Henry Wirz wrote an excellent letter regarding the fallacy of term limits for credit union directors [CU Times, June 8, page 11]. He made the argument that there were better ways to select and replace directors in credit unions and that one of those better ways was a good evaluation process. While I agree with most of the things Wirz said, my experience is that most credit unions do not do evaluations of the board and its individual members, and if they do, they are merely surface jobs.
It is not necessary for board members to be “owners” in order to perform their fiduciary duties as a board member. It is necessary that they be educated on the process of serving as a board member and that there is leadership in the board room that has as one of its objectives the “refreshing of the board” over time.
As a member of the faculty of the board advisory services of the National Association of Corporate Directors and the executive director of the Institute for Excellence in Corporate Governance here at the University of Texas–Dallas, I can assure you that there are ways to increase board members’ effectiveness.
For some credit unions that are doing a good job already, term limits might be a good idea anyway in order to prevent the 20-to-30 year service on boards that I often see in credit unions. The recent problem with corporate credit unions and the meltdown of other credit unions is indicative of lack of board attention. Good management wants good board members, but bad management doesn’t. The problem is that many credit union board members don’t know the difference between good and bad management, not to mention good and bad governance. The tragedy is that they often don’t know that they don’t know.
University of Texas–Dallas