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CUNA Drop indemnification golden parachute proposals
WASHINGTON (9/9/10)--The Credit Union National Association (CUNA) has urged the National Credit Union Administration (NCUA) not to proceed with proposed changes that would limit or generally prohibit golden parachute and indemnification payments to officials of federally insured credit unions, including natural person and corporate credit unions. CUNA's comments were developed with CUNA's Federal Credit Union Subcommittee, which is chaired by Truliant FCU President/CEO Marc Schaefer. CUNA’s comments are in response to a recent NCUA proposal that would generally not allow federally insured credit unions, regardless of their financial condition, to make payments to an institution-affiliated party (IAP) to compensate them for any legal costs they have incurred in connection with administrative or legal proceedings by NCUA or a state regulator if the IAP was assessed a money penalty, removed from office, or the subject of a cease and desist order. The prohibition would not apply to qualified pension plans, "bona fide" deferred compensation, and some other types of employee benefits and severance agreements, and would not apply to current employment contracts, only to those that are agreed to or renewed after the rules take effect. While CUNA supported efforts to contain costs to the National Credit Union Share Insurance Fund, the agency's rationale for issuing the proposal, CUNA's Deputy General Counsel Mary Dunn said CUNA is “generally concerned that the scope of the proposal is too far-reaching and will have a chilling affect on the ability of credit unions to attract management personnel and board members.” The NCUA’s proposals also give the NCUA a “greater role for the agency in the regulation of corporate governance issues than it currently assumes.” Dunn raised concerns that the supplementary information accompanying the proposal provides little justification for it and reiterated general credit union concerns that the NCUA has “crafted a proposal for all federally insured credit unions that is based on its concerns regarding problems experienced by a limited number of corporate credit unions.” She also questioned the need for the short, thirty day comment period for the proposal. CUNA also raised concerns about NCUA’s proposed prohibition of so-called "golden parachute" compensation packages to the departing executives of troubled federally insured credit unions. The so-called “golden parachute” payments addressed by the proposal should also “be permissible to former officials of credit unions in conservatorship, CAMEL 4 or 5 credit unions or those in troubled condition situations in which the official receiving the payment was not involved in causing the loss,” CUNA added. "CUNA cannot support proposals that do not provide proper safeguards for credit union officials who strive to fulfill their duties and serve their credit unions well," Dunn stated. The letter urges NCUA, if it believes the rule is in the best interest of credit unions, to make important changes and allow credit unions to comment again before the rule is adopted. For the full comment letter, use the resource link.


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