The chairman of Servus Credit Union Ltd.’s board of directors is defending a multimillion-dollar payment to the CEO of the newly formed credit union.
Bill Anhorn said on Wednesday that Steve Blakely was contractually entitled to a portion of the money, with the remainder provided to him as a retention payment.
Blakely was CEO of Edmonton-based Servus Credit Union before it merged with Community Credit Union, headquartered in Red Deer, and Common Wealth Credit Union, of Lloydminster. He was chosen to head up the amalgamated credit union.
Financial statements for the original Servus Credit Union for its 2008 operating year indicate that Blakely received $4,127,000 in remuneration and benefits, including $3,653,000 that was identified as a “bonus.”
“I think it’s a little bit of a misnomer to suggest that it’s a bonus,” said Anhorn, explaining that the merger effectively terminated the contracts of the CEO’s of the three credit unions — including Blakely’s.
“As a consequence of that, there were both legal and contractual obligations that arose,” he said, describing these as the severance portion of the monies paid to Blakely.
He added that Blakely was also paid a “retention amount” when it was decided that he should be hired as the CEO of the amalgamated credit union.
“At the end of the day, we felt Mr. Blakely was the best-qualified, most-suitable candidate to complete the vision of creating this new credit union.”
Anhorn declined to comment on whether severance packages were paid to Murray Haubrich or Jeff Mulligan, the CEOs of Community and Common Wealth credit unions respectively. He explained that the members of those two credit unions voted in the past to not publish information about CEO remuneration, and that he was also bound by confidentiality and privacy legislation.
However, in the case of Community Credit Union, its financial statements indicate that operating expenses related to personnel rose from $38.5 million in 2007 to $51.4 million last year.
Anhorn confirmed that CEO remuneration would have been included in these figures, but said a variety of personnel expenses were affected by the amalgamation process.
Anhorn praised Blakely for the job he and his executive team did in orchestrating the credit union merger, which he described as a “tremendous accomplishment.”
“In a relatively short time frame, like six months, we had a fully integrated staff, we had for the most part harmonized our products and services, and we had aligned for the most part our various business entities and technological processes.”
Anhorn also pointed out that the cost of the amalgamation is expected to be more than recouped through improved efficiencies and economies of scale going forward, In fact, he said, the merger has been projected to generate $18 million to $20 million in savings over the next two to three years.
“You have some up-front costs that are required in order to do the job.”