CU Boards Not Devoting Enough Time to Important Strategic Matters, CUES Report Shows

Although credit union boards are stepping up in some very important ways, they continue to fall far short in other critical areas such as spending enough time on strategic discussions that can help credit unions become more vigilant, identify risks and opportunities, and adapt to imminent changes.

In a 2020 State of Credit Union Governance report that highlighted credit union governance and leadership trends, directors said they spend as much as 60% of their board meeting time on operational oversight issues. The recently released report was produced by CUES in Madison, Wis., Quantum Governance L3C in Herndon, Va., and the David and Sharon Johnstone Centre for Corporate Governance Innovation at the University of Toronto.

More than 30% of directors surveyed for the report said they do not feel that their board is effective in helping to develop the credit union’s vision, mission and strategy.

“Many directors feel they are spending too much time  ‘in the weeds’ – reviewing compliance policies, approving progress reports and addressing operating issues – to the detriment of time spent on important strategic matters,” according to the report.

Surveyed board members said only 26% of their time focuses on reviewing matters of strategic importance.

However, a review of credit union board meeting agenda and minutes suggested that even this 26% might be an overestimate because some directors may include the time they spend on strategic issues during their annual retreats in their overall tallies, with little time actually being dedicated to strategic issues in their regular, monthly board meetings, according to the report.

In addition to struggling with balancing operational and strategic discussions in the boardroom, the report revealed directors often fail to ask the hard questions that need to be asked and they rarely hold each other accountable for poor performance.

The report also found a lack of clarity among directors on what “effectiveness” really means in a number of key areas of good governance, and that governance is a term that many credit union leaders find difficult to define with precision.

“There are still differing perceptions between board members and CEOs regarding critical governance issues (including, importantly, trust) and those perceptions diverge even more based on director and CEO tenure,” according to the report. “Larger credit unions, with assets of $1 billion or greater, still tend to rate their governance practices higher than small credit unions rate theirs. And, finally, (survey) respondents remain very concerned about recruiting future board members.”

In addition to its key findings, the 58-page report, available on CUES’ website, addresseed five central areas: Board structure and composition, board governance, board leadership, strategy and decision making.