It’s unfortunate that the Board and management of Coast Capital Savings have not been up-front about their conflicts of interest with regard to changing to a federal credit union. A conflict of interest arises when a person performs in multiple roles with divergent goals at the same time.
To start, the Board and management teamed up in a manner that seems much too cozy. Then they enlisted the help of employees to persuade the membership (i.e., the owners) that the move was a good idea. This all confuses the issue of who works for whom.
The Board and senior management have much to gain in becoming a federal credit union. Compensation is part of it, and the magnitude is already apparent. The Board Chair’s compensation increased 437% from 2006 to 2009, directly in response to their ambition to go national. The Board’s average compensation increased 283% during the same period. That’s just the beginning. As these executives become “peers” to the executives at the big banks, their compensation levels will rise accordingly, pursuant to the compensation philosophy that was put in place in 2007.
Career prospects expand for anyone who is looking to be near the top of a national financial institution. Furthermore, the Bank Act requires that the CEO be chosen from the Board of Directors, opening up a new career path and fundamentally changing the nature of the co-operative’s Board of Directors. This was not disclosed to the member-owners.
Nor was it disclosed that the executives at Coast Capital Savings were involved in lobbying for the 2012 changes to the federal Bank Act that permitted the move to the federal jurisdiction. The Bank Act is a barrel of snakes that yields undisclosed advantages to the Board and management at the expense of the member-owners.
Ross Gentleman, writing in a post on his blog Credit Union Futures, points out that credit unions are in a position to lobby for changes to B.C. credit union legislation. This gives the Board and management of Coast Capital Savings yet another opportunity to advocate from a position of conflict-of-interest.
References: See The Case Against Coast Capital Savings Becoming a Federal Credit Union.
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