Does the voluntary merger rule make credit unions look bad?

Credit union industry stakeholders are still combing through the National Credit Union Administration’s proposed rule aimed at increasing transparency in the voluntary merger process. Most notably, the agency wants to shine a light on the financial incentives that are sometimes put in place for executives and directors at the CU that is being acquired, and to make it easier for members to communicate with each other about the deal prior to voting on it.

The regulator didn’t take this on as a lark. In an analysis of recent mergers, NCUA staff estimated that more than 75% of those mergers included some sort of payment for the board and/or management of the acquisition target. And disclosure of these arrangements was lacking in many cases, they said.

CU Journal talked to a number of interested parties, many of whom said that the way the rule has been framed has created a negative impression that could wind up besmirching the much-touted white hat the movement likes to wear.

As some of the sources we interviewed note, there are some perfectly legitimate reasons for these payments.

As to the provision related to member-to-member communication, members are already able to talk to each other at the special meeting before the vote.

But if CUs want to keep wearing that white hat, they may need to be ready to be held to a higher standard.

“I start with the idea credit unions should be the leaders in corporate democracy, because we make a big deal out of it,” said Eric Richard, a long-time CU advocate during his tenure as general counsel at Credit Union National Association and now a partner in the CU Counsel, LLC. “But at this point publicly traded corporations are more transparent.”