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Thursday, June 2, 2005

A penny saved is $1.6 million paid to a rich guy

A few weeks back, Willamette Week named Portland Teachers Credt Union its Rogue of the Week for the credit union's conduct in dealing with two of its members. The members had reportedly been complaining about a number of features of credit union policy, including, according to WW, "increasing credit rates and the $1.6 million salary of CEO Cliff Dias."

As a PTCU member, I get form letters over Cliff's signature all the time. Your money's safe with us, great rates on car loans, certificates of deposit, we're your credit union, we're there to help the little guy, etc. For a while, the letters told of the upcoming merger of PTCU with another credit union, out of Eugene, which would have meant a name change but which Dias promised would lead to wonderful, wonderful improvements. After several of these missives, one day a letter came along telling us that merger had suddenly been dropped like a hot potato. We were never told why.

Little did I suspect, until the WW story, that Dias was another one of the many members of the Grossly Overpaid Executive class here in town. Many a time have I stood in interminable lines at the sparsely located PTCU branches, wondering why the organization couldn't provide better service. Oh well, I told myself, it's a frugal organization, keeping expenses low, not wasting money, passing the benefits on to members. "Wait patiently," I told myself. "It's all for the common good."

If Dias is really making $1.6 million a year, obviously I was quite wrong.

Comments (33)

Jack, et al, I wish I could tell you more but all I can tell you is this:

That estimation may be a little short. Also, take into account other sources of income; spouse, stocks, annuities, etc. and you'll come up with a much larger overall number.

As for the salary amount, this figure is still shy.

Does it make you sick? It should? CNN is reporting that there may be a 42% hike in job cuts, Bush is still president, Jeb is thinking of taking a turn and sending this country into Hell and this small little credit union, with far-away branches and little glitz is spending a considerable amount of wages on one man.

Ain't life grand?

And the countdown for the termination of the Bogdanski PTCU checking account begins....

Look on the bright side, at least he is not applying for a job at PDC.

BTW - My wife is a member of 1stTech CU, in the annual report, don't they list salaries/stock of officers?

Give him a break; I'm sure he has an expensive desk that needs to be paid for!

Executives make a lot of money because the leadership they entail can grow their shareholders (you know, the whole reason companies exist,) far more capital. They make a lot of money because average Joe Shmoe doesn't have experience balancing books and leading companies with thousands of employees and staying in the black quarter to quarter. Average Joe doesn't have 10-20 years experience running companies, and average Joe getting paid 6 figure instead of 7 isn't going to run the company as well.

If companies didn't pay millions to their CEO's, other Credit Union's would get the skilled CEO's and they might lose out on some great management.

In fact you might be getting a great rate at a CU directly as a result of that high salary on that CEO.

Now I'm not saying this guy is great or not at his job, (he's been there a while so probably is better than not,) but the salary of CEOs quite rationally follows basic Econ 101 and capitalism plotlines. If the Directors of the company find fault in the salary levels they have full power to vote the salary down. They obviously agree that paying him that much is in THEIR best interest.

As for the employees and the customers of the CU, if they are unhappy they can leave. I did just that with First Interstate (Wells Fargo) and then I did it again with USBANK. I did it because when their current parent companies bought out the banks I joined I noticed severe service degradation. It's quite easy to whine, (which bloggers are increasingly becoming expert on without any real solutions or justifications) it's a little more effectual to just leave as a customer.

The dudes salary is justified. End of story.

Thanks for that thoughtful, open-minded comment. You're right, someone running a credit union ought to be making $1.6 million. I retract my criticism.

I thought companies existed for their customers and the community as well as shareholders. How naive I am. I guess that is our only choice, though. Voting with the feet. That seems to be what all the Oregon institutions say: Love it or leave it. And loving it doesn't mean helping it grow and change. It means, shut up.

First, let me clarify: the concern was not that Cliff Dias is making so much money, but that he is making so much money and the services are getting worse, not better. Perhaps that is the price of becoming a larger credit union, but I suspect it doesn't have to be that way.

Second, with PTCU there is something more going on. They could have received the comment cards and spewed some pr bs justifying Mr. Dias' high salary. That is exactly what I would expect. Instead they refused--and continue to refuse--to justify his salary,which makes one think that maybe there is no justification for it being so high.

Third, when asked to see the bylaws, they refused (twice), which it turns out is a breach of contract and, well, illegal, since the bylaws expressly state that the charter and the bylaws should be made available to any member to inspect.

