PROCTOR, W.V. — Before Bob Burrow was elected to the board of Corporate One FCU in April, he had reservations about taking on the risk of overseeing a corporate credit union with all the problems the system has been experiencing.
"Sometimes you have to say, 'I am going to take a risk' because you think it's worth it," said Burrow, CEO of the $221-million Bayer Heritage FCU here. "You can't live in fear."
Interviews with leaders of a number of corporate credit unions indicate there is heightened awareness among existing and potential board members of the liability risks associated with overseeing a corporate CU, but that's not dampening interest in serving, they said. Educational programs for board members, however, will likely become a stronger focus, especially if NCUA changes board qualifications, the management at several corporate CUs told Credit Union Journal.
When U.S. Central and WesCorp were placed in conservatorship by NCUA, one key question raised was where were the boards of those institutions. Burrow said that regardless of whether or not NCUA makes changes, board members need to be better educated because their role is evolving.
"Are the challenges facing corporate credit unions and their boards more difficult now than in last 10 to 15 years? You bet. And I think it's going to get even more difficult," said Burrow, who previously served on the board of West Virginia Corporate CU. "It will behoove all of us on corporate boards to not be satisfied with just showing up and reading reports and half-heartedly going through the motions. We need to be as educated as we can and try our best to understand the intricacies of this whole marketplace and stay on top of current issues. We have tremendous responsibility on our shoulders to make the right moves. I think board members have to ask intelligent questions and be more challenging."
Doug Wolf, CEO of Midwest Corporate FCU in Bismarck, N.D., feels the makeup of corporate boards will not be greatly impacted by the system's current problems, as long as the NCUA does not call for significant changes in board member background and education.
"From our core membership I don't see where getting people to serve on the board will be unusually difficult," Wolf said. "However, if NCUA follows through with further (Advance Notice of Proposed Rulemaking), where there is talk about qualifications of board members and changes are implemented, that could cause some issues."
In Columbus, Ohio, Corporate One CEO Lee Butke acknowledged that discussion about board qualifications might lead to a call for outside directors, which he thinks may be a mistake, producing boards that have business savvy but are less engaged. Citing observations from investor and philanthropist Warren Buffet about what makes an effective board of directors, Butke emphasized the need for board members to have "skin in the game. I cannot figure out how an outside director could be connected to the concept of credit unions and member-owners without having a significant stake in the CU movement. I think there is this view that having true, independent directors would have caused something different to happen within the corporate system. I think if you look to the global financial markets, and to markets in general, that certainly did not keep the problems with the economy from happening."
Having a skin in the game will continue to drive interest from natural-person credit union CEOs in serving on corporate CU boards, said Thomas Bonds, CEO of Corporate America CU in Birmingham, Ala. "It would seem to me if I were a leader of a natural-person credit union, I'd be wanting to serve on my corporate credit union's board so I could influence decision making."
Burrow agrees. "When I decided to run for the board of Corporate One, I knew it might be a bad time to even consider doing that. But then I got thinking about the importance of being able to influence change and to try to preserve a corporate system that is worth preserving. How can anyone do that if when times get difficult everyone heads for the hills?"
But Glendale Area Schools FCU President Stuart Perlitsh is skeptical whether any new blood will affect change within the corporate ranks. "With everything that has gone on, the boards of corporate credit unions should be affected," said Perlitsh. "But I doubt that they will. Because the CU community subscribes to the old boys network that created the condition we are in — with overlaps of corporate boards, and trade association presidents serving on corporate boards. It's just a pool of incest that has created this toxic waste and I don't see things getting any better anytime soon."
