This is the second part of a three-part series examining the board function at a CU.
If you are like me, it is uncomfortable to be on a board not knowing much about the function of a board, and the director’s role in it. For some who have never served on a board before yours, it can be a journey of several years gaining a little here, and a little there. During that time, like an engine with one cylinder firing only occasionally, your board is not operating at peak performance.
Legal Duties of Boards and Directors
The fundamental legal realm to cover gives an overview to help the new recruit put themselves in perspective.
For the board as a whole:
* Overview of corporate laws affecting board activities.
* Review of fiduciary duties and responsibilities; standards of diligence.
* State statutes that limit personal liability.
* Credit union laws and regulations governing board activities.
* Audits and examinations.
For individual directors:
* Fiduciary duties and responsibilities represented by individual actions.
* Code of ethics and conduct.
* Core values
* Governance policies (clarify board, committee and CEO roles and boundaries)
* Overview of applicable laws, such as the Bank Bribery Act and Bank Secrecy Act.
If your UC leads a normal life, the above should cover the legal landscape fairly well. If you have had unusual legal or regulatory issues, there may be other facets that you will want your legal counsel to present to a new director.
History of the Organization
I can’t tell you how many times the history of the organization has come into play in the organizations where I held a director or committee member’s position. While it is difficult to know just how much of the organization’s history will be relevant to a new director’s work, these are some fundamentals that will assist in the process.
* Date chartered, original field of membership
* Where the early days of operations took place.
* Volunteers or past CEOs who made significant contributions.
* Creation of top management positions such as marketing, human resources, information technology, strategy, etc.
* First standalone building; first branch.
* Business model changes: mortgage loans; indirect lending; credit cards; share certificates; share drafts; e-commerce.
Once you have gone through the trouble of creating a narrative of the history, add it to the business plan document. Corporate history is a common element of business plans and a good place for a new volunteer and new employee to go gain foundation knowledge about the organization.
Partners and Major Relationships
Here reveal to the new recruit who the credit union has partnered with to provide service to members, to be a part of the credit union community, and to be a part of the ‘local’ community.
Examples include trade and professional associations, business partners such as data processing firms, credit union service organizations (owned in whole or in part or under contract), law firms, CPA firms, and more. It is possible this orientation be centered on management’s disaster recovery plan for that likely includes this kind of list.
What Your CU Expects Of Each Director
Over time you have developed expectations for director productivity and behavior. If these are written (and they should be), this is an essential orientation tool.
Have the mentor, if you are using that idea, go over the expectations carefully. Of course, there are individuals who will be an issue later even after reading the expectations. However, having this in the process of orientation makes it possible to refer back to the expectations when addressing incidents. Most important, review of the expectations makes deviations much less likely to occur and become an issue.
The expectations may refer to the Code of Ethics you have in place. If not, this is the part of the orientation that covers the code.
Gaining Knowledge From Financial Reports
People without financial backgrounds cannot expect to get a total pass in court, a “get out of jail free” card of sorts, for not having some understanding of what the reports tell them. Even new directors with financial backgrounds need to understand the significant differences that credit union accounting and reporting present.
Start the financial orientation with an introduction to the typical reports contained in the typical board agenda packet. An orientation to the pages is not sufficient. Take the time to teach each new director how to read them at least to the extent of the balance sheet, income statement, key ratios, trend charts.
Avoid the tendency to deliver too much to someone with no financial or accounting background. It may already be they are quenching their thirst at a fire hydrant with the above.
Also, too much knowledge of the details of these reports can open the door to micro-managing.
While the financial area may be the most complex of concepts for new directors to grasp, there are many more elements to a comprehensive orientation program. We will explore those in the next and final installment of this series.
Dan Clark is a governance and planning facilitator and coach operating out of Tallahassee, Fla. Reach him at dan
