Hoping for the Best Is a Lot of Work These Days
The Chairman's Group met recently in Baltimore. The organization comprises mostly credit union chairmen but also other volunteers, and I was fortunate enough to receive an invite.
This particular annual meeting doesn't have many of the frills larger conventions boast, though they couldn't resist sneaking in the obligatory golf tournament and an Orioles game (best thing about that I'm sure was the stadium!). But the agenda was entirely developed by the members. Other than an opening speaker on the economy and a wrap up session on embracing change, there were no talking heads.
The agenda was set by the membership. There were five roundtable discussions and one person at each table was appointed to facilitate the discussion on topics ranging from CEO evaluation and benefit dynamics of a 21st Century board. An open forum was left at the end to discuss the top three questions submitted during the conference so everything was kept very fresh. The entire group was split into several rooms. There were about 10 people at a table discussing the subject matter, and they were all in the same peer asset groups. The board of a $50 million credit union has much different concerns than that of a $500 million credit union.
I found much of the discussion at this group very encouraging for the future of the industry. In a branding session, one volunteer showed that his credit union made all the roofs of its branches a striking purple for brand recognition. Sure enough, the credit union became known in the area as "the purple credit union." Sure beats the drab blue that every other financial institution uses.
In the open forum, of course one of the topics was NCUA assessments and the corporates. One chairman noted that during the economist's address he looked around the room and saw many attendees sitting slack-jawed when Ed Krei, managing director of The Baker Group, suggested shock testing portfolios to at least 400 basis points. His own large credit union was shock testing to 1,000 basis points because the new economy called for that. Another large credit union chairman said his credit union went to 800 as did others, but some either didn't know or were only going to 400. However, they took it very seriously when they saw what their peers were doing. Peer pressure can have its plusses.
Many of the board members in the rooms were well-versed on their credit unions were up to. No doubt these were engaged board members who knew their stuff; they were definitely the more progressive volunteers. They were well-educated and discussed the value and uses for board self-evaluation. This is a must! It can help improve individual board members-and we all can use that-as well as weed out those unwilling or unable to perform their duties.
Fiduciary duty was also a hot topic. Many took it seriously, but I truly cringed when a couple folks mentioned the "new" requirements coming out of the NCUA. There's nothing new about fiduciary duty; it was always there. All that is changing is that it will have to be documented.
Some I think were overestimating the requirements too. Someone who's a writer for example isn't going to become a CPA overnight and that is not what's expected. Having a bare minimum understanding of what shock testing is or ALM is crucial to overseeing a financial institution. And after instances like Cal State 9, as highlighted by Issa Stephan, CEO of First Financial FCU, at the NJCUL Annual Convention, someone should have seen the signs of trouble ahead. Sure, the NCUA screwed up in that instance, but so did the board and it left credit unions holding the bag on over $200 million in losses.
I was not surprised to hear at The Chairman's Group that a couple of the chairmen mentioned a board member or two had already said they would not be running for the board again specifically in anticipation of the NCUA requirements. Those probably aren't the folks you want on the board anyway.
This discussion brought on talk of board member diversification. The agency and others have been encouraging credit unions to recruit people with various backgrounds to the board. Many expressed concern that they couldn't get someone with an IT background or marketing or HR up to speed on financials within the NCUA's proposed 90 days. I'd say this isn't rocket science and just because someone doesn't crunch numbers all day for a living doesn't mean they can't understand the financials if they want to.
Board member age was a hotly debated topic. One gentleman who was probably old enough to remember the signing of the Federal Credit Union Act noted that NCUA Board Member Gigi Hyland is traveling all over the country telling boards to get a more diverse cross section of their memberships to serve, including age and ethnicity. It seemed this volunteer took it as a personal affront to wipe out all the white men over 65.
That is absolutely not what she's saying. I don't want to put words in Board Member Hyland's mouth, but I've heard this speech and it's about being inclusive rather than exclusive. It's about keeping some of the more senior board members but back filling with qualified people who happen to be younger or happen to be a minority represented in your FOM. Of course you don't just bring people in because they're young, as a couple of the chairmen suggested was being advocated.
Aggressive recruiting in the right places can help. Think outside the credit union. Provide board nomination marketing collateral to MBA candidates at local colleges or even guest lecture in a business or accounting class. Visit an African-American church or mosque within your FOM to talk about the credit union and serving on the board. Recruit at the local women's chamber of commerce. This work is vital to a sustainable credit union model, and, yes, it is work. In today's environment there is no more just hoping it will all work out.
--Comments? Email firstname.lastname@example.org