Directors say “We welcome the conversation”, but does that conversation include members?

Coast Capital Facebook Page refuses to create thread to discuss our Special Resolution with members. “We welcome the conversation.” says Bill Wellburn (Board Chair) and Glenn Wong (Governance Committee Director) on page 5 of the Special Resolution booklet, but do they want members to be part of that “Conversation”? It does not appear so. If they do, then why not create a Facebook thread so members can discuss this important topic out in the open?

Ensure members have a voice in the conversation by going to the Coast Capital Facebook page, and then view the “Join the Coast Capital Savings Youth Team” thread and hit “Like” under David Lee’s last post, and please “Like” ours too. Let’s remind Coast Capital that we are all members of the same team, and each member deserves to be heard on this conversation regarding excessive director pay. Members have the right to be informed when voting on our Special Resolution.

Note that because Coast Capital refuses to create a post where members can discuss the Special Resolution on Director Pay, members like you have had to use the Youth Team post in order to try and be heard. It makes a good read. Check it out below.

Check out the Coast Capital Facebook thread here and join the conversation

Coast Capital Special Resolution Booklet is misleading to Members

The data presented on Director Compensation on page 7 of the Coast Capital Savings 2013 Special Resolution booklet contains a graph on Board Compensation which, while accurate, might be quite misleading to some members. The graph presented in the booklet might lead members to think that the Board of Directors is paid a very low and very reasonable salary, however this is not true and they are actually the highest paid board of all Credit Unions in Canada.

Have a look at what is presented on page 7 of the booklet. Does this tell you that our Board of Directors is the highest paid Board of all Credit Unions in Canada? By presenting Total Compensation divided by the number of Members, their graph makes an Apples-and-Oranges comparison. That’s not right. It is certainly misleading to us. Have a look.
Board Compensation - Cost per Member

We took this data and presented it below in a way that is far clearer in our opinion. As you can see from our presentation of the data, the Coast Capital directors are, based on their own data, the highest paid Board of Directors of all credit unions in Canada.
Board Pay vs CU Size wrt MembersWe took Coast Capital’s data and plotted Total Board Compensation instead of Compensation-Per-Member as presented in the booklet. This is an apples-to-apples comparison. Decide for yourself which presentation provides the clearest message about Director Compensation for you. Does this make the situation on Director Pay clearer? We think so. What do you think?

Higher Director Pay – Does it improve Coast Capital’s Bottom Line?

Directors at Coast Capital DO NOT RECOMMEND our Special Resolution on Director Pay! They want to keep voting themselves their own pay raises without consulting members. This process has resulted in 500% pay increases since 2007. They claim that their pay is required in order to attract and retain high quality Directors. Higher Quality Directors should result in higher profits. Has Return-on-Investment increased at Coast Capital Savings since Directors started setting their own pay?

Keep reading…

In the Special Resolution booklet sent to members, Directors advise voting “against” our Special Resolution.  Why? Here is what they say on page 5:
The Board does not endorse the member’s special resolution. Your vote “Against” the resolution will:
• Maintain the existing member-approved compensation framework;
• Ensure a Board of dedicated and highly competent directors; and
• Allow us to continue to attract and retain directors with the required business experience and skills.

While the first bullet statement above is clearly true, is that a good thing?
We do not think so.

More importantly, we wondered about those last two bullets. Are they true?
We wondered if all this excessive director pay actually ensures that the Board contains a set of highly competent directors who we would want to retain.

How can one tell if directors are worth all this extra money and retention?
If generous director pay is actually attracting good directors, then it should be possible to see their skill reflected in the bottom-line. Over the years, we should see a steady increase in profits as reflected in the return on investment.

Net Income as a Percentage of Average Equity is a reference to the Return on Investment shareholders are receiving. It is the common benchmark for measuring financial performance. It is a good measure of our Director’s performance too.

Just for fun, we thought we would plot Director Pay versus the reported Coast Capital Return-on-Investment between years 2006 and 2011. Have a look at this chart and decide for yourself if allowing Directors to set their own pay has resulted in better Return-on-Investment for Coast Capital. Then please vote FOR our Special Resolution to restore member control over director pay.
Board Pay vs ROI 2006-2011

Let’s be clear. We are not saying that the current set of directors are not highly competent. Members can decide that for themselves. However, the data suggests that the current compensation framework may not be working. We beleive that it is healthy for members to have control of director compensation. Please vote FOR our Special Resolution.

