'Disturbing Conclusions'

Register now

A new study says it has uncovered some "disturbing conclusions" in how credit unions recruit and select members of the board of directors.

While volunteer directors are often cited as a distinguishing characteristic of credit unions, a new study from the Filene Research Institute authored by William A. Brown of Arizona State University suggests that credit unions recruit and select new board members most commonly through networking and word of mouth, relying on an existing volunteer network and "using a nominating committee often dominated by existing board members."

Brown said he further found that board member recruitment typically involves limited use of job descriptions for board members, limited use of skill profiles to select members, and few strategies in place to ensure a diversity of new board members. "A natural conclusion is that the board recruitment function yields candidates who mirror the views and attitudes of current directors," Brown stated.

The findings are based on a survey of 672 credit union executives and 379 board member representing 713 credit unions from across the U.S. Credit unions participating in the survey are representative of all assets sizes, types and locations, the author said.

"The Brown report suggests a number of steps credit unions can take to maximize the effectiveness of the board recruitment and selection process," Filene said in its analysis. Among those steps are:

* Consider adopting a more comprehensive recruitment system.

* Develop a profile of board member competencies.

* Consider board term limits.

* Expand the election system to allow for more open participation by members.

* Examine best practices in recruiting and selecting board members

"The Filene Research Institute is interested in credit union boards for a number of reasons," says George Hofheimer, Filene Director of Research. "Credit union boards are different because they are comprised of volunteers who represent the membership. But the make-up of credit union boards often fails to reflect the changing demographics of the membership. The divergence of opinions on the value of boards is extremely volatile, making research a valuable tool in understanding differing opinions. And public policymakers have recently cast an extremely bright spotlight on the quality of governance."

CUJ Resources

For more information on both studies, or to order copies, visit www.filene.org. Copies are free to Institute members; $125 to non-members.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER