11/13/2022
By Ray Birch
ARLINGTON, Va.—It's never been more critical for credit union boards to have a “bench,” says one expert, who notes the strategy not only leads to stronger succession planning but also deepens board member experience and knowledge while helping to avoid reputation risk.
“I see volunteers from all across the country at different training events,” said David Reed, partner at Reed & Jolly, PLLC, who consults with credit union boards and provides training. “The issue is our boards are generally getting older, and they are not going to be able to serve forever. So, when does the credit union realize it needs to replace people on its board?”
Reed said a move is generally made by a credit union’s board only when it is forced to do so.
“The primary reason that someone leaves the board is death or a serious medical issue, and that's not exactly what I would call controlled succession planning,” said Reed. “And when that happens, the credit union typically finds itself with no bench, if you will. They don't have any backups. Since this is not a controlled process, the person who steps in is generally somebody the management team recommends.”
Avoiding a Conflict
Reed said replacing someone with an individual who has close ties with management does not align with a primary directive for credit union boards—they reflect the membership they serve and are diverse, not only in race and gender, but also in skills.
“Someone comes in as a board candidate through a recommendation from the management team, to me, that is a bit of a conflict of interest,” Reed said. “I understand how management is always going to be involved in this process, to some extent, because they meet a lot of people. Yet, if the board is not deliberate enough in their succession planning/board member replacement process, they are naturally going to look more to the management team to help fill positions. That's not really how this process was designed to work.”
Reed reminded that cooperatives are democratically run institutions.
“The board is elected from among the members, and they have nomination requirements and policies…One of the big things that I've been preaching to boards is that you need to have a process where you are identifying future volunteers and you're bringing them into your operations as associate board members, as auxiliary board members, as committee members,” said Reed. “Then, when it comes time to rotate in a new board member, you have somebody you've already vetted. They have experience with the credit union. They've had some training in the credit union. You've seen how they work with others, and you bring in that volunteer.”
David Reed
The JV Team
Having a bench is critical to the effectiveness of the board and the future of the credit union, stressed Reed.
“Call them JV board members, if you will,” he suggested. “Whatever you want to call them, these people can go to the meetings. They can learn. They can receive the board packets. I believe it's a diversity imperative—and I don't mean just diversity as far as age, sex and race, but just different perspectives. If you have a seven-person board where, on average, (individuals have served) as a board member for 20 years, yes, they are putting their hearts into it their work and they are good at what they do and they're dedicated. But let's face it, that's not a whole lot of new perspective, and they're receiving most of their information from the management team, as opposed to a 30-year-old consumer member of a credit union who looks at the world differently.”
Just Won’t Wait
Reed said another important reason to build a bench is because younger candidates won’t wait, as they have in the past.
“Millennials, for example, you tell me they will consider being part of the board if they are told they will have to wait five or six years, which is often the case for new members at many credit unions,” Reed noted. “They will not wait that long. You need to get them involved sooner.”
Issue of Reputation Risk
If the board does not reflect the makeup of the membership, Reed said that can bring risk to the credit union’s reputation.
“The cooperative board is meant to represent the community they serve, and a lot of them don't,” said reed. “That's what we see over and over again. Everybody on the board worked at the original sponsor of the credit union. Well, now the credit union no longer has a single sponsor. Now they are a community credit union, and they simply don't have a lot of people from that community.”
Comments
Post a Comment
Please no profanity or political comments.