MADISON, Wis. - The board should play a critical role in a merger representing the member’s best interests. At least that’s the theory. But what’s the practice?
William Brown researched just that subject in the Filene Research Institute 2007 study, “The Board’s Role in Credit Union Mergers.”
He conducted interviews with 42 executives and 10 board members and found that:
* Mergers developed for one of two reasons–concerns about the long-term viability of the merging credit union such as shrinking membership or weakening financial condition or the departure of the CEO.
* Two-thirds of the mergers discussed in the study are not part of the organization’s long-range plan or strategic objectives.
* Potential merger partners are most likely to be identified through existing professional networks.
* In about 25% of the cases, the board is not highly influential in decision to merger because: the acquiring credit unions are more likely to minimize the board’s role; and the boards of merging organizations are typically more involved, although not always.
* Most boards rely heavily on the CEO to manage and use professional relationships; to oversee and manage the process; and to provide accurate and complete information.
* Major issues discussed and decided by the board include making sure the merger is in the members’ best interests; ensuring the continuing financial viability of the continuing credit union; continuing employment for staff; board governance issues; branch locations and IT systems.
* Three categories of board involvement emerge: Proactive and very involved–about 25% if participants; responsive and engaged–about 50% of participants; minimally engaged and possibly aloof–20-25% of participants.
Brown suggests that the “most practical thing you can do…is to incorporate merger and acquisition scenarios into your strategic plan.”
Brown reported that two-thirds of those interviewed failed to take this approach. He also suggests developing a succession plan for the CEO, since small credit unions say the retirement of their CEO is the main reason for the merger.(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com http://www.sourcemedia.com
