Boards and Leadership: How Boards Can Add More Value
The research literature on the governance of corporations is extensive, and Researcher Robert Hoel mines it well for specific insights to improve the governance of credit unions. Perfection is elusive, but boards should deeply consider the ideas printed in this full report.
Boards should consider these ideas:
- Four board profiles emerge, from the weakest (“rubber stamp”), to the middling (“scout” on one hand, “watchdog” on the other), to the strongest (“challenger” boards). Challengers are rare, but they combine the best inclinations of helpful advisers and tough overseers.
- Today, 88% of corporate boards conduct structured board performance evaluations, and 79% of directors think doing so is the most important technique to ensure board effectiveness. A proactive nominating committee and a board evaluation system accompanied by an action plan are the best ways to encourage appropriate board turnover.
- Boards should not fixate on traditional metrics like return on assets (ROA) or CAMEL ratings, though they certainly should watch them. Instead, they should seek out, or build, meaningful membership metrics that ensure individual members receive a positive total return on their credit union capital.
- Behavioral economics proves that leaders should guard against dangerous biases— like clinging to sunk cost projects, overvaluing their own opinions, and herding with peers— by overtly acknowledging them and systematically seeking further opinions.
And that’s just a start. Download the full report for a guide to reconciling the business-driven demands of leading a modern credit union, with the mission-driven needs of your membership.