Coast Capital Director’s Spin on our Special Resolution Booklet Explained

This is a continuation of our response to the information in the “Board of Directors Update & Special Resolution” booklet, Page 6

Coast Capital Savings now rewords their position on Director Compensation: “Framework” Approved – Not Compensation

Page 6 reads “Our director compensation framework is already member approved with built in checks and balances.”
Coast Capital used to state that “Directors Compensation is already member approved” until we called them on it. They have now changed their statement to “our director compensation framework is already member approved”.

That is a BIG difference.   

Members lost their right to approve Director Compensation back in 2007. We think that’s wrong. We want Member’s ability to approve Director Compensation restored. That is what our Special Resolution is asking for. Vote YES is you agree.

We have always maintained the 2007 vote approved the PROCESS (FRAMEWORK) to facilitate comparison of Direction Compensation, not the amount of the compensation.   Now they apparently agree. 

What is their position?  Is their compensation already approved by members?
 Page 6 says that Director pay determination is “Conducted by an independent compensation consultant”. Remuneration is decided by the Directors.  However they do make use of an “independent compensation consultant”.

Compensation consultants can operate under a huge conflict of interest. Consultants report to the client who hired them. If consultants want to be engaged by the client the next time, then they are wise to look after the people that hire them.  In the case of Coast Capital, that client is the Board of Directors.

Conflict of Interest is a problem in the compensation consulting business but reducing the conflict is simple – have the consultant engaged by, and report to, the people that own the business – the members themselves (yes, that’s us) and not the Directors.

Another problem is compensation consultants are bound by the instructions issued by the client.
If the client instructs the independent consultant to “compare us to the Boards of other BC credit unions” then only Boards from that group will be referenced for the report. However. if the same client says “compare us to the Boards of mid-sized public companies across Canada”, only Boards of companies meeting those criteria will be referenced.

Under the two scenarios, the recommendations of the consultant will be entirely different.  Obviously, the public company sector is different and pays more for good reasons. Coast Capital is not a public company, nor does it operate across Canada, so why include those criteria in the Remuneration Philosophy?

What instructions does the board give the compensation consultants?
The exact wording from page 6 of the Special Resolution booklet reads “established a Director Remuneration Philosophy that placed director compensation at the top end of cooperatives but no higher than the lowest quartile of public companies of similar size and complexity”.

But what does this mean?
The Directors are instructing the consultants to recommend pay that is above the top quartile of other Canadian Credit Unions. That means that they are asking to be paid more than other directors in other Canadian credit unions regardless of size. Wouldn’t you like to get paid more than anyone else in your industry? Sounds like a sweet deal for Directors. Yes, the booklet does point out that the consultants are also requested to recommend a pay level that is also within the bottom quartile of similar sized companies on the TSX. But is this reasonable? No, the pay of Directors in publicly traded companies is not relevant to the pay of director within a credit union or co-op. That’s an Apples and Oranges comparison. Can you ask your boss to pay you more than anyone else in your industry? No. Does it make you boss feel any better to tell him that you won’t be paid as much as execs in some unrelated but very highly paid industry? Still no. But those are the instructions given to the Compensation Consultants. That’s not right.

How does this compare to VanCity?
Vancity engages an independent compensation consultant that reports to a Compensation Committee with member participation.  Their consultant is likely asked to reference the proper peer group – other BC credit unions.  That is why there is a difference of over $100,000 a year between the pay of Vancity’s Chairman and our Chairman.

From Page 6 “The boards of directors of at least half of the 10 largest credit unions in Canada establish director remuneration”.
We don’t know who was first in BC, was it Coast Capital?  Not that it matters, it is a mistake to let anyone or group approve their own remuneration.
Mr. Wellburn, Chairman of the Board, was a chartered accountant before he became a professional director.
Do you think he advised his accounting clients to let employees, consultants or directors set their own pay?
Do you think any of our Board members would make that recommendation to their clients?

From Page 6 “Every year on our web site we post………number of meeting directors attended…..”
This is not correct.  In dictionaries, “attended” is defined as “being present”.  Most likely that is the meaning Coast Capital members associate with “attended”.
Coast Capital permits Directors to “phone in to where a meeting is held” and then the Director is in Attendance.   Directors get $1020.00 for attending each meeting.

We have asked for the web site information to be corrected so we can determine the frequency of Directors phoning in to meetings and being paid.
Members can phone the member service center and ask for the correct information to be forwarded.

