Organizational Failure Usually A Board Failure, Directors Told
A group of credit union directors gathered here was told they should all be subjected to a rule in Canada requiring mandatory board education and training.
Herman de Vries, manager of supervision and loss prevention for the Credit Union Deposit Guarantee Corporation of Manitoba, told the CUES Directors Conference that in nearly every case, corporate governance failures often can be traced back to the board.
"One key element is a failure to understand the role and responsibilities of the board-they get into micro-managing instead of oversight," he said. "Other failures include a lack of strategic planning, a loss of objectivity, no recognition of red flags, and inertia-a failure to act."
A quality director has many skills and behaviors that bring comfort to regulators, de Vries said. A good director should bring a questioning attitude and does not remain silent.
He or she should embrace sound business standards, have the ability to focus on big issues, and know the roles of both the board and the CEO.
According to de Vries, a director listens, but does not jump to conclusions. And, a director studies and is prepared.
CUs and their board members alike have a list of excuses for not training directors, he continued. They cite cost, lack of time and lack of opportunity to get specific training.
"Often times a director feels he or she doesn't need it," he said. "Or they say, 'I'm a volunteer, the credit union should just take what it gets.'"
However, de Vries argued, training has many pros.
"Knowledge is power, and education is never a waste," he declared. "It will help directors better understand their role and duty. It helps them focus on planning and directing."
The cost of corporate failure is more legislation, said de Vries. Directors should mandate to their own board and insist an education provision be placed in the by-laws.
"If not, then the risk exists of being compelled by the legislature. Lawmakers act to protect the public. After negligence comes new laws. If credit union boards are lax in their duties, they might lose some of their autonomy."