What Can Be Learned From the Crisis?
The world as we know it is in a continuous state of change for credit union directors. The new proposed NCUA regulations will require increased board leadership, transparency and communication that is different than a "check the box" mentality. What important leadership lessons are to be learned so that your board can make better decisions and maintain member trust?
Poor decisions made by managers of financial institutions during the recent economic crisis have impacted many and led to a significant lack of trust in our country’s financial system and our country’s regulatory oversight. What do you need to do as a credit union board member and what does your board need to do to be ready?
Governance may appear to be a vague term that has more relevance to publicly traded companies than credit union boards. I would respectfully encourage credit union board members to expand their knowledge about governance and the impact it will have on your credit union and the members your serve. There are many forward-thinking credit unions who buy into the need for good governance, and probably just as many that are slow to adapt to the changing landscape.
Let’s quickly review some of the high-level findings from the 25th edition of the Spencer Stuart Board Index that I believe has significant relevance to credit union board governance and then discuss the impact of continuous learning and board culture on making good decisions.
The 2010 Spencer Stuart Board Index highlighted the top six governance issues receiving the greatest attention this past year: executive compensation, the board’s role in strategy discussions, the board’s role in risk management, CEO succession planning, director recruitment and addressing shareholder (member) concerns.
Twenty-one percent of new directors are first-timers on public company boards. Demand remains strong for director candidates with financial backgrounds, investment or accounting credentials, regulatory/government, risk, technology and marketing expertise. Thirty-five percent said that their searches took three to six months to complete. Almost 30% reported taking six to nine months, and 27% said more than nine months.
Many boards charge the full board or the audit committee with the responsibility for risk management. More than 50% say the entire board has primary responsibility for oversight of risk management, 41% hold the audit committee responsible, and only 8% have a dedicated risk committee.
Most boards undergo performance evaluations, with 96% conducting some kind of review. Half of them examine the full board and individual committees, 25% evaluate individual directors, and 25% assess only the board as a whole. Almost all, 99%, conduct full board evaluations once a year, while the remaining 1% do it every other year.
Are the right issues getting to the table, and is your board engaged at the strategic level that they need to be? Are you thinking about the new levels of accountability that come with serving on a board?
Are you focused on board composition? Are the skills sets established for board members before a candidate’s name is even nominated? Are you working now to ensure the right board composition in terms of how long this process should take if done correctly based upon criteria?
Are you continuing to learn how your board is doing as a team? Are you assessing how your board is doing to identify critical gaps between where your board is and where it should be?
Is every board member participating and contributing? When people don’t speak up, they are less likely to take personal ownership when every member needs to feel vested in the credit union’s mission.
Is the right information being provided in advance so that board presentations can be used to highlight specific areas of concern or questions?
Have you established high levels of trust on your board to ensure that honest communication can take place without retribution or things getting personal so that the best decisions can be made in both stable times and unstable times?
Does your board have the strength of character to respond appropriately to succession planning or a potential crisis as a unified force ready to act in the credit union’s best interest?
How can we move the needle to make education and learning a critical initiative for credit union board members? Learning is a process and the smartest credit union leaders and board members I know develop a learning culture and focus. Utilization of time and energy and brain power becomes incredibly important. There is only so much oxygen in any particular room, so developing clear agendas in a board meeting and adhering to them becomes crucial.
There will be a time in the life of every credit union when there is a crisis. The fundamental principle in life and business success is respectful relationships. Respectful relationships are tethered to how we function together around the boardroom table.
To go back to my initial question: How do credit union boards learn to make good decisions and continue to hold the trust of your members? Continuing education as a board member will help your credit union to focus on the right issues, learn how you continue to add value on a daily basis and to help your board and credit union emerge as ethical and mission-driven leaders.
Stuart R. Levine is chairman/CEO of Stuart Levine & Associates.