The Board has made it very difficult to find out how much each Director is paid.  The information is six clicks into the tabs on the web site (if you know where to go) and historical information removed so the curious see only the last year.  ($178,173 collected by Mr. Wellburn in 2009).

We are pleased the Board has agreed with us that detailed information concerning the amount paid to each Director should be published in the annual report.
In the next post we will look into this statement on Page 6: “Directors earn fair compensation for the challenging work they do on behalf of members”.

FINANCIAL PERFORMANCE FALLS WHILE DIRECTOR PAY SKY ROCKETS AT COAST CAPITAL SAVINGS

Return on Investment decreases by 37.5% for shareholders – Directors increase pay 

RE:  References to the quality of Directors and that we are able to attract them due to the Directors Remuneration Philosophy.  Let’s have a look at how that has worked out since beginning in fiscal 2007.

Net Income as a Percentage of Average Equity is a reference to the Return on Investment shareholders are receiving.  It is the common benchmark for measuring financial performance.

Coast Capital’s return for both 2005 and 2006 was 16%.

Return steadily declined to 10% in 2011.  A 37.5% drop for members.

The economy was not the best during those years but while members’ returns were shrinking and employees were asked to tighten their belts, the Board took huge pay increases. 

 “One of our greatest strengths is the cooperative structure of Coast Capital Savings.  It provides a special balance amongst the interests of our members, our employees and the communities we serve.”

Message from the Board of Directors – 2006 Annual Report – Coast Capital Savings Credit Union Chairman – Bill Wellburn

Do you see a special balance when the Board takes huge increases and members, employees and the communities we serve take less? 

Director Remuneration should be under the control of our members.

Vote FOR the Special Resolution.

Director’s Update & Special Resolution Booklet – More from the Spin Masters

The truth about   Page 5 – “We welcome the conversation.”

The Board of Directors did everything possible to prevent your opportunity to vote, all of which is documented in emails.  The Board “welcomed the conversation” in this manner:

 (a) Refused three separate requests to allow access to Credit Union property to ask members to sign a petition asking for a vote (how else could we identify Coast Capital members?);

(b) When we made the third written request we explained that if they did not allow us on credit union property we would be forced to launch a public campaign (newspaper ads, web site, etc) to get members attention and that would not be in the best interests of Coast Capital, the Board of Directors, Members, Employees or us.  We wanted to do this quietly; all we wanted was a vote.  They responded with a letter accusing us of threatening the Board and the Credit Union.  (They never dreamed we would get 300+ signatures – it is a first in the 60 year history of Coast Capital and perhaps BC.);

(c) The Board says they think member input on director compensation is invaluable.  They had to be forced into a membership vote to review a 6 year old decision made by less than 3% of the membership.  Does that indicate they value member input?

(d) The Board is not “allowing” this vote.  They are required to hold the vote under the laws of the Province of BC because we were able to collect more than the required 300 signatures. There is absolutely nothing voluntary about having this vote, it has been forced upon the Board.  They claim they welcome the opportunity to hear your voice.  Is that  believable?

 “We hear you already” Page 5

The source of all that is wrong with this process (besides greed) lies in the Remuneration Philosophy which was presented to members in 2007 with no opportunity for debate.  Unless they had a strong background in compensation issues, those that voted in 2007 would not be able to foresee the consequences or the pitfalls of allowing a group to set their own pay.  The three paragraphs, 200+ words, in the Remuneration Philosophy were a sales pitch, not an explanation.   You can read it on the CC web site under Governance. 

The Directors are aware of our concerns regarding the wording of the Remuneration Philosophy but they tell us it is business as usual by stating  a review of Directors compensation under the Remuneration Philosophy is  “underway right now”. 

The Board of Directors might “hear” us but they are not “listening” – there is a huge difference.

When the Directors proposed the resolution allowing them to set their own pay, the ONLY reason they offered was so that Coast Capital could attract better candidates to stand for election to the Board.  That excuse rings pretty hollow when 22 of 26 members that expressed an interest this year decided not to run leaving only the four incumbents.  The higher compensation is not the answer as far as attracting candidates so it turns out the only beneficiaries are the Board of Directors.

Directors at Coast Capital DO NOT RECOMMEND our Special Resolution on Director Pay!

