MADISON, Wis. – Name any state credit union league and thechances are good it's looking at diminishing numbers of affiliatedcredit unions because of declining numbers of credit unions intheir state. Forced to face this reality, boards are considering arange of options from minor tweaking to major reorganization in theinterest of keeping the board representative of the league'smembership. Jeff Carpenter, vice president of the AmericanAssociation of Credit Union Leagues travels around the country tomeet with league boards of directors that are evaluating theirboard structure. He says when he visits with league boards he'scareful not to make any recommendations. Instead he suggestsquestions board members should ask themselves, “then they have todecide what's best for them.” “In some cases, some boards decidesince there's no cost savings to be realized from downsizing theboard then there's no need to change. They keep the status quo,”says Carpenter, adding “but that's rare.” “What's driving boards'reorganization is the declining number of credit unions,” saysCarpenter. “Leagues were created around their chapters and allchapters were allotted a certain number of votes. But now we'reseeing cases where chapters with fewer number of credit unions havethe same number of votes as those with more, so there areinequities being developed. “Or we have cases where there's a lackof representation on boards of large or small credit unions,” hesays, or constituent credit unions say unqualified leaders arebeing attracted to serve on the board or the process to serve onthe board is too bureaucratic. “The bottom line is if there's aperceived inequity in board representation and all credit unionsaren't appropriately represented on the league board, thensomething needs to be done,” said Carpenter. It was changes in thecredit union landscape in Washington State that prompted theWashington Credit Union League to accept the recommendations of aleague task force and put a vote to its membership during itsannual meeting last month a motion to reduce the number of boardpositions from 17 to 10 and to revise the way board members areelected (CU Times Sept. 24). John Annaloro, president/CEO,Washington Credit Union League said the “Washington credit unionmarket is changing considerably faster than other parts of thestate. There's a lot of uncertainty and opportunity in the marketnow.” Since he became league president, for example, in August1997, Annaloro has seen six completed mergers between creditunions, three more are waiting in the wings, and two credit unionshave converted to mutual banks. Annaloro said the WCUL had firstconsidered making changes to its governance structure about twoyears ago on separate occasions because of the decreasing number ofcredit unions in the state. As of August 2003 there were 143 totalcredit unions operating in the state, and Annaloro expects thatnumber to drop below 140 by the end of the year. At one time, therewere close to 400 CUs in Washington State. “The declining number ofcredit unions through mergers and consolidations isn't unique toWashington State,” he explains. “It's the trend in all the leagues.“The financial services industry is faced with issues it has todeal with so fast these days, a league board has to be able toinitiate action quickly. Boards are making strategic and businessdecisions of greater importance these days. It doesn't allow forcasual, quarterly gatherings,” he added. Under the new bylawsapproved by the league membership, one person from each of eightgeographic districts will be elected to the board. The previousgovernance rules called for two people to be elected from eachdistrict. The newly approved plan also calls for two at-largedelegates to be elected statewide, instead of just one. Inaddition, board elections will now be conducted by mail andoverseen by an outside third party. The Credit Union Association ofOregon went through its own exercise in governance examinationstarting in 2001, and at press time it was a little more than oneweek away from learning whether its affiliated CUs agreed with agovernance task force's proposal to make significant changes to theboard structure. Richard Hein, president/CEO, OSU FCU, Corvalis,co-chair of CUAO's government affairs committee and chair of thegovernance committee said CUAO initiated the exercise two years agobecause it wanted to make sure the association was “well preparedto deal with policy issues it anticipates will confront creditunions in the coming years.” The governance committee that wassubsequently formed was made up of credit union CEOs representingall assets sizes and geographic locations, and it was charged withlooking at the qualifications, selection and election processes ofthe CUAO Board. It was also asked to review the role of thechapters in the board governance and the CUAO bylaws as theypertained to governance issues. The governance committee was askedto provide its report to CUAO by May 2002; it completed its reportand turned it over to the board in November 2001. Among thecommittee's findings, it recommended downsizing the board from 15to 10 directors and reducing the representative-to-credit unionratio from 7 to 1, to 10 to 1. The current board structure was 30years old and was developed at a time when the number of creditunions was increasing and was expected to continue to do so. Infact, the committee found, “the opposite has occurred for the past20 years.” As of August 2003, according to CUNA, there are 102credit union in Oregon, 97 of which are league-affiliated. InJanuary 2002, there were 113 total CUs in the state, and in 1999there were 125. The governance committee also recommended theselection of directors be based on congressional districts, withtwo directors elected from each of the five districts. The currentstructure has one director representing each of 10 chapters in theassociation, plus five at-large directors representing five assetgroups. “In Oregon, most credit unions are located either inPortland or along the I-5 corridor, which is also where themajority of the population in the state resides,” Hein says. “Withregulatory and legislative advocacy being our number one priority,it made sense to have the selection of directors based oncongressional districts with two directors coming from each of fivecongressional districts. If congressional districts are supposed tobe balanced according to the population, then the board ofdirectors should be balanced the same way,” says Hein. Among someof the other recommendations the governance committee made werepreserving chapters for education and networking activities;redefining the qualifications to serve as a director; creating astanding nominating committee to oversee the election process; andchanging the voting structure to one vote per member on anydecision that comes before the CUAO membership. Voting on theproposed changes began Sept. 1 and concludes the end of September.If the package is approved, changes in the CUAO Board governancewill take effect at its 2004 annual meeting. “The credit unionlandscape has changed tremendously from how it was when mostleagues' governance practices were formed,” says Hein. “For leaguesto continue to be representative of their members and be able torespond to their needs, they need to examine themselves and theirgovernance practices and be willing to make changes if necessaryfor the good of their member credit unions.” -

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