Fire the CEO: When the Time Has Come
- Credit union CEO firings are rare events.
- CU directors usually have a long tenure and many have built a friendship with the CEO and are reluctant to act.
- Boards can help insure good performance by setting targets.
No job is harder for a board of directors of a credit union, but no job is more crucial than knowing when to separate the cooperative from a lagging chief executive officer and having the strength to act.
Success may be the preferred path, but there are multiple ways a CEO can get him or herself fired, said Lozoff. And these exit routes are detailed in the CEO contracts he writes for his clients. The first route is what might be called moral lapses that bring shame on the institution and this could be anything from a DWI conviction through a sex offense or even filing bankruptcy. Lozoff stressed that committing the offense does not necessarily trigger termination. With a DWI, for instance, the board might instead require the CEO to undergo counseling and possibly join AA.
Credit union governance expert Stuart Levine elaborated that “defalcation and theft are also causes for immediate dismissal.”
How a CEO firing typically plays out in practice, said Lozoff, is that a dissatisfied board will call in a firm such as his and indicate they are thinking about a CEO change due to performance shortfalls. Lozoff then drafts a contract with the CEO that sets out clear targets and from there, the CEO’s fate is in his own hands.
Discomfiting as firing the CEO may be, it could be the easy part of the job. That’s because actually firing a CEO triggers substantial work for board members. “If you don’t have potential successors identified, the process of transitioning from one CEO to another can be complicated and expensive,” warned Matt Fullbrook, manager of the Clarkson Centre for Business Ethics and Board Effectiveness at the University of Toronto and an expert in credit union governance,