Model Governance Code Issued in Washington State

OLYMPIA, Wash. – Mindful of both state and national attention on corporate governance, the State of Washington’s Credit Union Division is making available model codes which set out policy recommendations for membership voting, board elections, ethics, and other issues to credit union managers and volunteers. The model codes are “strictly for discussion and we hope credit union boards take a look at them” in light of new complexities and responsibilities for directors, explained Linda Jekel, the division director and head of an industry-backed 2005 Governance Task Force which produced the codes. The policies, detailed in a 57-page task force report issued in September and circulated this fall among Washington CUs, are a fallout, officials said, of the thwarted Columbia Credit Union conversion to a mutual savings bank nearly two years ago. In a bulletin accompanying the models, Jekel stressed that her division requested the task force to help answer questions about election of officials and membership rights. She said the policies are offered to credit unions as suggestions, do not have the force of law, and are not part of the examination. The policies cover such areas as campaigning for office; member access to corporate records; elections; and reporting of illegal, fraudulent or dishonest conduct-whistleblower provisions. Jekel expects further discussion of the codes this spring, probably in March or April, when she meets with members of the “Save Columbia CU Committee.” She also said she intends to meet with a representative from O Bee CU of Tumwater. The CU’s directors had raised concerns with the Washington Credit Union League last May about the role of elected volunteers in league leadership. More recently, O Bee directors had complained about a lack of volunteers on the task force itself, which was put together by Jekel and the Washington League. Officials said the 14-member task force, which contains a preponderance of CU attorneys but also has CEOs and one vendor representative, was organized by Jekel and Stacy Augustine, senior vice president and general counsel for the league, as a result of thorny membership issues raised during the Columbia CU scrap in Vancouver. “There were questions raised about the democratic process in electing and nominating candidates,” said Jekel. Since September, Jekel and her staff, joined by the league, have conducted a series of four meetings across the state to discuss the model policies. Describing governance “as still pretty top of mind” among CU managers, Augustine said the task force is an outgrowth of a Washington and Oregon attorneys group which meets informally and regularly to discuss legal problems impacting the industry. “Some issues did come out of the Vancouver altercations,” she said, noting that CU executives have grappled ever since of what is fair and unfair in handling elections. The task force has issued a report. It starts by noting that the implementation of governance standards under Sarbanes Oxley “have increased member and regulatory scrutiny” over corporate governance issues and that while only two provisions on document destruction and whistleblower protections “explicitly require credit union compliance (with or without a policy) the Act addresses many processes and practices that may be relevant to credit unions.” The report went on to say that “the scandals associated with the passage of Sarbanes Oxley are expected to have an effect on consumer expectations. “For example, once consumers come to expect all publicly traded corporations to have a policy on ethics, they may also expect their credit union to have an ethics policy,” the report stated. Credit union attorneys said the Jekel task force has already triggered wide-scale reviews of internal governance policies at CUs in both Washington State and Oregon. “I can’t say it is all due to the task force meetings, but some of my clients are already moving ahead with changing their policies, many of which are based on bylaws that are 35 years old,” said Portland attorney Hal Scoggins a partner with Farleigh & Witt. -