Finally, they hired a lawyer to send a letter threatening legal action for defamation of PTCU. Of course, they would have no leg to stand on, but it's still pretty creepy. Why such a strong response? Why hide the bylaws? Cleary, transparency is not a goal for them and member-relations means nothing at all.

The problem with indy's comments is that a credit union is a member owned institution and has no shareholders. Its only duties are to its members. Because it has no shareholders to return company profits, a CU should be able to offer more competative rates. A $1.6 million CEO salary and the cancellation of its members for exercising their rights as members would prima facia be a violation of the duties the CEO and Board owed to its members.

It would not at all be my expectation for a member-owned institution to operate this way.

As an aside, CEO salaries do not operate like Econ101. They are held artificially higher than the equalibrium amount for a variety of reasons. One reason it that sometimes CEO salaries are approved by a hand-picked group of the CEO's friends called the Board of Directors, who then themselves get large salaries if they approve the salary of the CEO. This would be crony capitalism at its finest.

The PTCU directors are all volunteers, according to the company website.

I have no problem with paying good CEOs well but when it comes to the so-called "non profit" organizations it is getting a little ridiculous - witness Goodwill and now PTCU. I went to the Milwaukie PTCU branch a few months ago to set up an account to buy a fairly large CD but gave up after realizing they weren't going to add a second teller despite the nine or ten folks ahead of me in the only line. So much for a membership focus. Unfortunately, credit unions (and I've been with one for about 20 years now) seem to be going the way of traditional banks and savings and loans in terms of interest rates, service and employee compensation. Enter the internet...

What does the CEO of 1ST-Tech CU make? Or that credit union in Vancouver that the Hewlett-Packard employees can join? I bet their 5 top employees are on par with PTCU.

You can see some interesting comparisons (but not executive compensation, of course) here.

Caveat: Even if it's true that "they all do it," I'm not buying that it's o.k.

LOL! And Andy Weiderhorn is doing a bang-up job from his cozy office in Sheridan, well worth the $2 mil per year...

Yeah $1.6M seems a *little* high, then again, doesn't (or didn't) PTCU have around 1,200 employees?

I find it curious PTCU has twice the amount of loas as 1ST-TECH, but similar assets. And PTCU's loans almost match their assets....I sure hope a lot of folks in PDX don't lose their jobs soon.

Don't worry, Scott. We have Erik Sten and Sam Adams in charge of economic development!

Recently, my credit union changed names from "Oregon Telco" to "Unitus".

Strangely, upon changing names, I found that I (and a number of my friends who also bank with them) were getting dinged with a bunch of charges that one would expect from wells fargo. I also heard that they were cutting employee benefits in order to open a second branch by the I-5 mall.

So indeed, at least one other credit union in this town is going to hell. Are there any "good ones" left?

Dias is also the treasurer of the PTCU. Given my lack of knowledge about corparate structures I would not venture a criticism in this vain. Maybe another individual could shed light at to whether or not this would represent a conflict.

"Thanks for that thoughtful, open-minded comment. You're right, someone running a credit union ought to be making $1.6 million. I retract my criticism."
Somehow I detect an attempt at criticism. Except you don't back up your statement. Can you justify why he shouldn't be making that much money? Are you whining that the PTCU is under this vast CEO conspiracy where the CEO is hoarding, by himself, all the money? Strike up another great checkbox next to Jack's blog under thorough Investigative Journalism!!

"Caveat: Even if it's true that "they all do it," I'm not buying that it's o.k."

Thanks for the insightful comment! You back your statements up as well with one liner rants like a 2 year old! (and a tad trollish on your own blog!) WAH! I don't like it! No reason, just... wah!

"Yeah $1.6M seems a *little* high, then again, doesn't (or didn't) PTCU have around 1,200 employees?"

So the amount of value added annually by this CEO/Treasurer is around $1,333 per employee?

Um, wow.

You know, next time I'm up that way I'll be marching in and asking to see the bylaws. Thanks for the tip, Jack.

"then again, doesn't (or didn't) PTCU have around 1,200 employees?"

When I worked there five years ago there were about 250 total employees or so that worked in the branches and at their headquarters at Montgomery Park. Can't imagine there are too many more than that today (they haven't added any branches or new departments, as far as I know).

PTCU markets itself as being a member-owned nonprofit to attract customers who think that means it's a break-even business, but really, its profit inures to management instead of shareholders.

