WAIKOLOA, Hawaii–Credit union board members gathered here were offered some pointers on how to put themselves and the boards they belong to under the microscope.
Speaking to Rochdale Paragon’s Volunteer Leadership Institute here, Filene Research’s James Marshall, who manages the Cooperative Trust, shared some of the research done by Filene on what makes for effective credit union boards.
Among the findings that research has made apparent:
- Most CU boards don’t have any formal process in place for evaluating themselves.
- Boards that do have such processes are far more effective.
- Diversity on the board to reflect that of the membership pays real dividends.
According to Filene’s research, 35% of CUs have no process for terminating ineffective directors; 37% don’t believe that their board renewal processes identify effective directors, and 61% of credit unions don’t have any kind of formal board/director evaluation process. Overall, 40% of CU boards admit that their board renewal process needs work.
The research found most CU board members joined the board as the result of a recommendation by another board member, followed by CEO recommendation, followed by coming off the supervisory committee, according to Marshall.
Marshall told the meeting he is a big proponent of so-called “Evergreen Lists,” which are lists of people who are ready to be on the board at any one point. The people on such lists are those:
- Who the nominating committee has agreed would be effective directors.
- Who have indicated a desire and availability to be board members (desire is great but availability not so easy, reminded Marshall).
- Who have been conditionally approved by the whole board.
“Part of that process means identifying skills lacking on the board and finding people who fill that gap,” said Marshall. “If you have an evergreen list you can fill a vacancy straight away.”
Marshall said credit union boards that improve their governance practices and adopt governance ratings result in improved performance by the CU. But he also offered a caveat.
“Of all the measured relationships, the only governance practice that yielded a strong positive correlation with actual credit union ROA performance was whether boards felt they had an effective CEO evaluation in place,” said Marshall. “In other words, boards that felt they had a strong CEO evaluation in place were more likely to yield stronger ROA performance.”