Mission Critical: Board Governance & Oversight

By Brandi Quinn

Quinn Brandi

As the financial services industry continues to evolve, credit union boards are becoming even more critical to the organizations they serve. Boards can fulfill their increasingly important role with a comprehensive plan to assess and enhance their organization’s current program. Considering the following four key areas will ensure a contemporary governance program for boards to meet the future needs of credit unions:

Roles and Responsibilities

A credit union board is essentially responsible for managing the CEO and guiding the overall strategy of the organization. As such, it is the board’s overall responsibility to provide direction to the CEO on the organization’s strategic priorities while also providing feedback on the CEO’s performance. One of the key components of this is to set CEO performance and compensation targets. 

In relation to strategy, it is the board’s overall role to set the vision for the organization’s long-term strategic plan, investments and operational priorities. For example, the board may want to consider the following key questions. What new services should we provide to members? In what areas should we invest? What gaps, if any, do we have in the current management team, and is there a strong succession plan for key roles? For what should we hold the management team accountable? Should we acquire, or might we be acquired, and what should we do to prepare?

In addition, boards must also ensure compliance with regulations – and directors can be held liable for compliance issues even if they do not actively oversee the organization’s compliance program. This is why it is also important for each director to be covered by the credit union’s directors and officers liability insurance.

Recruiting and Succession Planning

Talent is essential when it comes to building a board with the skills to compete in the 2020s. Companies, as well as credit unions, are facing increasing pressures to advance the customer experience, address the evolving industry and protect data. To address these challenges, consider the following elements when recruiting the right directors for the board:

  • Diversity of thought: Directors that represent diversity of background, education and experience comprise a boardroom with diversity of thought and the ability to challenge management. The most effective boards do not “rubber stamp,” and some boards designate a director to represent a counter position to the majority, similar to the Supreme Court. In conjunction with a strong board chair who is able to manage the deliberation process, this approach can result in great thinking.
  • Technical and financial skills:Credit unions must evolve to address increased cyber security threats, the changing payments landscape and the demand for enhanced mobile technology capabilities. To effectively guide the management team, boards must be able to navigate the technology implications that affect the overall financial industry. 
  • Outside resources: Consider bringing in outside resources for short-term consulting roles or training. This can include industry experts to provide insight on emerging trends and assist with ongoing board education.

Board succession planning is not a one-time exercise – it must be embedded within a board’s culture and part of the board’s ongoing activities.A sustainable process for board succession planning should include establishing a “future board state profile,” assessing current capabilities, determining anticipated gaps, and continuously looking for opportunities to recruit directors with a focus on essential skills and competencies.

Additional best practices for maintaining top-notch board membership include defining term limits, conducting annual interviews to “reapply” for board participation, requiring mandatory attendance at meetings, determining what committees your credit union needs, and defining a process to select and develop committee leaders. 

Board Structure

The board chair sets the overall tone and structure of the board meetings, ensuring all directors are contributing meaningfully and are heard. An effective board chair works with the CEO to set the agenda in balancing the number of strategic topics with adequate time for active engagement. This can include relevant topics such as strategic planning, financial planning, CEO succession, risk management and cyber security. The agenda may also include an open discussion time to help encourage dialogue and engagement between the board and executive leadership team.

Driving an effective board structure extends beyond the role of the chair to other committee leaders. Each of the committee chairs should strategically align the goals of the board within the practice and governance of the committee’s responsibilities. Committee agendas should directly support the board’s desired goals and ensure effective structure and processes are in place. Communication and information flow are critical to the success of board effectiveness. 

Culture

Establishing a culture of open communication is essential for an effective board. Set the expectation that every board member should share his or her opinions, and encourage debate and dissent. Given the diversity of experiences, directors must be able to address topics of their expertise but also function at an appropriate level in governance (versus the role of management) and strategic planning.

A recent survey from Russell Reynolds Associates identified behaviors that are the most important for effective directors. The behaviors revealed that being prepared is an imperative for boards today. However, what enables a board to function at a higher level is when directors are able to constructively challenge and enhance a management team’s abilities. Being current and respectful are imperatives; being bold enough to bring independent thought and ask appropriate questions are characteristics of truly effective directors. A credit union should embed these behaviors into the fabric of its culture in order to have an effective board.

Brandi Quinn is SVP of Enterprise Reporting & Corporate Secretary at PSCU. In her role, Brandi delivers senior-level subject matter expertise on corporate governance and enterprise reporting best practices. She also serves as the focal point for communication with PSCU’s board of directors and plays a significant role in the establishment and administration of critical corporate and governance matters. 

Section: Standard
Word Count: 1111
Copyright Holder: CUToday.info
Copyright Year: 2019
Is Based On:
URL: http://www.cutoday.info/THE-tude/Mission-Critical-Board-Governance-Oversight