Last month I participated as a panelist in a NationalAssociation of Corporate Directors webinar titled “Capitalism,Transparency and Ethics.” Following the global financial crisis,directors are increasingly concerned with how to effectivelynavigate the new environment. Being held under greater scrutiny bythe public, members and the NCUA, it has become even more importantthat directors demonstrate a commitment to ethical behavior andensure transparency.

The tone at the top still remains the epicenter of anyorganization. Leadership and character serve as the sustainabilityof member value around the boardroom table. Taking the time toreaffirm what values and beliefs are held by your credit union areprincipal foundation issues.

Compliance and oversight should be reviewed on a regular basiswith reports from the person responsible for this area. Do you haveany 800 number hotline reports that rise above the mundane orserious member complaints that come in on a regular basis? It'simportant to note how the officer responds to these concerns andhow they are investigated.

Sandy Warner, former chairman of J.P. Morgan, once said that inunderstanding reputational risk, ask yourself how you would feelabout a transaction you were about to approve if it appeared on thefront page of the Wall Street Journal for your family to read. Ifyou violate common sense values with a wink and a nod, Sandy Warnerwould have said “pass.”

It's important to understand the CEO and their well-definedbeliefs, and how these beliefs are translated throughout theorganization. The tone in the middle comes from the tone at thetop.

Small things matter. I will never forget interviewing apotential employee for a large media company on a privatehelicopter. She proceeded to empty a drawer full of snacks into herbriefcase. I knew at that point that nothing good was going to comefrom this interview. Her compelling actions defined her leadershipcapacity very quickly. Despite my recommendations, the companyhired her, only to experience problems down the road.

People make choices every day in leadership positions. Sometimeslegal and ethical don't entirely match up. Are ethics the basis ofyour judgment or are they put into your decision and rejectedbecause they are not convenient? Do board members have thefortitude to differ from consensus and tell the truth? Having thecourage to say in a collegial, but challenging and mature way, that“the baby is ugly”, can bring important dialogue, that is not sugarcoated, to the table.

Having breakfast or lunch with the auditor to read their eyesand open up a conversation is a good way to ensure the integrity ofthe chief financial officer's office. Meeting with the CFO or theirlieutenants once a year to affirm the integrity and transparency ofthe credit union is additionally helpful. Giving people the courageto speak up and share what's on their minds and to ask penetratingquestions, will bring out the truth, when people are asked directquestions.

When asked how frequently the board reviews their existingethics policy, 23% of participants on the NACD webinar said lessthan annually. Reviewing these policies with your counsel on anannual basis, where any enhancements based on Dodd-Frank can beshared, and asking your CEO about their strategic communicationplan to transmit values throughout the organization, is ameaningful exercise to strengthen the culture of both the board andentity.

This should not be a “check the box” exercise, but rather aprocess that prevents breakdowns in the organization and confirmsthe moral leadership at the top. The unethical behaviors that ledto the collapse of companies such as Enron and WorldCom began withdecisions and behaviors at the top that were unacceptable. Humanbeings need periodic speed bumps with speed limit signs posted tobe reminded of the rules every so often – whether it's conflict ofinterest or foreign corrupt practices for vendor relationships.

In closing, ethics is not just situational. If you train peopleon behaviors and what actions should look and feel like, everyonewill have the playbook on what your credit union values. Thinkabout whether your organization's ethical code is a check-the-boxmentality or a values-based approach. If it is values based, youare to be applauded. And those who have the courage to say it is“check the box”, then perhaps aspirationally, it's a good goal tothink about moving towards a more values-based approach.