Board governance and the cooperative model – time for change?

We all know the number of credit unions continues to shrink and the reasons for many mergers are entertaining to say the least. Yet, we all know how the cooperative model is supposed to work, right?

  • The Board of Directors represent the member-owners. Do what’s best for the member-owners while being financially healthy. “Do well to do good.”
  • The Board of Directors holds management accountable.

It’s time to ask ourselves:

  1. Who’s holding the Board of Directors accountable?
  2. Is the credit union cooperative model at risk?

Don’t read on just yet. Take some time to think about those questions and based on your credit union, how would you answer them?

Our industry is incredibly unique. We don’t need to puff our chests out as we grow assets and earnings. We serve member-owners. Yes, the cooperative model is at risk if we don’t implement board accountability and credit union executive accountability. This requires implementing practices that ensure we do what’s best for our member-owners.

Soon, our members will see little differentiation between credit unions and banks if we don’t change our mindsets and evolve and improve. Cliché words that mean a ton right now.

Let’s get the problems for many credit unions on the table first before we offer solutions:

  • Understanding good governance principles is lacking.
  • That is, values, behaviors, meeting dynamics, etc.
  • Minimal real representation of our member-owners.
  • Strategic thinking and planning are lacking.
  • Understanding the business and the specific credit unions’ success factors is lacking.

We can do better, no? Let’s get the possible solutions on the table

  1. Defining your governance role

The Board and each of its committees have a role and responsibility to fulfill? Do we all know what that is? How much time in Board meetings is spent talking about the members, strategic issues or challenges we need to face? Is the word “cooperative” ever mentioned? Yes, there are the regulatory items, but move that to consent agenda or delegate to a committee as much as possible.

  1. Culture

Do not underestimate the importance of this. Human nature is to be concerned with our own livelihoods and personal success and well-being. But we must be vulnerable. We must allow ourselves to say proudly “I don’t know”. We must engage in honest, open, and healthy debate. This is how we all learn, grow, evolve, and ultimately do what’s best for the organization and our member-owners. Check out Patrick Lencioni’s, “The Five Dysfunctions of a Team”. How many apply to you? If it’s all of them, congratulations, you just took the first step to getting better.

  1. Two-Way Accountability

The Board is responsible for holding management accountable of course, but how do they know they are fulfilling this role? The Board should be held accountable for representing and answering to the member-owners, but how is this being done?

First, every Board member should hold management accountable by knowing and understanding the credit union business model, critical or key success factors and the value being provided to its members. Can you articulate this? Each credit union is different and has different definitions of success. There are several methods to measure member value. Find one and use it. (Contact us and we can provide options.) Pretty basic stuff.

Second, to help ensure the Board is representing the member-owners and being held accountable, it is time to consider non-cooperative business model practices to credit union governance. That’s right, what non-credit union and public companies do to ensure board effectiveness, accountability, and leadership. Things like:

  • Annual elections
  • Rotation of Committee and officer assignments
  • Documented and publicized skills matrix
  • Serious performance assessments
  • Disciplined engagement with the member-owners
  • Term limits

This can make a difference from where we are today … and aren’t credit unions supposed to be different?

Let’s try to change our mindsets, be vulnerable, embrace open and honest debate, and save our cooperative model, before our member-owners see no difference between credit unions and banks.

Rich Nave

Rich Nave

Rich has over 38 years of finance and accounting experience, including 17 years in the credit union industry, the last 13 as the CFO for a large credit union in ... Web: Details