Final in a CU Journal Series on the Role of Volunteers
MADISON, Wis. — One of the most visible changes at credit unions in the wake of the Great Recession has been the sharp increase in expectations for credit union directors — especially when it comes to financial education.
Three years ago NCUA released Rule 701.4 requiring board members at federal credit unions to have a "working familiarity with basic finance and accounting practices." Since then, numerous organizations have offered director education programs, including in-person and online workshops, retreats and seminars. Overall, the consensus seems to be the rule had its intended effect and directors have become better educated.
Chuck Fagan, president and CEO of the Credit Union Executives Society, said the question of board preparedness is "right up our neck of the woods as an organization that focuses on professional development."
While there has been increased interest in financial literacy, Fagan said many boards have improved their orientation process and online courses for directors.
"CUES has invested in our Center for Board Excellence, so boards can incorporate learning into their regular board meetings," he said. "This program is two years old and was put in place out of requests by credit unions. That portal has a significant amount of information. It has content from the Rotman School at the University of Toronto. More than 100 credit unions have been involved."
Though Fagan believes the drive to improve director education is working, he insisted the CU community still has more work to do.
"We have to get many more credit unions involved in strengthening their constant education process so boards develop," he said. "Boards have to let the qualified people at the credit unions do the day-to-day stuff, while the boards think about strategy, leadership and growth."
Jim This, president and co-founder of the Paragon Group, an Olympia, Wash.-based CUSO owned by TwinStar Credit Union that offers board effectiveness evaluations, said when NCUA made director education a focus, he thought it was a "great" development.
"I think board education has increased considerably over the past three to five years," This said. "CUNA has volunteer achievement programs (VAP). It is a basic volunteer certification. Many credit unions have written into their policies a requirement for a certain number of hours of continuing education annually. Credit unions are making available to their volunteers a lot of resources online. I hear board members are going to these things more and more."
Mark Lynch, a credit union consultant now based in Sault Sainte Marie, Mich., specializing in growth strategies, program and product development, strategic planning, board governance and project management, said he is seeing a "very slow move toward more qualified boards."
"I find directors who go to conferences are more diligent these days about attending sessions, taking notes and learning," he said. "While there may be some who are just at the conference to pick up giveaways from the vendors, it should be noted that when I speak at management conferences I see plenty people in the bar schmoozing when they could be attending sessions."
Perspective Please
Scott Earl, who became CEO of the Arizona Credit Union League in 2007 and was named CEO of the Mountain West CU Association when the ACUL combined with the Colorado and Wyoming Leagues, said it is important to keep some perspective on the supposed shortcomings directors had prior to the education requirements.
"Compared to rest of financial institutions, credit unions got through the recession better than a lot of banks did," Earl noted. "Still, the NCUA education standards were a good idea. Most common sense credit unions were already doing it. If that regulation was a big deal for a credit union, it was not doing a good job in the first place."
The Mountain West CU Association offers a number of educational opportunities for directors, Earl pointed out, ranging from schools and certificate programs, live seminars and webinars, and conferences such as the recent Western States Volunteers' Conference in Las Vegas. While at that conference Earl said the MWCUA's goal is to provide volunteers, board members and supervisory committee members with deeper knowledge, expose them to new ideas and give them a chance to interact with their peers.
"Education is so important," he said. "Volunteers need to continue to get education. Requirements today make it tougher for credit unions to recruit volunteers, but at least they come in with an understanding of what is expected. We have been a volunteer-driven industry for years, and I think the role will be critical going forward."
Net Positive
Some industry insiders say the NCUA regulation requiring director education was a "net positive," but insisted many credit unions already were doing a lot to make certain their directors were educated and prepared.
According to Pete Weldon, who is chairman of the National Association of Credit Union Chairmen (NACUC) and chairman of the board at $206 million-asset 1st Community FCU in San Angelo, Texas, there are better chairmen today due to the requirements.
Asked if directors are better educated today, Weldon replied, "Heavens yes!" and adding, my board has been good all the way through."
Weldon brought up a related topic, which he said he is flatly against.
"I hate term limits for credit union directors," he said. "It can take two or three years to really know what you are doing, and then up comes a term limit."
Weldon asked rhetorically if people would stop seeing a doctor simply because they have been seeing that doctor for two or three years.
"It is awfully hard to get young people to get involved in boards because they are busy establishing their own lives."
