Consultants seem to agree that governing a credit union hasbecome more daunting. And the trend toward greater boardaccountability isn't likely to go away.

Dan Clark of Dan Clark Associates noted the impact of NCUA Reg.701.4, which mandated financial literacy training for board members. Board membershave always been required to be informed and educated enough totake good care of a company. Most nonprofits get away withrecruiting one financially savvy board member, and the otherdirectors look to that person to determine whether the organizationis in good financial shape. Now every credit union director needs aworking knowledge of financial issues, he said.

“There has been a great deal of hesitation to adopt a governancerather than management posture. Even once it's adopted, habits dieslowly,” Clark said.

The board should delegate all personnel issues to management, hestated. But that's a big shift. There is what he labels anerroneous idea: only boards can make policy.

“There is nothing in the written record going back to theEgyptians and the pyramids that said the board owns the policyfunction. It is a board function, but they don't own itexclusively. That's more of a truth than what's practiced,” hesaid.

“All leaders make policy to guide their followers. You can'talways watch them. You want them to know what is O.K. and whatisn't O.K.”

Clark describes the approach contained in the governance manualoffered by his firm, about to be issued in its 15th edition.

“In my manual the board has a one-page personnel policy that ineffect said you want the right people on the staff and you wantthem managed correctly. It's up to management to write a personnelmanual that helps staff do the right thing and spells out theperformance review process.”

There is an exception, he added. If management creates a policythat commits the credit union for more than one budget period, thatrequires board review.

Clark has seen a growing desire for board meetings to becomemore strategically focused and forward looking. He decries meetingswhere the treasurer spouts data from the balance sheet and incomestatement. His view is the board should have the statements beforethe meeting. Don't waste face time with things that should havebeen studied in advance, he said.

Clark acknowledged he's not the only one urging boards to bemore future-oriented. He argues that on the other hand,regulations–or at least the way credit union boards interpret therules–are taking them the other way.

“Having been a former regulator, I understand you want to beaware of operations, but I don't think we should be askingdirectors to write procedures,” he stated. “Employees should be theones to write procedures they are following.

To move things along at board meetings, he advocates droppingRoberts Rules of Order from the boardroom and letting the boardestablish its own guidelines. That's been in his manual since theearly editions. He argues there is nothing in law or regulationthat requires boards to use Roberts in board meetings.

When a director told him the by-laws required using RobertsRules of Order, he asked her to send him the applicable sectionfrom the by-laws. The by-laws only specified that at the annualmeeting would be governed by Roberts.

Lynn Walker at Boundary Management Consultants has seen acrossthe board, whether it's credit unions or not, nonprofits orprofits, a greater sense of directors' responsibilities andaccountability. He said there's a heightened recognition of theirobligations, and they tend to be more diligent.

Credit unions are beefing up efforts to recruit board memberswho want to contribute and do a good job. At the same time, thereare hurdles.

“It's not just the fact boards are being held more accountable,”Walker said. “There's a wider and wider range of things people cando in their free time. It's not just happening on credit unionboards. It's much more difficult to find the kind of qualitypeople.”

He indicated many governance models are available to helpboards. People are looking for best practices in governance, andthere is more sharing of ideas. Directors listen more, and theylook more closely at governance than in the past. He sees a muchgreater knowledge base among directors. Some of that has happenedthrough more education for board members.

At the same time, Walker added, “Vulnerability concerns peoplemore. Regulators and regulations continue to focus on boards,holding them more accountable. I don't see any end to that. Amongthe membership, there's beginning to be a greater sense of theirvoice within the credit union.”

As for bankers' allegations that credit unions today are justlike banks, their governance absolutely makes a difference, Walkerstated.

“Unlike a for-profit bank, whose focus is only financial, creditunions can define their return as not entirely financial butwhether members are better off because the credit union exists.They offer a betterment to the community that goes beyond financialreturns. Do they struggle with it? Yes. But that's kind of what anonprofit's role is all about.”

“The board has a role beyond oversight. In addition to makingsure nothing bad happens, they have a role in making sure somethinggood happens. How are our members better off? I think that's aquestion all boards should ask.”

Miriam Carver, a policy governance theorist and consultant, saidcredit unions continue to be concerned about the accountability ofthe board and the board's need to stay in control.

As for persuading directors to follow new governance models,“When anyone is very experienced at doing something, it is achallenge to follow new guidance and do something differently,” shesaid.

“It's not unusual to see board members of quite large creditunions who can remember when the credit union was small. The levelof involvement may have been different at that time. For a lot ofboard members it's really quite challenging.”

An issue she hears discussed is whether the CEO should serve onthe board. CEOs have stated that if they are going to achieve thestatus they need, they should be on the board. Boards have saidthat in order for them to obtain the information they need, the CEOshould serve as a director.

“I think both arguments are quite spurious,” Carver said. “Asfor the status and recognition of the chief executive, it is animportant role and it does require a level of respect. If the boardis not treating the chief executive like a very important person,putting him or her on the board is not going to help things. If theboard needs information from the chief executive, then the boardshould demand it.

“The board is there to act on behalf of the owners, but thechief executive is there to act on behalf of the board. They aredifferent roles. Putting the chief executive on the board, andexpecting him or her to act in the interest of owners rather thanin the interest of meeting board expectations, places the chiefexecutive in a very funny position.”

As for credit unions and other non-profits struggling to findpeople willing to serve as directors, “I can see why,” Carver said.“A lot of credit unions and other non-profits have suchmeaningless, tedious meetings. This is not because they aremeaningless, tedious people–they have no idea what the realgovernance job is.

“If you have a very rigorous definition of the governance job,you can tell prospective board members they do have an importantrole and a meaningful contribution to make. … Governance is a realjob that needs to be designed in such a way that it's doable.

“Let's not tweak what credit unions and other nonprofits do.Let's start from scratch and find something that actually makessense.”