Credit Union Boards Face Challenging Times

Today’s environment just might be the most challenging one that credit union boards have faced in modern memory. The pressures of serving on volunteer credit union boards are extremely high. Just like their counterparts on paid boards at for-profit companies, credit union boards have a major fiduciary responsibility, without the attendant compensation and often without appropriate recognition. Yet like their for-profit counterparts, they govern substantial financial organizations and are responsible for managing capital risk.

Credit union board members are industry heroes. They assure member service and financial safety through their leadership in good governance. They provide insights into strategic goals. They oversee management of risk, which seems greater today than ever before. Current issues include an intensely competitive environment, often from larger and better funded entities.  Organizational stresses include litigation, regulatory compliance and decisions related to technology and investment capital for hardware, software and cybersecurity protection.

This is hard work. Every director must ask themselves why they joined the board, and whether they have the capacity to continue serving at the highest of levels. They must consider questions like:

1. Do you fully understand current expectations of board service?

2. Are you clear on the credit union’s mission and statement of purpose?

3. Do you understand fiduciary duties of care, loyalty and obedience, and are you familiar with your directors and officers (D&O) policy?

4. Do you understand the charter and workings of each board committee?

5. Are you prepared to fully participate and engage in both committee and board meetings?

6. Do you have access to organizational leadership to learn all you need to assess your participation?

7. Are you satisfied with the “tone at the top” in addressing ethical conduct and compliance with law and regulation?

8. Does the board have an effective onboarding process?

Ongoing board service demands additional board member attention. Consider the following:

1. Are you fully up to speed on, and given full access to, the organization’s business plan? And do you receive data on member satisfaction?

2. Is the board fully engaged in Enterprise Risk Management (ERM)?

3. Do you understand the technological needs and investment requirements for safe and effective operation, including a robust cybersecurity plan?

4. Do you fully understand the appropriate relationship between board and management?

5. How effective is the board in assessing the effectiveness and accountability of the C-suite?

6. Is there a succession plan in place?

7. Is the board committed to Diversity, Equity & Inclusion (DEI) and Environmental, Social & Governance (ESG) awareness?

8. Do you review the impact associated with reputational risk and your continuing service on the credit union board?

9. How effectively do you participate in board conversations, and are you comfortable with challenging conversations when you have a different point of view?

“Duty of Loyalty” requires directors to be well informed to proceed in good faith in making business decisions in the best interest of the organization. Board members must now devote more time, effort and talent to keep themselves fully informed to oversee the credit union’s operations, policies and strategy.

The attention to “Duty of Care” is also increasing. Do you actively participate in strategic discussions based on diversity and community outreach? Directors know they must act with the care that a person in a like position would reasonably believe is appropriate for members of a governing body in similar circumstances. Pandemic effects, demographic changes and technological disruption are taxing the best minds out there.

The board’s work is becoming much more difficult, due to factors including the changing market for digital and tech-based services that younger demographics demand. This complex competitive environment requires ever-increasing investments just to stay in the game. Such risks and challenges impact credit unions’ financial standing and for some, it’s about survival. It is increasingly difficult to chart a path forward.

Compared to the past, service-oriented credit union board members are facing mounting stress. Their decisions go to the heart of delivering safe, secure, state-of-the-art service to members. Many boards are finding that escalating investment requirements are forcing them to choose credit union merger strategies in order to maintain member service and safety.

These cumulative pressures are causing a growing number of credit unions to seek outside advisors to help board members carry out their duties and responsibilities as they navigate uncharted waters. It often takes a new, trusted voice to make sure that current and potential board members can satisfactorily answer the questions above. The duties of care and loyalty require it.

Stuart R. Levine is Chairman and CEO for Stuart Levine & Associates LLC in Miami Beach, Fla.