As credit unions turn their attention to their respective fall planning sessions,
many will implicitly or explicitly undertake an evaluation of the role and effectiveness
of their board.
Credit union boards are a key stakeholder in the overall management and success
of the organization. A credit union board that understands its proper function
in the organization and has the capacity to meet its obligations serves as an
effective catalyst for growth and member value. Clearly establishing the appropriate
roles and responsibilities of the board and its relationship with the CEO is
therefore essential to a credit union's future success.
Setting the Strategic Direction
The primary role of a credit union board is to establish the strategic direction
of the organization. The board's role is to define the credit union's future
and leave daily management responsibilities to the CEO and his/her team.
Assuming responsibility for defining the credit union's vision and strategy
can be a significant challenge for a credit union board. As one chief executive
of a small credit union commented, "our board used to leave the strategic
direction to me. Getting my board to become accountable for setting our strategy
required a lot of effort to educate and train them."
Once the board establishes the strategic direction of the credit union, the
board needs to step back and allow the CEO and his/her team to develop and execute
the implementation plan.
Credit union boards also play a critical role in helping to set the organization's
performance goals and regularly monitor progress against plan. An effective
board influences management decisions by setting goals and monitoring performance
against these goals, not by 'micro-managing' the day-to-day operations of the
credit union. According to the chief executive of a large credit union, "my
board provides an indispensable role of ensuring that my team and I remain on
Since a credit union board represents the interests of its members, the board
must be aware of the key risks to which the credit union is exposed and vigilant
in managing these risks. Key risk categories include operational risks (i.e.
fraud, systems crashes, security breaches), market risk (i.e. risks associated
with interest rates changes), credit risks (i.e. delinquencies), and event risks
(i.e. floods). Effective board governance also includes ensuring compliance
with all relevant regulatory issues.