MADISON, Wis. – Name any state credit union league and the chances are good it's looking at diminishing numbers of affiliated credit unions because of declining numbers of credit unions in their state. Forced to face this reality, boards are considering a range of options from minor tweaking to major reorganization in the interest of keeping the board representative of the league's membership. Jeff Carpenter, vice president of the American Association of Credit Union Leagues travels around the country to meet with league boards of directors that are evaluating their board structure. He says when he visits with league boards he's careful not to make any recommendations. Instead he suggests questions board members should ask themselves, “then they have to decide what's best for them.” “In some cases, some boards decide since there's no cost savings to be realized from downsizing the board 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,” says Carpenter. “Leagues were created around their chapters and all chapters were allotted a certain number of votes. But now we're seeing cases where chapters with fewer number of credit unions have the same number of votes as those with more, so there are inequities being developed. “Or we have cases where there's a lack of representation on boards of large or small credit unions,” he says, or constituent credit unions say unqualified leaders are being attracted to serve on the board or the process to serve on the board is too bureaucratic. “The bottom line is if there's a perceived inequity in board representation and all credit unions aren't appropriately represented on the league board, then something needs to be done,” said Carpenter. It was changes in the credit union landscape in Washington State that prompted the Washington Credit Union League to accept the recommendations of a league task force and put a vote to its membership during its annual meeting last month a motion to reduce the number of board positions from 17 to 10 and to revise the way board members are elected (CU Times Sept. 24). John Annaloro, president/CEO, Washington Credit Union League said the “Washington credit union market is changing considerably faster than other parts of the state. There's a lot of uncertainty and opportunity in the market now.” Since he became league president, for example, in August 1997, Annaloro has seen six completed mergers between credit unions, three more are waiting in the wings, and two credit unions have converted to mutual banks. Annaloro said the WCUL had first considered making changes to its governance structure about two years ago on separate occasions because of the decreasing number of credit unions in the state. As of August 2003 there were 143 total credit unions operating in the state, and Annaloro expects that number to drop below 140 by the end of the year. At one time, there were close to 400 CUs in Washington State. “The declining number of credit unions through mergers and consolidations isn't unique to Washington State,” he explains. “It's the trend in all the leagues. “The financial services industry is faced with issues it has to deal with so fast these days, a league board has to be able to initiate action quickly. Boards are making strategic and business decisions of greater importance these days. It doesn't allow for casual, quarterly gatherings,” he added. Under the new bylaws approved by the league membership, one person from each of eight geographic districts will be elected to the board. The previous governance rules called for two people to be elected from each district. The newly approved plan also calls for two at-large delegates to be elected statewide, instead of just one. In addition, board elections will now be conducted by mail and overseen by an outside third party. The Credit Union Association of Oregon went through its own exercise in governance examination starting in 2001, and at press time it was a little more than one week away from learning whether its affiliated CUs agreed with a governance task force's proposal to make significant changes to the board structure. Richard Hein, president/CEO, OSU FCU, Corvalis, co-chair of CUAO's government affairs committee and chair of the governance committee said CUAO initiated the exercise two years ago because it wanted to make sure the association was “well prepared to deal with policy issues it anticipates will confront credit unions in the coming years.” The governance committee that was subsequently formed was made up of credit union CEOs representing all assets sizes and geographic locations, and it was charged with looking at the qualifications, selection and election processes of the CUAO Board. It was also asked to review the role of the chapters in the board governance and the CUAO bylaws as they pertained to governance issues. The governance committee was asked to provide its report to CUAO by May 2002; it completed its report and turned it over to the board in November 2001. Among the committee's findings, it recommended downsizing the board from 15 to 10 directors and reducing the representative-to-credit union ratio from 7 to 1, to 10 to 1. The current board structure was 30 years old and was developed at a time when the number of credit unions was increasing and was expected to continue to do so. In fact, the committee found, “the opposite has occurred for the past 20 years.” As of August 2003, according to CUNA, there are 102 credit union in Oregon, 97 of which are league-affiliated. In January 2002, there were 113 total CUs in the state, and in 1999 there were 125. The governance committee also recommended the selection of directors be based on congressional districts, with two directors elected from each of the five districts. The current structure has one director representing each of 10 chapters in the association, plus five at-large directors representing five asset groups. “In Oregon, most credit unions are located either in Portland or along the I-5 corridor, which is also where the majority of the population in the state resides,” Hein says. “With regulatory and legislative advocacy being our number one priority, it made sense to have the selection of directors based on congressional districts with two directors coming from each of five congressional districts. If congressional districts are supposed to be balanced according to the population, then the board of directors should be balanced the same way,” says Hein. Among some of the other recommendations the governance committee made were preserving chapters for education and networking activities; redefining the qualifications to serve as a director; creating a standing nominating committee to oversee the election process; and changing the voting structure to one vote per member on any decision that comes before the CUAO membership. Voting on the proposed changes began Sept. 1 and concludes the end of September. If the package is approved, changes in the CUAO Board governance will take effect at its 2004 annual meeting. “The credit union landscape has changed tremendously from how it was when most leagues' governance practices were formed,” says Hein. “For leagues to continue to be representative of their members and be able to respond to their needs, they need to examine themselves and their governance practices and be willing to make changes if necessary for the good of their member credit unions.” -

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