The Board of Directors does not recommend voting YES to our Special Resolution to restore control of Director Pay to the members. Directors want to keep voting themselves their own pay raises without consulting members. This process has resulted in a 500% pay increases since 2007 for some directors. No wonder they oppose our special resolution. Vote YES today to restore member control of Director pay.

Directors believe that they should get paid more than all the top quartile Credit Unions in Canada (these are the instructions Directors give the “independent” remuneration consultants). This is what the board recommended back in 2007. That is not right.

Click on the link below to help fix this now, or mail in your ballot when you receive it in the mail, or pick up a ballot at any Coast Capital Savings branch today.
Click here to go to the Coast Capital Savings website and see Director recommendations on our Special Resolution.

“ATTENDANCE” REDEFINED BY COAST CAPITAL SAVINGS IN ANNUAL REPORT TO MEMBERS

Directors get paid $1020 for every meeting that they “Attend”.
Do you get paid for attending meetings at work? Coast Capital Directors do.

At Coast Capital Savings, Directors get paid for meeting “attendance” even if they are not physically present and just phone into the meeting. In 2011, Bill Wellburn attending 52 meetings at $1020 each for a total of $53040 in addition to his base salary and other remuneration for a total of $164140 in 2011. In a recent Victoria Times-Colonist article, Coast Capital Director Glenn Wong defended Board Chairman Bill Wellburn’s high pay by pointing out that Mr. Wellburn now attends over 80 meetings per year. What Mr. Wong did not mention is that this means that Bill Wellburn was paid over $81600 for attending those meetings in addition to his base salary and other remuneration.

Dictionary definition of Attendance means “being present

Phil Embley does not believe that members would approve of paying directors $1020 for simply “phoning in” to a meeting. He wanted to know how many meetings Director’s attended physically versus phoning into the meeting. Coast Capital is required to disclose what Director’s get paid. As part of this disclosure, Phil asked that they provide a breakdown of how many meetings Director’s attended in person versus the number “phoned-in”. His email to Coast Capital Savings is presented below. He is still waiting for an answer.

March 19- Email sent to Lisa Skakun, General Counsel:
Subject: DIRECTOR ATTENDANCE

On several occasions we have asked for the attendance records of Directors and the information has not been provided.  The refusal seems to be based on the premise that “attendance” can be redefined to include “phoning in” to the location where the meeting is held.   “Phoning in” is not a recognized meaning of attendance.  Attendance in any dictionary is described as “being present” and that is what members have always assumed was reported.
The information regarding Director Attendance presented to members over several years is likely incorrect.  We want to see the real “attendance” for all meetings.  We are not inquiring about the purpose of the meetings or where they were held.  We simply want to know how many meetings were held and who was truly present.  We would like to see a restatement of the years 2006 to 2012 inclusive.

Please let me know if you require further information.
Phil Embley

Press coverage in CUNewsWire

Coast Capital Savings Board of Directors obtained approval to set their own remuneration beginning in 2007. Since then, the board has voted themselves a total pay raise of over 500% in some cases. That is not right and you can help fix it.

See this article about us in Credit Union NewsWire and take their Poll about Director Compensation. We are gathering momentum just in time for the vote on our Special Resolution. http://www.cunewswire.com/board/

Please contact us via email at CompensationWatch@gmail.com if you would like to help spread the word.

Coast Capital Votes on Director Pay – More Members Need to Join the Protest

A recent VancouverObserver.com Article on Co-Op Governance references our Coast Capital Campaign.

This excellent article by Mark Latham of Votermedia.org captioned “We Want Our Co-ops Back” is proof of a growing swell of discontent within BC cooperative communities. As explained in the article, governance, specifically the erosion of member democracy, is a general issue.

Having to spend thousands of dollars and fight with the Coast Capital Board to simply have another vote on this matter is one indication that something is wrong. The article will definitely help our cause. Give it a read and pass it on.

Ballots are scheduled to be mailed out Thursday, March 21st and voting begins the next day. Members, be sure to vote. The voting options will be explained in the election package.

We have not seen the statement the Board is sending to members or how they are managing the voting process and appearance of the electronic web page. We hope it is fair.

Our statement also accompanies the ballot which will help publicize the issue. Remember, the vast majority of the 500,000+ members are not aware of our campaign.

We need to get word out to members so talk it up with friends & family that are Coast Capital members.For those that have the time and inclination, if you are interested in passing out pamphlets or parking a vehicle with a sign near to a branch, please let us know via email to CompensationWatch@gmail.com