Second In A CU Journal Series On The Role Of Volunteers
It is a fair question, but a deeply sensitive one around credit unions and their boards of directors: Are CUs doing enough to weed out older board members who have served for decades but lack the financial knowledge and experience to be effective?
At the heart of the controversy a sense of unfair targeting of older directors.
But industry insiders and experts say that's not the point. At issue is — in today's increasing complex and regulatory marketplace that features increasing complex financial products and services — is someone who became a director 30 years or even 40 years ago still fit to lead?
When CUNA's Community Credit Union Committee commissioned a white paper on effective CU board succession planning two years ago, George Hofheimer, chief research officer for the Filene Research Institute in Madison, Wis., addressed the elephant in the room in his introduction:
"The typical credit union board member is a 61-year-old white male," Hofheimer wrote. "He has served on his credit union's board for well over a decade, and has a better than average chance of serving on the board for many years to come."
After noting most CUs do not have a reliable system for attracting the next generation of credit union board members, Hofheimer asks how CUs will effectively compete in the future?
"When discussing board succession issues, the debate tends to veer toward ageism, nothing could be further from the truth," he said. "I have noting against 61-year-old while males (I hope to be one someday), but the cold hard fact is today's credit union board members are aging, and the credit union system is struggling to find future credit union board members."
Jim This, president and co-founder of the Paragon Group in Olympia, Wash., told Credit Union Journal the first point to keep in mind on the issue is "Older does not mean unable to understand." The second point, he said, is CUs need to realize having a quality board means there needs to be an influx of new ideas.
The Paragon Group, a CUSO owned by TwinStar Credit Union offers organizational development, risk management solutions, strategic planning, executive recruiting and volunteer development. It partners with CUNA in producing board effectiveness evaluations. Last month, the firm presented its 17th annual Volunteer Leadership Institute Hawaii.
"What we encourage boards to do is look at themselves to see how many open positions there are," This said. "If there is natural turnover, they might not need term limits. But if the same board members have been there for eight or more years, term limits might be necessary."
There needs to be a good blend of legacy and new ideas on CU boards. As for succession, he cautioned there is no one-size-fits-all solution, according to This.
"Again it is not about age, but how many years the same person has been on the board," he noted.
Knowing When It's Time To Step Down
Pete Weldon, chairman of the National Association of Credit Union Chairmen (NACUC), said he understands why the question of when to replace a director needs to be discussed.
"Some credit unions ask me how to get rid of a board member — I hope to know when to step down," he said.
Weldon is chairman of the board at $206 million-asset 1st Community FCU in San Angelo, Texas. He said his CU has two "older" board members, "but both of them are very sharp."
"The fast pace of today does not allow for board members who are not able to keep up," Weldon said. "If someone is not keeping up, the executive committee needs to approach him or her and offer an emeritus spot for a year or two, but they have to do what is best for the credit union and the members."
Chuck Fagan, president and CEO of the Credit Union Executives Society, said when he hires for staff at CUES, "age is not a consideration and it should not be one for a credit union's board."
Fagan stressed the concept that it is "very positive" to have a "constant cycle" on the board to get fresh perspectives.
"So whatever that board member looks like, the credit union should find that person," he advised. "The chairs have to take an active role in making sure every board member is contributing. The credit union has to come first."
CUES' Center for Credit Union Board Excellence recommends a self-assessment be done for a given credit union's board every 12 to 18 months.
"The board needs to be examined individually and how it acts as a group," said Fagan.
Best Practice: Recruiting New Directors
The volunteer structure means "warm, wonderful people" inhabit credit union boards, according to Susan Mitchell, but not necessarily directors who are well equipped to navigate the new normal in which CUs have to operate.
Mitchell, who is CEO of Las Vegas-based credit union consulting firm Mitchell, Stankovic and Associates, said there is a "transition" underway in many CU boards. Part of this transition is being forced by regulators via educational standards, while another portion is being forced by the health of the volunteers themselves.
"I know of one director who has been on the board for 60 years, and health is becoming a factor," Mitchell said.
Much of the emotion that goes into the question of when and/or how to replace a director comes down to best practices, according to Mitchell. She said both board and CEO succession plans must be methodical.
"Boards need to have recruiting and nominating processes that go beyond a circle of friends or colleagues to the membership itself," Mitchell advised. "Next, there needs to be a better onboarding process for vetting volunteers. The credit union needs to know about the candidates' innovation, and their potential contributions."
Mitchell emphasized that it's extremely important that the recruiting/vetting process hold people accountable, which, she pointed out, can be very difficult when the people are volunteers and, often, friends.
The difference between an emergency and a formal transition process makes people more accountable, Mitchell continued. She is currently is working with a credit union on its strategic planning sessions. The CU's chair is asking board members how much longer they plan to serve to enable the credit union to find replacements in a timely manner without having to enforce a strict term limit.
"The idea of a term limit for directors sounds good to people, but it is tough on the CEO and on the board," Mitchell said.
She suggested the best way is to look at the nominating process. Volunteers need to be recruited to a candidate profile, she said. "Know the background, qualities and attributes of the most desirable board member. There are many ways to find these people."
Avoid Hard & Fast Rules
Scott Earl, CEO of the Mountain West CU Association, said credit union boards do need to transition to the younger generation if CUs are going to adapt to serve Gen X and Gen Y.
"A 70-year-old board member might be able to understand younger people, but not all 70 year olds do," he said. "That is the problem with a hard-and-fast rule."
Earl said he has never been a fan of term limits for directors. He cited a CU in Colorado that he said has done a "phenomenal job" with a board that limits directors to three, three-year terms, "Which makes for an active nominating process," he observed.
"Some older boards do a phenomenal job, so the best way to judge is by the success of the credit union," said Earl. "Some directors have been involved forever and I would not trade them for anything, but others should have been gone years ago."
Scott Simpson, CEO of the Utah CU Association, noted there are a number of vibrant credit unions in his state that have had longstanding board members.
"Those credit unions all are on the leading edge of technology, and that comes from good management," he said. "There is not a one-to-one correlation of age or length of service and the capacity to face the future. With that said, all credit unions are at some level recruiting for the next board position. We are mortal, so at some point we have to keep an eye on the horizon."
