Over the past few months Credit Union Times has coveredat least five different credit unions at which CEO embezzlement andfraud occurred. These failures of leadership have left in theirwake an abundance of angered and disillusioned members.

In fact, in a recent exchange of messages with a member of oneof these credit unions, I found a person so disenfranchised due toher experience that she is now a bank customer.

Her perspective, and perhaps also the perspective of many othermembers and credit union leaders, is that the fault lies with thecriminals. I agree, but I also believe another body is at fault:the respective boards of these damaged institutions.

While detecting fraud can be a very difficult task, in the caseof every one of these situations the performance of the creditunion was so poor relative to the industry that the CEO should havebeen fired for cause. That these boards condoned such performanceover so long a timeframe puts them, in my opinion, as much at faultfor the fraud as the perpetrators themselves.

In evaluating credit union health, my firm, Glatt Consulting,uses a 5-point rating system to assess and rate individual creditunion financial performance. We look at 11 different metrics,assigning health scores for each metric based on where the metricfalls in a set of ranges. Scores of 5 reflect the highest degree ofhealth.

A 0 score reflects the lowest degree of health. In looking atthese credit unions through the lens of our scoring system we findthat each of them performed well below what we would term anaverage, healthy credit union. Specifically, over 10 years, theaverage HealthScore for this collection of credit unions was 1.8versus the industry average of 2.48 over the same timeframe. Thisis a significant difference.

The question is, why did these boards allow for such anemiclevels of performance? While a skilled fraudster can hide theiractivities well, none of the CEOs in question were leading healthycredit unions. The financial performance of their respective creditunions was highly visible, in plain sight, in black and white – andnot good.

In early January of this year I was quoted in Robert McGarvey'sCU Times article titled, “Fire the CEO: When the Time Has Come,” as follows:

“It is surprising how infrequently CEOs are let go. Perhaps itshould happen more often.”

Poorly performing credit unions like these formed the basis ofmy perspective and were the catalyst for sharing that particularsentiment with Mr. McGarvey.

Yes, the job of a volunteer credit union board member is oftendifficult, complicated, and thankless. Regardless, a board'sresponsibility to the ownership for preserving credit union healthand sustainability never goes away no matter the complications orthe level of appreciation. Firing, terminating, letting someone go– whatever you call it – boards must empower themselves to act inthe face of persistent poor performance.

I admit I was not in the board meetings of these fracturedcredit unions. I don't know for sure what board members were toldby the CEO, how financial performance was shared, or what themethods for holding the CEO accountable to results.

I also acknowledge that these were small credit unions and oftensmall credit unions lack solid reporting tools and face challengesmaintaining strong checks and balances. But even in offering theseplausible excuses for a lack of awareness, it still does notabsolve board members of poor governance performance.

What we see in the failure of leadership showcased in theembezzlement cases of these five credit unions is a cautionary taleregarding boards allowing themselves to be ineffective, and theirinstitutions fooled and undermined by exceptionally stupidcriminals.

Tom Glatt Jr. is a credit unionconsultant in Wilmington, N.C.