Encouraging board diversity – in age, gender and ethnicity – hasbeen a campaign for corporate boards for years. Next month, theconcept will arrive at credit unions in the form of a voluntaryquestionnaire from the NCUA.

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Credit unions will be free to ignore the questionnaire. If theydo choose to respond, the NCUA will shield their individualresponses from members or the public at large. Instead, the NCUAwill include anonymous, aggregated data in its annual reports.

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The advantages of having a diverse board include being able torecruit a broader base of members and better respond to existingmembers' needs, fostering member empathy among directors, accordingto Stephanie Galligan, a research manager for the think tank FileneResearch Institute in Madison, Wis.

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“It's going to build a stronger credit union in the end,” shesaid.

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That advantage was cited by officials at a credit union inSilicon Valley and one in Iowa, where many new Hispanic memberswork in pork processing factories.

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In a letter to credit unions in June 2015, then NCUA ChairmanDebbie Matz urged credit unions to promote transparency ondiversity issues, including providing demographic information onboard members and other officials.

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“These methods may include displaying the results of a creditunion's diversity assessment, diversity metrics or profiles, anddiversity efforts on its website, or within its written annualreport to members, or both,” she wrote. “Transparency is not justmetrics; it's about telling your credit union's full story orjourney to embrace or enhance diversity and inclusion through yourefforts.”

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But the extent of a credit union's interest in board diversityis sometimes difficult to see.

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Some credit unions have websites with clear links to a pageabout their board. Some show photographs of their board members,with short descriptions of their backgrounds and tenure on theboard.

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For other credit unions, the public must hunt hard to find boardinformation on the institution's website, and it may only include alisting of their names. Sometimes these bare-bones lists are withina link to the credit union's annual report and require viewers toscroll to the back pages.

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And some credit unions appear to have no information about theirboards on their websites.

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CUNA spokeswoman Vicki Christner indicated the tradeassociation's members make their own decisions when it comes toachieving board diversity.

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“Credit unions are democratic organizations that are owned andcontrolled by their members,” she said. “Members have equalopportunity for participating in setting policies and makingdecisions – including the ability to choose their boards. Policieson board composition – diversity, term limits, self-evaluation,continuing education requirements, etc. – are set by each creditunion. CUNA does not collect information on those policies.”

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While banks and other public companies are subject to moreexplicit reporting rules on diversity, credit unions are onlysubject to requests from the NCUA for voluntary reports on employeeand board diversity. Its efforts are targeted at credit unions with100 or more employees, a threshold drawn from regulations thatapply to banks, and a group that employs more than 70% of thecredit union workforce.

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In March, the NCUA approved a diversity checklist as acollection tool for the voluntary responses it will begincollecting from credit unions in October. Questions on theassessment are related to various areas of diversity, includingboard, leadership, workforce and supplier diversity.

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Canvassing credit unions about their diversity practices shouldnot come as a surprise. The NCUA is required to do so under theDodd-Frank Act and it established its guidelines for compliancethree years ago.

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Monica Davy, director of the agency's Office of Minority andWomen Inclusion, said the canvass won't hurt credit unions andmight help them instead.

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“[The] NCUA believes diversity is a good investment for creditunions,” Davy said. “Diversity leads to innovations, which enhancescredit unions' ability to identify business opportunities andcapitalize on them in new and more relevant ways.”

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A Filene study completed in 2014 found that only half of creditunions had diversity policies for their boards. Since then, therehas been little change, Galligan said.

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“It's definitely slow to move,” she said.

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Credit unions have cultural barriers to change in boardnominating processes, she said.

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“It's easy to get set in your ways and nominate friends withsimilar mindsets and knowledge,” she said. “It's hard to lookoutside of yourself.”

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Galligan advised credit unions to implement a board evaluationprocess that is regular and repeatable. Boards should be constantlyevaluating themselves, including their diversity of age, gender andethnicity.

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Having a diverse board is part of the strategy at Community 1stCredit Union ($573 million in assets, 56,147 members) for buildingits membership among the growing Hispanic population in southeastIowa.

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Many of the Hispanics came from Mexico in recent decades to workin pork processing plants. They are ideal candidates for growthbecause they have growing incomes and untethered financialloyalties.

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David Suarez took a different route. The Ecuador native came toIowa in 2006 on an H-1B to work as a journalist at aSpanish-language newspaper. Last year he joined the Ottumwa,Iowa-based credit union as its bilingual community developmentmanager.

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His job includes promoting diversity in all areas of the creditunion – including its board. This year he helped recruit thenine-member board's first Hispanic member, Edith Cabrera, acommunity college instructor with an MBA who is now working on herdoctorate.

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“Our CEO was really open to bring diversity to the board,”Suarez said. “That is really important to us because we have a lotof Hispanics who are members of the credit union. It was importantfor us to represent these members on our board.”

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Diversity efforts will help the credit union serve the communitybetter. Many of the Hispanics are unbanked, as they grew up withthe practice of paying for everything with cash.

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The credit union can help Hispanics learn to use credit wiselyto buy cars and homes. It can help new members by extending loansas small as $500 to help them build them their credithistories.

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The credit union also developed a special mortgage to helpHispanics buy homes. The mortgage requires a hefty 20% downpayment, but allows applicants to borrow based on their consular IDor federal Individual Taxpayer Identification Number.

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Those programs have earned the credit union an award from theIowa Finance Authority for promoting affordable single-familyhousing.

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“The key thing in my daily job is trust. You have to gain trustwith Hispanics,” Suarez said. “It's really hard to reach them, butwhen you finally reach them, they will do business with you forgenerations.”

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Board diversity is also critical for First Technology FederalCredit Union ($9.1 billion in assets, 444,520 members). First Techis based in Mountain View, Calif., and its members are drawn frommany of the biggest names in Silicon Valley, includingHewlett-Packard and Tektronix, which founded the credit union in1952.

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First Tech members tend to be highly educated with a wide rangeof ethnic and cultural backgrounds.

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First Tech CEO Greg Mitchell said the credit union imposes noquotas, but the board considers age, gender and ethnicity alongwith skillsets in picking members. The 11-member board now includesthree women including its chair Dotty Hays, an African American,two Asians and a Hispanic.

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“We want a board that reflects our membership base,” Mitchellsaid. “It's just good business.”

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First Tech also has a young membership base. Its median age is38, compared with a national median in the 40s for credit unionmembers.

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“The challenge many credit unions face is how do they attract ayounger membership base,” Mitchell said. “Having younger boardmembers helps guide decisions that reflect the values and needs ofyounger members.”

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Jim DuPlessis

A journalist for decades.