There are many differences between banks and credit unions. The Credit Union “Movement”, as we credit union development educators prefer, vs. “Industry” is a philosophical distinction. The term “members” is interchangeable with “customers “or “client”; however, the use of customer can evoke a strong response from purists.Organized as not-for-profits, America’s credit unions are 501(c) 14 organizations and with rare exceptions their elected directors are volunteers and unpaid.Banking is the world’s oldest profession. We know money lenders existed in the time that Christ was on Earth and that credit union’s came to be in response to banks and the high cost of obtaining credit at reasonable rates for prudent purposes. Bank directors are paid to serve and compensated for the number of meetings attended.Bank directors are pre-qualified and bring key business acumen, as well as serving as rainmakers to attract new business. Paying a director raises the level of competence and contribution to the organization. The Board can select who they want to serve and there is an expectation that the director will make an investment in the bank, receive dividends based on the success of the bank, plus receive compensation as a director.In stark contrast, most volunteer directors do not use their institution as their primary financial institution and have no “skin in the game.”The link below provides some examples of the largess that giant banks bestow on their directors. Like most news reports, the examples were likely selected for shock value. The community bank in your town pays their directors; however, annual compensation is likely less than $20,000 and perquisites like mileage, AD&D insurance, etc. http://dealbook.nytimes.com/2013/03/31/pay-for-boards-at-banks-soars-amid-cutbacks/?smid=tw-shareAre bank director’s more qualified and professional? Do they make a superior contribution to the strategic direction of the bank than say a credit union director? I cannot say for certain. I know that in the 29 years I served as a credit union CEO, I observed fine people who exemplified the prudent person doctrine and gave willingly in some cases for 40 years without pay to help their fellow employees and member-owners. It is a trait that is disappearing. Today, there is increased regulation and interference by overzealous regulators, plus civil liabilities and fines, which cause people not to accept volunteer roles in a financial institution.While directors and officers liability insurance, AD&D coverage, mileage, a meal each meeting and a trip or two each year for professional development is provided, that isn’t adequate to attract and retain the talent that today’s sophisticated credit unions need in a director. Nor will it attract the strong business person who will take a stand when an NCUA or State examiner crosses the line.Paying directors makes sense and so does term limits for volunteers. The credit union industry and its members deserve and need better representation. NCUA and State regulators often run rough shod over smaller credit unions because those institutions have long-serving unpaid volunteers and frequently a CEO that has a long tenure and stopped developing themself and board. Paying directors in credit unions is a business decision. It will require regulatory revision and be opposed by more than a few.The industry must increase its knowledge and professionalism in its directors. Simply accepting a person that serves for decades does not add value. CEOs may like that because they can manipulate long time directors and the care and feeding of those directors is job security. The regulators accept that they can intimidate volunteers and have taken virtually no position on ineffective unpaid boards.I believe a well-informed director is management’s best supporter and the institutions best possibility for success. They reward performance because they understand that and they will stand up to the regulators if that is needed. Establishing a reasonable compensation program for credit union directors will facilitate the recruitment of different individuals and open the choices of candidates to persons that would not consider the position otherwise. Those candidates accept there is a fiduciary responsibility as a director in a financial institution and they expect that there will be reasonable compensation for taking that risk. Wouldn’t you?Nothing changes if nothing changes. Paying credit union directors and expecting more from them is the right action whose time has arrived.