Outing the Elephant

illustration of an elephant in a boardroom
By Leisa Goodman

3 minutes

Credit union boards need to discuss these four challenging topics.

All credit union directors have been there—having to tackle uncomfortable topics they’d prefer to leave well enough alone.

Attendees of Rick Powers’ session at Directors Conference 2016 cited CEO succession, director pay and mergers among the tough discussions they’ve faced.

Here are four top “tough topics” from Powers—national academic director at the University of Toronto’s Rotman School of Management, Toronto, and lead faculty for CUES’ Governance Leadership Institute™—that boards need to discuss.

1.  New Director Recruitment

Consider what skills are already represented on your board as you recruit, Powers said.

For example, if you have financially literate directors, look for new members with a deep understanding of member needs. Powers suggests filling out a grid with the name of each board member on the vertical axis and desired skills on the horizontal. Filling in the boxes for the skills each current member has will help you spot gaps.

Most boards value industry expertise. Recruiting domain experts (such as a director with IT experience,) can have positive and negative effects. Although such directors possess a wealth of experience, they can also shut down challenges to their views.

“Research indicates the higher the proportion of domain experts, the greater the likelihood for failure,” said Powers. “In normal or stable situations, domain experts were helpful. However, in situations of high decision uncertainty, they had a negative impact.” 

Counteract the potential negatives of having a domain expert with data-driven decision-making.

2.  Board Makeup and Diversity

It’s a great idea to add female directors.

“Women often bring a different skill set,” said Powers. “Statistics also show the more women you have in senior management, the better the company performs.”

Powers suggests the nominating committee recruit board members all year long—starting when the board election ends. “Create an evergreen list ... those who are committed ahead of time,” he said.

Powers also suggests observing turnover rates and tenure. “Consider implementing formal board renewal guidelines,” he said.

Other ways to groom potential board members include having associate directors, who attend and participate in meetings, but don’t vote.

3.  Board Compensation

For CUs that are allowed to compensate board members, deciding whether to do so—and how—can be a tough decision.

Powers said compensation can help attract and retain board members. It also increases accountability and can result in directors increasing the time they give.

However, compensating directors takes money from other things. It can also make directors unwilling to step down, he noted.

4.  Cybersecurity

When it comes to cybersecurity, “it’s not a matter of if an attempted breach will happen—it’s a matter of when,” Powers said. 

He suggests increasing cybersecurity awareness by leveraging:

  • hindsight—learning from how others have handled cyber attacks;
  • oversight—knowing your current security framework;
  • foresight—running stress tests and security breach scenarios; and
  • insight—discussing what security needs will be in five, 10 and 15 years.

The ultimate goal of any CU board is the success of the organization—and its members. To effectively steer their organizations in the right direction, board members need to talk about a variety of important topics, including what might be the elephant in the room.

Leisa Goodman is senior marketing specialist at CUES.

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