Board Members Challenged To Take A Hard Look At How They Operate

Register now

The primary task a credit union's board of directors has is to govern the institution-and yet they often do everything but that, says one expert.

Michael Daigneault, principal and director of advisory services for Gaithersburg, Md.-based accountancy and consultancy DeLeon & Stang, told attendees of the recent National Council of Postal Credit Unions annual conference here a CU board has five basic responsibilities: governance, strategy, management and development, performance, and ethics and financial integrity.

"What happens is, the board gets so wrapped up in doing all those other things and forgets to govern," he said. "Many people take the first responsibility for granted-they assume the governance thing takes care of itself."

Daigneault, who is an adjunct professor of business ethics and corporate social responsibility for Georgetown University's McDonough School of Business, said the other four categories also are valuable. He said the board needs to think strategically, and do so all year long, not just at once-a-year "strategic meetings."

The management/development side includes all mentoring and evaluating, including that of a credit union's CEO, senior management and staff. "A very important role," he assessed. "The board and the CEO are like doubles tennis partners," he explained. "Both have their respective areas where they do their own thing. But, sometimes they have to cross that center line and help each other out."

The board and CEO must have "intuitive communication" to make sure the ball goes back to the other side of the net, Daigneault said.

"Management and development is important, but boards get too focused on that area and forget about governance and ethics and integrity. If they mess up those, it will mess up management and development."

CU boards must raise their level of governance, and must be a leadership source, Daigneault, asserted. He said there is a "dynamic balance" between boards and CEOs that in the most recent 30 years has tipped to one side. CEOs and their staffs have become "pretty good," he said, and "boards need to rise to that level."

One way for boards to improve, said Daigneault, is to create a governance committee. This committee would regularly examine the quality, effectiveness, accountability and future viability of the board. "Why is it the CEO gets evaluated all the time, but the board does not get evaluated? Sometimes, it is the board that is causing dysfunction at a credit union," he declared.


LAS VEGAS-Consultant Michael Daigneault offered 10 ways for CUs to improve governance:

1. Actively foster a dialogue about governance.

2. Conduct a "board or governance assessment."

3. Think in new ways, and ask good questions, by deliberating differently.

4. Establish or update the CU's code of ethics and ethics program.

5. Make sure board members know their responsibilities: legal, governance, regulatory and financial.

6. Evaluate the CEO and board leadership annually, or at least every three years.

7. Create a "governance committee" and charge it with improving governance throughout the organization.

8. If the CU does not have enough time or people for a committee, empower board secretaries to improve governance.

9. Provide constant education concerning governance issues and trends, because things change rapidly.

10. When in doubt, crisis or transition, seek governance expertise, counsel or training.

"Good governance is vital to good results, particularly during transition times, when people are thinking about big changes," he said. "Governance drives the values and standards of a credit union and impacts everything it does."

For reprint and licensing requests for this article, click here.