High Stakes Ahead for Secret Salaries

By Perez, Rob | Honolulu Star - Advertiser, April 16, 2012 | Go to article overview

High Stakes Ahead for Secret Salaries


Perez, Rob, Honolulu Star - Advertiser


Unlike hundreds of nonprofits here and nearly 3,000 credit unions in other states, Hawaii credit unions are not required to publicly disclose how much their top executives are paid because of a gap in federal law.

Even though the 42 nonprofit, federally chartered institutions here are publicly subsidized, they are able to keep Hawaii taxpayers - and thousands of the credit unions' local owners - in the dark about compensation information for their senior executives.

The secretive nature of management pay is raising questions at a time when the industry is lobbying to preserve one of its key public subsidies: an exemption from Oahu property taxes.

The 10 largest credit unions in Hawaii declined or did not respond to a Star-Advertiser request to voluntarily disclose compensation data for their five highest-paid executives - the same type of information that many other nonprofits here, such as charities, schools and hospitals, and roughly 2,800 state-chartered credit unions on the mainland, are required to disclose.

The federal credit unions are not subject to the same disclosure requirement. But transparency advocates say even those credit unions should make public the salary and benefits for senior managers because the organizations are publicly subsidized.

If Oahu's larger credit unions are unwilling to share compensation data, they could lose all or a portion of their property tax exemption, according to Ann Koba­ya­shi, budget chairwoman of the City Council, which next month will consider whether to overhaul the city's exemption system. One recommendation the Council will debate is a repeal of the credit union exemption.

Kobayashi said she intends to ask for compensation data.

"If they don't (disclose), there might be consequences," she added.

In addition to the salary data, the newspaper requested information on whether the top managers would receive financial payouts if they remained at the credit unions for a certain length of time or until they reached a certain age, an incentive that is designed to keep key executives from leaving. The deferred-compensation practice, called "golden handcuffs," is believed to be common among Hawaii's larger credit unions.

A 2010 whistle-blower lawsuit filed by a former Hawaii Community Federal Credit Union finance vice president provided an unusual glimpse into that secretive world.

Renee Inaba alleged that three top executives at the Hawaii island institution were paid $1 million, $750,000 and $650,000, respectively, once they reached a certain age. The payments were not based on merit, were large financial liabilities for the credit union and were not disclosed to members, according to her lawsuit, which is pending.

In court documents the credit union acknowledged that the board in 2001 approved deferred-compensation retirement plans for the three executives - it didn't disclose details - but denied Inaba's other allegations.

None of the 10 institutions the Star-Advertiser surveyed provided data on golden handcuffs or salaries.

Several institutions said such information is private or privileged, while saying that their executive compensation packages were in line with industry averages or with what other Hawaii credit unions of comparable size pay their top managers.

"We do not normally disclose compensation information as it may conflict with individual privacy concerns," Aloha Pacific Federal Credit Union spokes­man Kristopher Kono wrote in an email to the Star-Advertiser. "However, we can say our executive compensation is well below that of publicly traded institutions of similar size, and it does not exceed the industry averages," Kono added.

The confidentiality policies mean that the vast majority of Hawaii's 800,000-plus credit union members, who collectively own their respective institutions, are not privy to what they pay these top executives. The organizations' volunteer directors, who also are members and usually number no more than the nine on a board, have access to salary information because they oversee governance of the credit unions on behalf of their fellow members. …

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