Conflict of Interest

The Board and Executives Have a Lot to Gain—Member-Owners Have a Lot to Lose.



A credit unions' directors and executives serve as stewards of their member-owners' institution. However, they typically make hundreds of thousands or millions of dollars by converting their members' credit union to a bank. This financial gain for insiders generally comes at the expense of members. In addition to rates and fees getting worse, conversion usually means the loss of valuable ownership.

Conversion Shifts Ownership
from Members to Insiders
As Credit Union
Members own 100%**
As Stock Bank
Members own 1-5%*
Credit Union Members Pie Chart Stock Bank Pie Chart Pie Chart Legend
While insiders make $, members are
not compensated for their loss of ownership.
*Estimates based on analysis of available data from 9 recent conversions.
**Directors and executives are also members, and own a share equal to other members’.


Example: "A Few Insiders Share the Wealth from CU Conversions", Credit Union Journal, 12/22/06.


How much do insiders make?

The board of directors acquired an average of $742,000 dollars each in stock and awards by converting and began paying themselves annually and per-meeting, according to a study of insider gain at five converted credit unions conducted by the Credit Union National Association.

The CEOs at these former credit unions acquired or were given an average of $1.9 million dollars in stock gifts and options, are now paid more than 150% the salary of CEOs of similarly sized credit unions. Both groups are able to profit on the stock they purchased in a closed initial public stock offering. Directors and executives should not profit by recommending a conversion that costs members their ownership and good rates.



Insider Gain May Come at The Members' Expense

Insider gain at the member-owners' expense violates the trust between the member-owners and their elected and appointed leaders.
Directors and Executives Gain Member-Owners Lose
  • Insiders are able to give themselves 14% of the stock a credit union issues as options and grants. This is a direct transfer of valuable ownership from the member-owners to insiders. In a credit union that issues $10 million in stock, it is $1.4 million.
  • Salary increase, bonuses, and other perks for executives.
  • Annual and per meeting pay for directors, who had served as unpaid volunteers under credit union rules.
  • Profits on stock bought at IPO. This stock represents ownership that had belonged to the members
  • More centralized insider control under mutual or stock bank rules.
  • Members may lose valuable ownership of the credit union without compensation. They may buy it back as stock in the new bank, but typically 95-98% do not, and so receive nothing in return.
  • More expensive loans.
  • Lower paying savings.
  • Higher fees
  • Lose democratic one-member-one-vote governance
  • If stock is sold, legal mission changes from benefiting members to making profits off of customers.
For more information about how credit union to bank conversion works, take a look at the FAQ: Understand Credit Union Conversions, and Resources page.

To learn about how conversion often negatively affects rates, go to Conversion and Rates.