"The succession plan must, at a minimum, identify the credit union's key positions, necessary competencies and skill sets for those positions, and strategies to identify alternatives to fill vacancies," the NCUA wrote in its Feb. 3 posting of the proposed rule.

Boards must review their succession plans at least once a year.

"This proposed rule is intended to strengthen current succession planning efforts being taken by credit unions, and to require others that have not yet done so to commence their succession planning process," the NCUA wrote.

Luke Martone, CUNA's senior director of advocacy and counsel, wrote in a four-page letter to the NCUA Monday that CUNA supports "the overall objective of the rule." However, he said, "we believe the provisions included in the proposed rulemaking would be more appropriate as guidance than regulation."

Luke Martone

Martone was asked in an interview how guidance, rather than rule-making authority, would allow the NCUA to address situations in which a clique on a board is avoiding succession planning; for example, that it could time a merger to coincide with its CEO's need to retire.

Martone said examiners can already address succession issues in their regular examinations.

Aminah M. Moore, NAFCU's regulatory affairs counsel, also said the NCUA already has authority to address succession planning.

"Examiners should already be doing a high-level evaluation of a credit union's succession planning as it is a part of the management component of the CAMELS rating system, which makes this rulemaking redundant," she wrote in a six-page letter submitted to the NCUA April 1.

Aminah M. Moore

Among the few supporting the NCUA's proposed rule were the National Council of Firefighters Credit Unions Inc. (NCOFCU) and Stephen J. Foley, president/CEO of Bragg Mutual Federal Credit Union of Fayetteville, N.C. ($95 million in assets, 9,435 members).

It was founded in 1952 to serve civilian employees at the Army's Fort Bragg military base, but now serves numerous groups and an area that includes a broad rural swath of North Carolina and South Carolina.

Foley was hired as president/CEO in 2018, after two CEOs left earlier that year. One served a few months, the other, Betty Eileen Donovan, was president/CEO from November 2015 until she was fired in February 2018.

The following year, Bragg Mutual settled a lawsuit by Donovan that claimed wrongful termination, discrimination and retaliation after she reported to the NCUA the credit union board's alleged violations of its bylaws and regulations.

Steve Foley

Foley did not mention the lawsuit, but he noted that the absence of a succession plan created difficulty after the departures of the previous two CEOs.

"We have a plan in place now, and our board understands the steps to take in the event of an unexpected vacancy or an expected change in the leadership," Foley wrote. "Finding a good CEO is a challenge, it is also very hard to identify replacements for key positions in any small to medium credit union."

The NCUA said examiners will defer to the judgment of a credit union board in how it approaches drafting a succession plan "so long as its plan addresses the elements required by the rule."

"The expectation is for credit unions to develop a plan and provide training that is consistent with the size and complexity of the credit union. Therefore, smaller credit unions are more likely to have a simple succession plan that only addresses a few key leadership positions," the NCUA wrote.

The NCUA said the need for the rule became apparent as it saw many credit unions forced into mergers because they did not have people ready to take over key leadership roles. This was most common among small credit unions, those with under $50 million in assets, it said.

The NCUA also said it was concerned by the national wave of retirements of baby boomers, now ages 57 to 76.

"Succession planning is critical to the continued operation of those credit unions with board members and executives that are part of this retirement wave," the NCUA wrote.

Studies of CEO tenure vary widely. The Harvard Law School Forum cited an Equilar study that found the median tenure for CEOs of the S&P 500 companies was five years at the end of 2017.

A CU Times analysis of NCUA records found that among the 5,048 credit union CEOs listed in its data for December 2021, 2,203 CEOs had last and first names matching CEOs in December 2011, and 901 matching those in December 2001. Among board chairs, 1,547 matched for 2011 and 513 matched for 2001.

The median assets for all credit unions in December 2021 was $49.7 million, compared with $43.1 million for credit unions with CEO tenure of at least 10 years, and $36 million for tenure of at least 20 years.

Another CU Times analysis of NCUA data found that the median size of the 5,262 credit unions acquired through mergers from January 2001 through June 2021 was $3.9 million in assets, and 90% of them have less than $38.3 million in assets. Even among more recent mergers, those from January 2019 through June 2021, more than half of 336 mergers acquired credit unions with assets of less than $7.8 million, and 90% of them had less than $89.6 million in assets.