Board Reform Is What's Needed
I read with interest the Editor's Column in the Nov. 3 issue where you discussed the issue of whether credit union board members should now be unpaid. I agree this is a subject that should be openly and vigorously discussed and would like to share my experience with you and your readers.
I began my credit union involvement as an unpaid credit union director 30 years ago in Australia on the board of-wait for it-Credit Union for Bank Employees. I was a board member in Australia for 23 years before
moving to live in the United States six years ago.
I understand and share the frustration with the current state of board governance standards, the increasing complexity of the role of a board member and how difficult it can be to attract new young talented board members in this country, and I agree that something needs to be done. However, I strongly believe that introducing a system to pay directors in itself will not change anything. Given my experience, as a standalone initiative it would most likely make things worse.
Board governance standards in Australian credit unions are significantly higher than here in the U.S. However, I don't believe this is as a result of paying directors. It is as a result of programs to improve board governance policies and practices. The impetus for these changes came about through board initiatives and regulatory changes.
From my experience, if you simply start paying directors without introducing widespread governance reform, existing directors who should move aside to allow bright new young directors to move in, will want to stay to enjoy the new (as well as the old) rewards.
Convincing directors to introduce modern board composition and succession policies, director performance assessment policies and other governance improvement initiatives is a challenge. Identifying new young directors is also a challenge. However, I see some credit unions and many other not-for-profit organizations doing this and doing it well. It can be done without paying directors.
I also witnessed significant changes of attitude in many directors in Australia once they became paid. These directors tended to lose their focus on credit union philosophy and acted more like the director of a bank.
I agree that the current system is not sustainable. My preferred model would be for credit unions to introduce comprehensive board governance reforms and for directors to remain unpaid. However, if directors are to be paid, I would strongly argue that it should only occur after a comprehensive governance reform program has been completed. ?
Mark Lynch, CUDE, DUDE
Credit Union Consultant
Sault Ste. Marie, Mich.