Current board fiduciary duties require serious focus

Pressures facing credit union boards are extremely high and directors are dealing with more complex challenges. Just like counterparts on paid for-profit company boards, these hard-working women and men have major fiduciary exposure, but without the attendant compensation and often without appropriate recognition. They govern prominent financial organizations that require strategic capital deployment. Their decisions impact significantly on the delivery of safe and secure service. Increasingly they face critical decisions that will define the future of credit unions.  

Board service is hard work and demands a high level of director commitment. Through their leadership in good governance, board members exercise fiduciary duties of care, loyalty, and obedience. The “Duty of Care” requires directors to act with care which requires incredible amounts of preparation for meetings. “Duty of Loyalty” requires directors to be well-informed to proceed in good faith in making business decisions that are in the best interest of the members and the families they represent. They devote time, effort, and talent to be able to oversee the credit union’s operations, policies, risk management, and strategy. “Duty of Obedience” ensures adherence to stated mission, law, compliance and regulation. Additionally, directors define the appropriate relationship between the board and the C-suite. In this capacity, they need to assure that intelligent and reasonable succession planning is in place. They must commit to understanding diversity and inclusion for the board and the entire organization.

Commitment to duties mean directors are fully engaged and participate in regularly planning business conversations. They oversee and provide insights into strategy in an intensely competitive environment. Experience and, most importantly, data, driven by changing demographics, are critically important to these discussions. They are thoroughly engaged in the creation of enterprise risk management models that recognize reputational risk, litigation, and regulatory compliance. Their decisions around technology and the accelerating need for substantial levels of investment capital for hardware, software, and cybersecurity protection, make a pivotal difference for the credit union’s future and its ability to deliver safe and effective service to members. 

The work of credit union boards is extremely difficult as multiple essential areas of business must be addressed simultaneously. For example, pandemic realities, demographic changes, and technological disruption are challenging the best thinking. All of this is a serious responsibility for any board, and especially for volunteer directors who are protecting members’ financial well-being. To name just two urgent matters, the changing market for digital and tech-based services, which younger demographics in particular demand, and increased necessity and cost for cybersecurity, are forcing directors to make very difficult capital allocation decisions. 

The complex competitive environment demands incredible focus and investment to remain relevant. Some credit unions find their investment needs challenge their financial capacity, and for some their very survival is at stake. Escalating investment needs are compelling many boards towards merger strategies in order to maintain member service and safety. Pressures continue to build around the decision-making process. Outside independent advisors play an incredibly important role in the navigation of the path forward. Trusted voices can assist boards and leadership to execute their duties well. Smart directors know that the duties, which they have promised to uphold, require it. They should face into this decision with confidence, trust, and a commitment to share data in a clear manner.

Stuart R. Levine

Stuart R. Levine

Founded in 1996, Stuart Levine & Associates LLC is an international strategic planning and leadership development company with focus on adding member value by strengthening corporate culture. SL&A ... Web: www.Stuartlevine.com Details

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