Asure-fire way to get a heated discussion going at a credit union meeting is to bring up the subject of board term limits. When credit union CEOs mention term limits, it is immediately assumed that they are looking for justification to oust one or more board members who have been on the board seemingly forever. There is usually a further assumption that they also have in mind those individuals who have not demonstrated that they are effective board members. Typical comments that come up when discussing the need for term limits include these: “It is time for new blood. The board is no longer representative of our membership. The credit union has changed but the board stays the same. They are holding the credit union back.” Understandably, some board members feel threatened by any talk of term limits. They quickly become defensive. “Every time the membership votes, they are expressing their feelings on term limits,” is a common response. “If members felt anyone on the board wasn’t carrying out his or her responsibilities and duties, they wouldn’t vote to continue them in office.” Somewhere in any term limit debate, complaints will be made about board members who are living embodiments of the Peter Principle, or those who seem to prefer the way the credit union functioned in the good old days. Sometimes the complaint focuses on a board member who doesn’t do his homework and seems to be going along for the ride. CEOs have been heard to grouse that they feel helpless in trying to rectify a bad board situation. Some confide that they feel a term limit policy would be able to accomplish that which certainly can’t be done by the CEO. Eventually a bad board member would be forced to step aside. I have frequently been asked at meetings what my opinion is on the subject of board term limits. After first highlighting the obvious pros and cons, my answer is always the same: as long as a board member is making a meaningful contribution, how long an individual has been on the board, or his or her age, shouldn’t really matter. Now granted that is a pretty subjective answer. For one thing, precisely how is a board member’s contribution going to be measured? There is no test. There are no universally accepted standards. There rarely is any kind of a board evaluation process in place. And finding a board member that will admit to doing a bad job is rare. I have personally seen a number of so-called old timers that are extremely sharp, have a good grasp of technology, competition, marketing, and member expectations. They understand the difference between management and setting policy, always come to meetings prepared, and are forward thinking. I have also seen newer, younger board members who contribute next to nothing. A frequently asked question is, if the credit union is doing good can there be anything wrong with the board, or any member serving on that board? Yes! It’s a fact of credit union life that when everything is going along smoothly, members are happy and don’t know or care who is on the board. They certainly don’t give any thought to whether those on the board are doing a good job. So if a credit union is doing well, as most today are, and the membership is happy, why even get into a subject as personal and contentious as term limits? For one thing because one has to wonder how much better the credit union could serve its members if every single member of the board were pulling his or her own weight. For another, bad board members have an enormous negative impact on CU staff, sometimes even causing good CEOs to resign in frustration. For years everyone including me thought any discussion of term limits was moot, at least for federal credit unions, because term limits were not permissible. According to long-standing interpretations of the Federal Credit Union Act by NCUA, the only requirement to become a board member and continue to serve on the board is to be a member in good standing. (Of course that assumes that the individual can also get elected and re-elected.) Any by-laws specifically setting forth term limits were impermissible. Turns out, in some recent clarifications, that there is in fact a way to implement term limits of sorts. The board can instruct its nominating committee to implement a policy not to nominate any individual who has served, let’s say, three consecutive, three-year terms. However, any member in good standing who wants to throw his or her hat in the ring, may do so without benefit of the nominating committee route. They can seek a nomination by petition. Such individuals would not be subject to any nominating committee policies, including back door “term limits.” The bottom line to the entire term limit discussion is not really about the pros and cons of term limits, or even how to find a way to use them to solve a board problem. Evaluating a board member’s worth is the responsibility of each individual board member. Since it is pretty obvious that won’t always happen, the board itself has to do what needs to be done when a colleague is not fulfilling their responsibilities as a board member. Even though it is difficult not to support a long time colleague and personal friend. Even knowing it is difficult for that fellow board member to give up the many perks of serving on a credit union board. Asking any board member to not seek re-election is probably one of the most difficult decisions any board will ever be called on to make. But it must be done for the sake of the members and the board itself, and for the CEO and his or her staff with or without any term limit policy. Comments? Call 1-800-345-9936, Ext. 15, or Fax 561-683-8514, or E-mail [email protected]

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Peter Westerman


Credit Union Times

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