there for the uninformed to scrutinize and you can bet your last dime it would be. Why, in the name of all that is rational and at least semi-intelligent, would anyone want to stir up such a hornets nest as doing something totally stupid like this would? Do you really think that most of us have that little to do? Go peddle your philosophiocal BS somewhere else. I''ve read a lot of stuff through the years that I thought was illogical, without basis, and devoid of merit, but this absolutely takes the cake. Congratulations.
    Larry B. Davis
  • As a senior manager, why should I have my salary disclosed to the membership or to other employees? I have worked hard to achieve my position, taking the time and effort to educate and improve myself in IT arena in which I would be generally considered UNDER compensated in the For Profit arena, but would be in the top 5-10 of our credit union''s compensation scale. It really is no one''s business what I make.
    Anonymous Coward
  • All management should have compensation disclosed. It''s funny how credit unions are "for the member". My guess is member''s would be sick if they knew how much like a bank their credit union really was. Plus adding "incentives" to management compensation packages (cars, trips, expense accounts) shows you just how much these management teams don''t care about "member''s" but money in their pockets.
  • Honestly, there are so many ways to "hide" compensation, that, for me, it makes many of these disclosures superficial and irrelevant. I tend to keep my salary private for the most part because I don''t want it to cause any feelings like resentment among my co-workers. Having said that, if it became required to disclose, I don''t really have a problem because we all know that we''re paid less than bankers. So it would reflect positively on us in that aspect.
    John Godwin
  • I personally don''t think it is necessary at this point in credit union history. From my experience, most credit union CEOs and management teams work hard to return to member, a metric that is published. As long as members continue to benefit from good leadership that translates into lower interest rates on loans and higher interest rates on deposits, along with a host of other personalized services, I see no purpose for disclosure. And let''s face it, credit unions may pay to retain highly skilled leadership but they certainly don''t get the short and long-term stock options and golden parachutes public companies do. These are the numbers that astound and outrage the public, not credit union payrolls.
    Patricia Ryan
  • As a member/owner of a credit union, I''''m not allowed to know what the most highly compensated staff is being paid or what other benefits they derive from their employement with my credit union? Smells like something to hide. Whether or not there is may be a different question, it still smells like there is. With disclosure comes accountability, with accountability comes risk.
    Witheld By Request
  • Editor''s note: Chip Filson has posted a follow-up to this article titled Salary Disclosures Are the Tip of the Spear

    Take a look at different credit union approaches to executive compensation disclosures. The ultimate goal of disclosure is to sustain members’ trust with the credit union. read more
    CreditUnions.com Editor
  • As an CU executive that came from a private firm, I would have certainly thoutht long and hard about working for a credit union if my salary were to be under public scrutiny. I think the industry would be even more hampered by the inability to attract and keep experienced talent than it is now.
    CU Exec.
  • I''m on the fence here. If it weren''t for the handful of "alleged" credit unions with overpaid CEOs, this would be a non-issue. However, there are an awful lot of banks in credit union clothing, and if the member could see that part of the reason he or she is receiving bankish rates is bloated executive compensation, it would provide a greater level of transparency. I understand not wanting each employee knowing what his or her peers are earning, but for the topmost level of management, this is a good idea. The only people really concerned about this are people who are afraid of being labeled as "overpaid". Let''s get real -- if you feel you''re overpaid, you probably are!
  • In reference to Comment 5, dated 5/29; it seems you forget WHO you work for - -the membership! You appear to really have a self serving view on this topic.