In late January, the NCUA announced some new rules, and clarified others, applicable to boards of federally chartered credit unions. Everyone is focused on the new NCUA requirements for financial literacy in board members, but some may be overlooking an even more important pronouncement: The NCUA stated that while boards may (and in our opinion, should) delegate operational responsibility to credit union senior management, they cannot delegate their responsibilities for direction and control of the credit union.

The buck stops in the boardroom. The board "must directly exercise its authority to hire, fire, determine duties, set compensation and discipline senior management. The board must also ensure that appropriate policies are in place to guide senior management in the execution of their duties." A strong, clear and strategic compensation policy is the cornerstone for all of this. This is one of the most important responsibilities of any board, and without it, any long-term strategic success is left to chance.

Where should a board start in "ensuring that appropriate policies are in place to guide senior management?" As a wise man once said, it's best to start at the beginning. Usually the beginning is a clear definition of where the credit union is going in the long term. Long-term goals must be clearly defined and understood by all members of the board and senior management.