Nov 09 2007

The Board's Role in Credit Union Mergers

Board members discharge a number of essential duties at credit unions. None more important than the role they take in the increasingly common credit union-to-credit union merger. Listen to this interview with Texas A&M Professor Will Brown the author of Filene Research Institute’s latest study on the topic:

Brown and his research team used a variety of survey, interview, and case study methodologies to gain new insights into the credit union merger decision. The following are some of their high-level findings:

  • Mergers seem to develop for one of two reasons:
    1. Concerns about the long- term viability of the merging credit union (i.e., shrinking or stagnant membership, weakening financial condition), or
    2. The imminent departure of a longtime CEO.
  • Two-thirds of the mergers discussed in this study are not a part of the organization’s long- range plan or predetermined strategic objectives.
  • Potential merger partners are most likely to be identified through existing professional networks.
  • In about 25% of cases, the board is not highly influential in the decision to merge.
  • Most boards rely heavily on the CEO to oversee and manage the merger process.
  • Major issues discussed and decided by the board include:
    1. Making sure the merger is in members’ best interests (e.g., services offered and financial viability),
    2. Ensuring the continued financial viability of the continuing credit union,
    3. Staffing issues such as continued employment for longtime employees, consistency of benefits, and retention of key personnel,
    4. Board governance issues (e.g., allocation of board seats in the surviving organization), and
    5. Infrastructure issues such as branch locations and IT systems.
  • Three categories of board involvement emerge:
    1. Proactive and very involved (about 25% of participants),
    2. Responsive and engaged (about 50% of participants), or
    3. Minimally engaged and possibly aloof (20–25% of participants).

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Report Number 141