MADISON, Wis. (8/25/11)--Credit unions’ rapid modern rise--from small, fragmented lenders in the 1970s to increasingly sophisticated full-service institutions today--distracts from the fact that governance structures, in stature and in practice, have changed slowly in response, according to new research from the Filene Research Institute. “Power and Governance” Who Really Owns Credit Unions?" by Robert F. Hoel, professor emeritus for the College of Business at Colorado State University, offers critiques of annual meetings, CEO compensation, antidemocratic board renewal policies, hostile mergers, and board perks--to separate credit union rhetoric from credit union reality, said Filene. The governance report, the first of three, encourages directors and leaders of credit unions to:
* Measure members’ sense of credit union ownership and assess the relative governance power of the actors in their credit union to determine whether that power hierarchy is in the best interests of members. * Take steps to overcome governance biases. For example, a bias toward lack of board professionalism can be addressed through targeted board recruitment efforts. A bias toward excessive risk aversion can be addressed through in-depth analysis and discussion of risk-reward tradeoffs. * Expect regulators to overreact and try to dominate credit union decision-making in difficult economic environments. * Operate the credit union with transparency. Withholding information from members is unnecessary if the board is doing its job well. * Don't fret about low turnout at credit union annual meetings. Most owners of large institutions do not wish to be directly involved in the governance process. Instead create an extravaganza and use the event primarily as a marketing opportunity. * Realize that they share the responsibility to prioritize goals and demand high levels of organizational performance. Credit union members won’t demand anything. They will just take all or part of their business elsewhere if the credit union doesn't deliver good economic value.
“Power and Governance: Who Really Owns Credit Unions?” will be followed by two more reports: “Boards and CEOs: Who’s Really in Charge?” and “Boards and Leadership: How Boards Can Add More Value.” All three take aim at credit union governance, both the good and the bad, and prescribe real-world responses. To download the complete report, use the link.