Raising the Board Bar

CU boards worldwide will face higher standards.

September 29, 2010

The issue of board governance—performance standards, term limits, and remuneration—continues its migration toward center stage.

Following the calamities on Wall Street a few years ago, regulators around the world are taking a closer look at governance.

The topic came up frequently at The 1 Credit Union Conference last summer. It continues to draw attention in financial legislation, such as the Dodd-Frank Act and the most recent Basel accord that regulators from 27 countries—including the U.S.—approved last month.

“There are no board term limits in the U.S.,” said Gigi Hyland, National Credit Union Administration (NCUA) Board member. “Some directors can serve 30, 40, 50, and even 60 years. While that’s not necessarily a bad thing, it could mean that directors don’t always have the fresh set of eyes needed to see changes in their credit union.”

A larger issue in many countries is the absence of board performance standards, noted Andy Poprawa, president/CEO of the Deposit Insurance Corp. of Ontario and chairman of the World Council of Credit Unions’ International Regulators Roundtable.

Poprawa said Canada recently passed legislation requiring term limits for directors, but the law gives credit unions significant leeway in determining those limits.

In Australia, credit unions must develop their own policies for the renewal of their boards, Brandon Khoo, executive general manager for the Australian Prudential Regulatory Authority, said during The 1 Credit Union Conference.

Australian credit union directors, many of whom are paid, must pass a skills test to serve on the board. If a credit union doesn’t have sufficiently qualified directors, the board may appoint other directors.

Some say directors are a credit union’s greatest strength—and greatest weakness. In the future, expect regulators to maximize those strengths and minimize the weaknesses.

STEVE RODGERS is editor of Credit Union Magazine. Contact him at 608-231-4082.

Coming Soon in Credit Union Magazine:
The November issue will highlight these topics:
• Stimulus vs. Austerity. Two CUNA economists debate which approach is best for the economy in the long term.
• How CUs use ambassadors. CUs take advantage of advisory councils to be their eyes and ears in their fields of membership.
• Gift and prepaid cards. How will the CARD Act affect members’ and CUs’ use of gift and prepaid cards?
• Service delivery innovations. CUs seek new ways to deliver their financial services to members, including mobile banking, gift cards, and remote deposit capture. Which of these innovations will your members embrace?