The biggest risk to credit union long-term viability?

Remember the collapse of Lehman Brothers back in 2008?  When the fourth largest investment bank filed for bankruptcy? There was a tremendous uproar from the public and government about the economic impact of the downfall. The collective contempt focused on the company’s mismanagement and risk taking.  Much of that pressure fell squarely on the board of directors.

Lehman’s Board of Directors was composed of ten members, headed by Chairman and CEO Richard S. Fuld, Jr. Nine out of ten directors were retired. Moreover, their average age was 68.4 years (four of them were over 75 years old). Surprisingly, only two members had direct experience in financial service industry. Just one of those had current financial sector knowledge.

Sound familiar? Are we as credit unions immune? Or is it just the really large organizations with complex operations where such scrutiny can be made? We’ve debated the role and advancement of our board of directors’ for many years, yet we’ve not seen any real action or change.

Credit union charters state that the board must maintain its fiduciary duty first and foremost to the membership. And it’s the board, not the CEO, which ultimately serves as the long-term link to maintain the strategic direction and value proposition that credit unions represent to their membership. There is no doubt that the management team will determine the day-to-day success of the organization, but the board provides the necessary continuity of governance.  Together, they carry the vision and mission of the credit union forward well beyond any individual team member. Can we look at ourselves and answer in complete honesty that our current board processes deliver the very best for our credit union?

No one can question the ethics or commitment that our industry directors demonstrate. Quite the opposite, as volunteers, they consistently go above and beyond for the sake of their organization. Most have devoted significant years to the credit union. Each and every one of us owes them a debt of gratitude. However, the complex task and the tenure of our volunteers leave the credit union in a precarious position.  I’m not concerned about all the talk regarding how many CEOs will retire in the next five years.  My worry is the prospect of a mass exodus of our directors which will leave us disconnected from our mission as credit unions.

Our boards must realize the pros and cons associated with the current situation. We have to start building processes to enhance the structure and make-up of the future boards. After all, they will ultimately carry the organization forward. The industry must take a serious look at the make-up of our directors. Let the Lehman Brothers example be an eye opener for us as we seek a more balanced and technically sound board composition.

Does your board have the financial and technical expertise to fully understand the business as well the risks inherent in the financial industry? Is the diversity of membership reflected in your directors? Does the board have strong performance and accountability plans? Are there active and formal processes to bring in new directors who can be mentored and indoctrinated?

No one questions our volunteers’ commitment and devotion. But our boards have a tough job at hand. They must look inward and make some hard decisions about the future of the credit union board of directors.



Tony Ferris

Tony Ferris

Tony is a leading financial services strategist who has devoted 18-plus years to the financial services industry focused on creating competitive advantage through organizational and strategic development, collaborative partnerships, and ... Web: Details