By: Kevin Shaw, Senior Regional Director
Governance has been defined as: The system by which entities are directed. It provides structure and processes for decision making, accountability, and behavior at the top of an entity. Governance of our industry has always been its backbone due to a credit union’s purpose and philosophy. With increasing external factors and potential for partnership discussions, board governance has been a hot topic in recent years. The content below speaks to many of the requirements, duties and resources that emphasize the most effective characteristics of a well governed board of directors.
Requirements
- Illinois chartered credit unions must have at least 7 members of the board
- Federal chartered credit unions must have at least 5 members of the board
- Establish the par value of the share
- Declare the dividends and interest rates
- Approve the credit union’s budget
- Act in good faith and the best interest of the membership
- Know the credit union’s financial statements, ratios, and their cause & effect
Other Duties and Responsibilities
- Manage the CEO/board relationship
- Establish succession planning for board members and key personnel
- Emphasize supervisory committee activity for governance monitoring
- Understanding credit union bylaws to assist with specific board actions
- Manage risk and provide direction
- Provide adequate bond coverage
- Manage liability risk
- Develop and approve policies
- Establish and maintain a system of internal controls and compliance
- Provide direction on the strategic plan
Tools and Resources to Consider Utilizing (if you are not already)
- Establish associate positions for succession planning
- Start emeritus positions for historical experience and guidance
- Utilize other committees like credit, executive, investment, membership, compensation, ALM, building, search, nominating for special or specific situations
- Put in place term limits to continue to obtain needed expertise as the credit union grows
- Increase awareness of the Credit Union Act for regulatory guidance and parameters
The Credit Union Movement was founded on a motto that still stands strong today, We are:
Not For Profit, Not For Charity, But For Service
And as volunteers, your service and direction is appreciated.
Please don’t hesitate to email us at [email protected] or contact your Regional Director if you have questions regarding this blog post.