That's why nonprofits are a total scam - underlings work there for nothing, thinking that they're anti-corporate do-gooders, customers are lulled into thinking they're patronizing some higher cause, and management cleans up.

Maybe $1.6M is an appropriate compensation for a CEO of a similarly-sized private bank. (If not, its risks its nonprofit status, right?) But how do the salaries of the other employees compare? I bet you would find that the average employee salaries, not set by the unpaid board, are significantly less than the salaries of their private bank counterparts.

This disparity should be a focus of employees' and customers' sense of betrayal.

Hey "indy,"

You wrote, "It's quite easy to whine... it's a little more effectual to just leave as a customer."

I think you are forgetting that we didn't just whine, we publicized. Maybe if PTCU is embarrassed enough about their behavior, they'll opt to change. Or maybe if they lose enough members who were already becoming dissatisfied, they'll opt to change. That, to me, is much, much more effectual than quietly sidling away as a customer. Do you think you changed Wells Fargo or US Bank? Remember THEY WANTED US TO LEAVE so that we would no longer have a voice in our credit union.

I don't know that our actions will cause PTCU to change. I think that upper management and the board might be locked a little to tight in their bubble. Still, they have an obligation to their membership and they should not be allowed to forget that.

This is their Vision, by the way:
Our Vision

* Engage and retain mutually beneficial long-term relationships with members, employees, volunteers, business partners and communities.
* Exhibit distinguished leadership in delivering unsurpassed, sustained member value.
* Provide outstanding financial returns to our membership by delivering totally reliable and competitively superior financial services.
* Vest employees with the responsibility and authority to deliver superior member service.
* Encourage members to assume greater responsibility for achieving their financial goals.
* Serve the needs of our membership without regard to technological or geographical limitations.
* Pursue avenues for increased and sustainable growth.

They certainly should not be allowed to bully their members in the guise of "defending" themselves from defamation and business interference. We knew that it was an empty threat, which was confirmed by the fact that they threatened us with defamation when nothing at all had been made public. Yet once Willamette Week picked it up (I also wrote a well thought out letter stating why I thought refusal of the bylaws might be a breach of contract and requesting them for the third time) we got the nicest, loveliest letter from the attorney. He tried to make it sound like they just didn't *realize* we wanted to look at the bylaws and of course we could come to the office any time and have a peek and have our parking validated. NO PROBLEM.

So for those of you who want to know, members *are* entitled to view the charter and bylaws (it says so in the bylaws)--PTCU was in violation of their own bylaws and their contract with me when they twice refused--and members can call a "special meeting" of the membership for a specific reason if they have signatures of 2% of the membership which is around 3,200 members.

According to Goodman Isaac, that level of compensation is quite a lot higher than the CEO compensation for regional banks of similar assets, employees, and branches.

Hmmm. I was a happy customer, now I'm a deeply skeptical customer. What a difference a day makes.

"Indy" writes [in summary] that Dias charges what the market will bear, and that he is employed at that salary. Therefore, "the dude's salary is justified." QED.

Matt Song points out that CEO compensation is artificially high due in part to the fact that boards of directors have no vested interest in keeping executive compensation low, as directors get paid healthy fees themselves. Jack points out that PTCU directors are volunteers.

Let's synthesize two hypotheses: first, financial executives (including bank CEOs and credit union CEOs as a class) are overpaid for the reasons described by Matt Song, so even an unpaid board of directors can end up overpaying their company's CEO because the class of executives is overpaid.

Second, PTCU's "volunteer" board of directors is not made up of average members like Shamus and Scarlett, but is made up of people of the executive class, with an implicit interest in keeing executive compensation high. Anybody want to google all the members of the board of directors?

For more reading on executive compensation, try this google string:

"executive compensation" overpaid CEOs

If he's performing poorly that means he's probably overpaid. Indy's right though. And Mr. Song's post was perhaps a bit overbroad. Though the overwhelming majority of public company boards were on the up and up, Sarbanes-Oxley forced the ratting out those few "approved by a hand-picked group of the CEO's friends called the Board of Directors, who then themselves get large salaries if they approve the salary of the CEO."

Aside from Mr. Weiderhorn (whose company I believe has been delisted?) and non-public entities like a credit union, those days are past.

