The industry debate over term limits for directors surfaced anew last week with Unitus Community CU of Portland, Ore. announcing that it has adopted new guidelines to deal with the sensitive matter.
Management of the $836 million Unitus Community CU said its new term limit rules were adopted following methodical and deliberate discussion over at least four years and have been well received by the volunteer members of its board.
Under the new schedule, Unitus directors are limited to four three-year terms and then they must retire.
"Following discussions we’ve had with our directors led by our CEO, Pat Smith, we realized that given the new regulatory scrutiny, we needed to make sure we had a pipeline to the membership to bring on new ideas," declared Laurie Kresl, vice president of planning/business development.
Kresl said a goal of the new rules is to ensure greater member involvement and participation in the CU’s future.
For many CUs, it was explained, existing board members tend to stay on for successive terms, but two veteran directors at Unitus, Barbara Leonard and Vernon Reinecker, each completing three-year terms, agreed to leave in March.
Kresl acknowledged the sensitivity of term limits considering many volunteers "are very passionate and committed to their credit union and want to serve."
Recognizing the industry dialogue, the Filene Research Center in Madison said term limits "are one of many appropriate ways to make sure a board brings on fresh perspectives and new skills."
"I serve on a board with 12-year term limits and I know first-hand that directors can learn, internalize and then pass on useful institutional memory during that time," said Mark Meyer, CEO of the Filene Research Institute. "Every day credit unions are confronting new business and regulatory hurdles, and it’s essential for directors to have ongoing and frank discussions about making sure the board always has the best directors in place to understand the issues and validate the required competencies are represented."
Agreeing with that view is former NCUA Chair Dennis Dollar, who said his Birmingham consulting firm, Dollar Associates, has done considerable research on the topic. He noted that 10% of CUs over $1 billion in assets surveyed have some type of term limit or age limitation on board members.
"There is a larger percentage–slightly below 16% of larger credit unions–that have instituted term limits on the position of board chair," said Dollar, explaining that "the reasons most often stated in our surveys for the 90% of larger credit unions without term limits for board members is continuity of institutional knowledge, tradition and a belief that the democratic election process enables credit union members to re-elect or not re-elect the directors they have confidence in–regardless of age or length of service."
The approximately 10% of larger CU boards that have implemented term limits said the primary reasons for doing so were the desire "for new ideas and to help build the next generation of credit union volunteers," said Dollar.
It should be noted, however, that most of the CUs with term limits also have some form of advisory board or emeritus position so that the CU does not "necessarily have to lose the institutional knowledge of longtime board members after they leave," Dollar explained.
Volunteers, he concluded, "have been the pioneers that built a great credit union movement over the past several generations, many of them having served faithfully for 25, 30, 40-plus years."
"I know of no credit union, even those with term limits, that does not value that heritage of service tremendously. Even those with term limits designed to help build the next generation of credit union volunteers are finding ways to keep some of these long term-board members engaged after departing the board through advisory boards and emeritus positions," he said.
As for Unitus, its decision to alter term limits was reviewed in an online article published last week by the Northwest Credit Union Association. The article quoted the CEO, stating that term limits remain "one of the most difficult topics for a credit union board and management."
"At the very least, having the conversation is an important place to figure out what is best for each individual credit union," said Smith.
She emphasized that having an "engaged membership is one of the major benefits of term limits" and helps spur recruitment of new volunteers.
A formal press release issued last month noted that the first meeting of the new board after the rule change included the welcoming of two new volunteers–Jim Lewis and Scott Thompson. Lewis is a former PBS executive involved with nonprofits and Thompson is a Portland home builder. The two succeeded departing members Leonard and Reinecker.