How the Policy Governance Model Can Guide Board/CEO Relationships

The most critical relationship in a credit union is between the board and CEO. One approach that a number of credit unions have used in this relationship is the Policy Governance Model. Several years ago State Employees Credit Union (MI) changed the way that the management and the board communicated by adopting the Policy Governance Model as developed by John Carver. In this governance model the Board communicates policy to management and in turn receives regular monitoring reports.

 
 

The most critical relationship in a credit union is between the board and CEO. One approach that a number of credit unions have used in this relationship is the Policy Governance Model.

Several years ago State Employees Credit Union (MI) changed the way that the management and the board communicated by adopting the Policy Governance Model as developed by John Carver. In this governance model the Board communicates policy to management and in turn receives regular monitoring reports.

SECU's board governance model calls for the Board to govern the credit union through four basic policy groups or categories. The first is the ends policy. This communicates in broad terms why the credit union exists and what it means to accomplish for members. The second is a listing of executive limits, setting limitations beyond which management may not go. The third maps the Board/Management relationship. The fourth is a definition of how the Board governs itself. Naturally, all these are interconnected and must be considered as a whole body of policies.

The third policy above - on the Board/Management relationship -- explains to the CEO (who is the Board's only employee) that the Board makes the ends policy but allows a reasonable interpretation thereof. The Board says that it will accept reasonable interpretations but will also be the final arbiter of interpretations. Accordingly, the Board is able to change policy rapidly and retains a very high level of control of the credit union.

For the ends and limitations policies, the CEO is obliged to make regular reports to the Board. Thus the Board is continually monitoring results not the means by which these are achieved. For example, SECU's Board no longer goes on an annual or semi-annual strategy planning session with management.

To hear more about State Employees Credit Union's policy governance and how two other credit unions have implemented it please join us December 3rd, 2pm eastern, for Callahan's latest webinar The Policy Governance Model. Click here to learn more.

 

 

 

Dec. 1, 2003


Comments

 
 
 
  • Excellent
    Anonymous
     
     
     
  • Timely article. The issue of board governance will impact credit unions more and more in the very near future.
    Anonymous