A member revolt over directors’ pay at Coast Capital Savings Credit Union that started with last year’s elections for the member-governed financial institution is continuing through this year’s ballot.
An opposition group is seeking to overturn a board remuneration formula set by a member vote in 2007 that saw its chairman’s pay rise to as high as $178,000 in 2009 from $33,200 in 2006.
The board did reduce the base pay of directors by 18 per cent in 2013 and struck a member-based committee to review its formula for determining directors’ pay following a vote that was 80-per-cent in favour of giving members power over director compensation.
The results of that committee’s work are on the ballot as a special resolution to Coast Capital’s elections this year. But to opposition-group leader Phil Embley, they don’t follow the spirit of the resolution he spearheaded on last year’s ballot, so he is leading the effort to put his group’s views to a test again.
“They’re way out of line here,” Embley said, comparing Coast Capital’s remuneration to the pay offered to directors at rival Vancity Savings Credit Union, which is one-third larger and operates in similar markets.
In 2012, Coast Capital chairman Bill Wellburn was paid $157,080 and directors’ pay ranged from $19,176 for a director who departed the board that year to $75,277 for a director who chaired two committees. Remuneration is based on a schedule that pays the chairman an annual retainer of $65,000 and directors $25,500, with $5,000 premiums to committee chairpersons and per-meeting fees of $1,000.
Vancity, by comparison, paid chairwoman Virginia Weiler $62,239, committee chairs $43,567 and directors $36,306 in flat stipends. Vancity directors also receive other perks such as reduced fees on services and automatic best rates on mortgages, which Coast Capital directors do not get.
The difference appears stark and Coast Capital’s debate raises the question of just what is fair compensation for credit union members who put their names forward to oversee organizations that have morphed from simple community co-operatives to more complex financial institutions.
It can be a big job, and Coast Capital chairman Welburn said his institution set a formula to raise the amount it pays directors because it was becoming increasingly difficult to recruit candidates with the skills they were looking for.
“What we found out was Coast, given our size at the time — $8 billion or $9 billion (in assets) — we were seriously out of market,” he said.
At the time, Wellburn said, the board set a formula for determining a “market rate” for director pay that, in working with a compensation consultant, set a rate at a mid-point between the directors of top-paid consumer co-operative organizations and the least-paid directors of private, publicly traded companies of similar size.
Wellburn said members approved that measure in 2007, with the provision pay rates would be reviewed, along with an independent compensation consultant, and voted on every three years.
“So it was finding a place where we could attract directors that are really talented,” Wellburn said, able to oversee the institution’s operations and “challenge management on where we’re going.”
The B.C. Financial Institutions Commission, which regulates credit unions, sets no standards for the pay that the directors of institutions receive. However, it does have high standards for the capabilities of boards of directors, said FICOM CEO and superintendent Carolyn Rogers.
FICOM expects boards to recruit candidates that have the financial literacy and management experience to safeguard the institution’s assets while meeting strategic objectives.
“I think over the years, credit unions have moved to compensation schemes that reflect those expectations,” Rogers said. “I think that’s reasonable.”
Last September, FICOM published guidelines for credit unions to follow with respect to governance, but Rogers said the only requirement with respect to payment is that the institutions establish a clear process for determining director remuneration that is transparent to members.
Co-operative-sector consultant Kim Andres said setting directors’ pay is a complex task, and directors are often the ones reluctant to propose raising it.
“People who volunteer their time for credit unions tend to be very community focused and sensitive to perception,” she added.
However, directors are signing up for a big job, Andres said. At some credit unions, the board might be just offering simple oversight, but at others the board might have more of a hands-on role in management.
And depending on how big and complex the institutions are, boards need directors with expertise ranging from legal to accounting to experience in mergers and acquisition.
Andres said credit unions often have their memberships vote on the aggregate amount they are willing to pay directors, and the directors decide how to allocate the money.
She added that it is becoming more common to set remuneration that starts with a base retainer, and then adds per-diem meeting fees to reflect the preparation work for making decisions at meetings.
Andres, a former credit-union CEO herself with 30-years experience, said most credit unions do compare themselves to their peers, though “there isn’t an expectation that you line up to the credit union next door and do exactly the same.”
“But you should be able to understand and explain why (your compensation scheme) might be different.”
At Coast Capital, Embley thought the pay formula was becoming too rich and directors too self-interested in racking up per-meeting fees. He petitioned to put a competing resolution in the 2014 election setting the board chairman’s pay starting this year at $68,884, remuneration for committee chairpersons at $48,261 and directors and the vice-chair at $40,114, to rise with B.C.’s inflation rate thereafter.
Voting on the Coast Capital ballot closes April 8.
Remuneration matters
A battle is brewing over the compensation paid to the board of directors at Coast Capital Savings Credit Union, which raises the question what is fair pay for a multi-billion organization. Examples of board pay:
Coast Capital Savings Credit Union
• Assets under administration: $14.8 billion (2013)
• Chairman Bill Wellburn’s remuneration: $157,080 (2012)
• Total board remuneration: $720,529 (2012)
Vancity
• Assets under administration: $17.5 billion (2013)
• Chairwoman Virginia Weiler’s remuneration: $62,239 (2012)
• Total board remuneration: $394,438 (2012)
First West Credit Union (formed in merger of Envision Financial, Valley First, Enderby & District Financial)
• Assets under administration: $6.1 billion (2013)
•Chairman Shawn Neuman’s remuneration: $79,404 (2013)
• Total board remuneration: $462,789 (2013)
Blue Shore Financial (formerly North Shore Credit Union)
• Assets under administration: $3 billion (2013)
• Chairman Dave Davenport’s remuneration: $46,718 (2013)
• Total board remuneration: $290,222 (2013)
