By Susan Mitchell, Mitchell Stankovic

In today’s complex financial services industry, the governance of credit unions must be modernized to reflect relevant business practices and to build organizational value for members. Strategic representation at the board level requires more than attending monthly meetings; it is about positioning the credit union to serve a diverse and changing field of membership. There’s so much more to know – from technology to regulation to business analytics. Engaged volunteer board members will strive to be aware of these matters at a high level and how they can affect the credit union, while refraining from getting involved in the operations of the institution. Boards should be looking on the horizon to the financial services landscape and simply guiding the credit union toward a destination that changes the lives of their members today and into the future. 

High-performing boards shape the direction of the credit union through its mission, strategic plan, purpose statement and critical policies. If your credit union’s mission is to be the community’s financial institution, then the board and management should be reassessing policies that stand in the way, so the board can approve changes. Management should also be ensuring a seamless process is in place for new account openings, whether reducing paper work, simplifying the legalese or making digital options available.

Then the board must ensure the leadership has the resources necessary to support the vision. As consumers move deeper and deeper into the digital world, credit union boards must keep up to speed and work with management to ensure the appropriate level of investments are made in this area. With increasing digital dependencies also comes increasing cybersecurity needs. Are those being properly supported as well? Every year there should be an increasing technology budget. Yes, it is expensive to operate in the digital space but critical to survival, let alone thrive in today’s environment.  

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The most successful boards also monitor performance – trust but verify! The board must ensure the members funds are being used to good purpose. Again, if your credit union aims to be the community’s choice, are the proper key performance indicators, such as membership growth, lending practices that reach a diverse community and average age of members, moving in the right direction after a reasonable amount of time? 

High-performing boards have systems in place to attract, retain and develop incoming volunteers, and hold every member of the board accountable. This governance practice is tough to implement as it requires an assessment of people who are at the soul of the credit union fabric – some serving as volunteers for more than 50 years. Nominating committees are reluctant to look for new skills in volunteers as an incumbent board member may be challenged and feelings hurt. Yes, credit union cultures are all about the people, however, credit union volunteers need to step up and ask themselves if their backgrounds are relevant to today’s membership. Become mentors to support the credit union legacy, instead of coveting the social engagement that will eventually require others to force the decision. Good governance practices require reassessment of volunteers and their contribution to the credit union, identifying gaps and seeking to fill those gaps with a deep bench of associate volunteers who can step up when openings arise. Board assessments must be both broad, assessing the composition of the board, leadership potential, technical expertise, etc. of the board as a whole, and individually focused. Key areas to review regarding existing individual board members and volunteers include:

• Understanding mission and vision
• Strategic representation of a member group
• Awareness of products and services and pricing
• Meeting attendance, service on committees and preparation for board meetings
• Engagement in a collaborative and informed way
• Keeping members’ interest in mind
• Supportive of management and asking relevant questions
• Attending conferences and staying current on best / worst business practices
• Recommendations for enhanced business practices and new ideas for consideration

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These are important characteristics to look for and ask about when interviewing board candidates, too. As members leave the board, credit unions must create a pipeline of volunteers. We see far too many credit unions with boards that do not reflect the current field of membership or have lost their commitment to cooperative principles. Here are some good questions to ask your candidates as you interview them and rate their answers:

• How would you describe the Board's role in a credit union?
• What is the CEO's role?
• What do you think are the most important financial considerations that board members should understand and why?
• What is your motivation in wanting to be a board member?
• Please describe current volunteer activities.
• What field of membership do you represent and why?
• How would you be able to make a difference on the credit union board?
• What do you see as the strategic challenges facing our credit union and the industry?
• As a board member, you will be asked to commit time to training, monthly meetings, strategic planning sessions and other fiduciary responsibilities as needed.Will you be willing to serve and have time allocated as defined?
• Other thoughts?

Not only do these questions help you determine whether the candidate would be good fit, but it’s useful information to have on existing board members as well. Ask all volunteers to go through a vetting process when terms come up. Here’s a sampling of solid questions to ask:

• What changes have occurred within the economy that the board should take into consideration when representing the member’s best interest?
• Please describe your continued commitment to the credit union and why you want to serve?
• What education have you done to ensure your knowledge is current and relevant to set policies and provide strategic direction?
• What field of membership do you best represent at this time and why?
• Describe the role of a board member and what leadership qualities will be required in the future.
• There are highly confidential issues discussed at the board meetings. Please tell us what is your position on this aspect of the board role?
• How important is trust and transparency within the boardroom? How will you ensure that the board members are working well together at the highest ethical level?
• If you were seeking new board members today, what qualities would you request?
• Other thoughts?  

Credit unions require thoroughly vetted volunteers who bring educated ideas to the table and understand the needs of the community as well as the financial institution. And when they start losing their edge and commitment, we must be willing to help them see it’s time to allow new volunteer candidates an opportunity to serve the institution. When board members lose touch with what’s on the horizon in the financial world, or even when their background is no longer representative of their own neighborhoods, the credit union board must be prepared with strong replacements when the time comes.

Finally, the future of the credit union cooperative business model rests in the hands of the volunteers. Reputational risk is paramount and social media commentary can enflame or enrich the member experience and credit union financial health. What is your board’s reputation in the marketplace? What is the story being told within the member community and the industry? Board liability is greater and CEO relations are not as easy to navigate as in the past. Larger organizations, higher compensation, greater regulatory oversight and professional board practices are all being scrutinized. 

We owe it to the future financial strength of our members, their communities and the credit union community as a whole to embrace modern governance.