Any company's board listens when customers vote with their feet over a sustained period, however.

from Drudge Report today:

****NYT SUNDAY: Gap between rich and poor has grown, extent to which is not widely known... Only 145,000 taxpayers with $1.6+ million in income...Developing... *****

I'm a member of PTCU and 1st Tech CU. Last month's APR Interest rates on savings, compared:

1stTechCU: Regular share acct - .35%; Instant Access Acct - 1.4%; First Checking Plus - .35%

PTCU: Savings - .35%; Mkt Rate Savings - .6%; Interest Checking - .5%


Also - PTCU Bill Pay was supposed to be free w/a certain balance, I forget how much, but I had more than that balance and got charged a monthly fee of about $4 anyway. When I called and complained, they said, "Ooops, so sorry," and took off the charge.

On the other hand on the good side of PTCU, when I had a problem with a check in an ATM that had gone astray, the PTCU Card Services person went WAAAY out of her way to track it down and personally get her hands on it for me in just a few hours.

>>After several of these missives, one day a letter came along telling us that merger had suddenly been dropped like a hot potato. We were never told why.http://www.registerguard.com/news/2004/08/11/a1.creditunionfolo.0811.html

The guy running Eugene's Teacher's Credit Union is making $1.5 million. Perhaps PTCU customers are getting a bargain? lol

Chris - please read the stories you reference! The 'guy' running SELCO is a woman who has been CEO there for years. She's given a lot to the entire credit union movement, not just her own institution.

She isn't 'making' $1.5M as the R-G article makes clear. Her annual salary is about $460,000. The Board is pumping up her retirement account to $2M, in increments of various sizes, including the $1.15M reported by the R-G, since she is nearing retirement age. After she pays a 40% federal income tax, she'll have about $1.2 million left which she can use for her golden years.

SELCO told all its members about this step in a letter, unlike PTCU which did refuse to do.

Thanks for the post, though. This is important info that we just didn't get here in any of our Yamhill County newspapers.

If you believe that $1.6m/yr is too much, how much do you think he ought to be making? And, while your at it, please state your annual income, and I'll roll it back to where I believe that it ought to be.

If you don't like the way the credit union compensates its officers and employees, bank elsewhere.

Thanks Jay Bird, gotta love people who love inequity and corruption.

By the way, since when did leaving something alone ever make it right? I do bank (credit union) elsewhere and we will be moving our accounts as we are able, but that doesn't change the fact that this is *our* credit union. We members own it and it is supposed to benefit us--"not for profit, not for charity, but for service" is their motto. I'm just not seeing how $1.whatever million is a service to me and the rest of the membership. I mean the APR on a line of credit recently doubled and the APR on a savings account is at a lowly .35--it's .9 at my other credit union.

I just really can't express how nice it is that millionaire CEOs have an idiot like you defending them, because you know their lives are so hard, poor guys.

As others have pointed out, you need to do a bit of research on executive compensation. Even such celebrators of capitablism as Fortune and the WSJournal have been raising concerns over executive compensation in the last two decades.

First, compensation bears no relationship to the performance of the company. This completely undermines the argument that corporate executives are paid as generously as they are because they are improving the bottom line.

Second, the ratio between what the chief executives make and the average salary has been rapidly growing in the US, and outpaces (to an unbelievable degree) what you'll find in other advanced industrial nations. Why? Our are companies that better run?

Finally, corporate salaries are not set by the "market" but by a cozy and tightly knit corporate board.

These are all reasons why large pensions and some concerned money managers (e.g. Warren Buffett) have been raising the alerts about CEO salaries.

Here's an article from the Register Guard that confirms that the merger fell apart because PTCU did not want to publically disclose its CEO's salary:


That same article has this to say about Dias's salary:

"But Dias' pay last year at Portland Teachers is stunning by credit union standards nationwide. It was 4 1/3 times the national average for total salary, bonuses and other compensation paid to CEOs at the nation's largest credit unions, according to a recent national survey."

If you look at the article linked at the bottom of the page, it gives exact numbers and figures. Not only does his pay dwarf other credit unions, it is far higher than for-profit commercial banks. Another gem:

"Even CEOs at the survey's 90th percentile - those whose pay was higher than all but 10 percent of the executives surveyed - earned an average of $457,534 in salary, bonuses and other taxable compensation."

This is NOT simply "what the market will bear", and "executives bringing value." His pay is way out of line with industry standards. It's so high that it's making regulators uncomfortable, and blowing business deals. Meanwhile, the bank's rates are laughably bad, and the bank is paying lawyers to threaten people who mention the CEO's salary.


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» Enough? from Isaac Laquedem
Jack Bog started a discussion about the $1.6 million salary reportedly paid by Portland Teachers Credit Union to its president, Cliff Dias. [Read More]

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