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Regulator Associate directors have some responsibility
OLYMPIA, Wash. (2/12/08)--Washington state-chartered credit unions who want to add “associate” nonvoting board members to their board of directors must ensure that associates meet all of the same statutory requirements that apply to full board members, says the state regulator. This information was sent in an interpretive letter last month by Linda Jekel, director of credit unions at the Washington State Department of Financial Institutions (DFI), in response to a request for guidance from state-chartered credit unions. “Associates must meet all of the same statutory requirements for fiduciary duty, confidentiality, meeting attendance, and avoidance of conflict of interest that apply to full board members,” Jekel wrote. “A state-chartered credit union wishing to utilize associate board members must vote to amend its bylaws to include associates, and delineate the limits and conditions under which they serve.” Associate board members are a growing trend at some U.S. credit unions, but unlike elected board members, they are nonvoting, are appointed by the board, rather than elected by members, and may be appointed for shorter terms than elected board members, Jekel wrote, adding that many serve for one-year terms. Some credit unions believe that having associates on their boards helps with recruitment and retention of qualified full board members, by acting as a training program, Jekel wrote. Associates can help with succession planning, can efficiently replace elected board members who are no longer able to serve, and could provide useful back-up and business viability in the event that a disaster--such as avian flu--reduces the board, she added. However, problems can result from adding associate board members, Jekel wrote. “Care should be taken to assure that associates are truly qualified, representative of the credit union’s membership, and not merely the buddies of current full board members,” she added. “Prudent management practices require that associates be adequately screened and trained and that they acquire a basic understanding of Washington State credit union law. Associates may need to be covered by insurance, just like full board members.”


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