“The CEO is the most valuable member of the credit union!” Jerry P. Nelson, partner KNG & Company, Inc., 4/26/19
Recently, I was invited to attend the first Board Governance Institute, “Taking a Balanced Approach to Measuring Success,” presented in Orlando by KNG & Company, a leading credit union consultancy.
I jumped at the opportunity because, Credit Union BUSINESS has redoubled its efforts in helping our fastest growing audience of credit union volunteers serving on boards at credit unions across the USA, because, after all, a giant piece of “the credit union difference,” lies in our not-for-profit status and the dedication and seriousness these volunteers possess. During the Board Governance Institute, I came to know and admire a group of 17 volunteer director attendees, and three credit union CEOs who all came to learn. And learn they did, from the KNG & Company partners!
KNG partners John Gregoire, Jerry Nelson, and Mike Higgins took turns presenting comprehensive information to a lively group of credit union directors (17), CEOs (3). The audience was very impressive. A group of credit union believers who take their board responsibilities very seriously. Each member of the group was not shy about asking questions about things they weren’t sure about, and not shy about joining in the discussions.
The gathering began with a social hour on Thursday night, and the first person I met turned out to be a neighbor. Jane Eckler serves on the Supervisory Committee of Velocity CU in Palm Beach Gardens, just a few miles down the road from me. Jane spent a career in the finance department of Pratt & Whitney Aircraft, Velocity’s corporate sponsor prior to its community charter. As a financial expert, she stayed on at the CU beyond retirement from PW, and remains active in all things Velocity, including helping to build enthusiasm for a local chapter of Palm Beach county credit unions.
The second and third people I met during the party was the board chairman of Patriot FCU along with his credit union’s CEO, who had both just arrived from Chambersburg, Pa. where Patriot FCU is located. Dennis Coons (board chair) and CEO Brad Warner obviously have a good working relationship and really seemed
to enjoy each other’s company. Dennis ran a very successful business when he joined the Patriot board some years ago, while Brad spent the first 8 years of his career as a banker before working in his first credit union.
CU SoCal, based in Whittier, California, was well represented with three board members. Eric Day, Chris George, and Lee Hardeman are each dedicated to the credit union’s success. Chris is a full time financial advisor, Lee has been on the CU SoCal board for 30 years. Eric is the founder of the Volunteer Advocacy Committee. This group began in California and is growing rapidly across the country, with recent coordination inside CUNA.
Eric was the former Board Chair at CU SoCal, and is currently the SVP at the credit union. The men from CU SoCal have so many tales to tell about the many mergers they have engineered. I think I heard the figure at 17 so far. Lots of room for growth!
Bright and early on Friday morning, we hit the ground running! John Gregoire began the discussion with a group of questions:
- What are the most important skill sets required for Board Members?
- How do Board Members keep abreast of opportunities, threats and challenges facing the financial services industry?
- How have the key attributes of Board Members changed over the past several years?
- At what level of credit union sophistication do the key attributes and requirements of the Board change?
- What is the role of the CEO in the definition, growth, and maintenance of the necessary Board skills and abilities?
Attendees broke into three groups comprised of board members and one CEO in each group to discuss each question and prepare for an open discussion.
Phil Meserve, from SAFE CU and a retired Air Force officer said two important skills are competency and leadership skills are important for board member, and also age and maturity are important qualities. “People in their 20’s and 30’s won’t have the same experience as people in their 50’s,” he said.
Gary Ruhle, of MidFlorida CU expressed that having the right people in the right jobs in both the C-Suite and on the board holds major importance. “And by not micromanaging,” he added. “having the right people on the bus in the right positions is most critical.” “The Board has to remain competent and relevant,” he continued, “through continuing education, and a succession plan for Board and senior staff is very key to making good policy.”
Rhonda Bouldin, a board member of the People’s Trust Credit Union in Houston, suggested that board members need to stay relevant by the credit union’s offering relevant services like cyber security for IT to build a solid foundation. “To make the experience perfect for members,” she said, “whether brick & mortar and online, it should be flawless.”
Jo Whiting is a career lawyer and serves as Chairman of the Board at Service CU in Portsmith, New Hampshire. She was attending the Institute with Service CU’s
newly minted CEO, David Araujo, who has been on the job for only a few months. Jo said that she wants to be involved in strategy with the new CEO. They both feel that the
relationship between Board and CEO are very important for setting the tone of the credit union’s service orientation.
KNG partner Jerry P. Nelson lead a fascinating discussion on CEO Compensation, which is a most critical consideration of credit union boards. “The CEO is the most valuable member of the CU,” he said. “The board’s most important duties are to direct the CEO, evaluate the CEO’s performance, and approve the CEO compensation.” he continued. “There is a direct link between the CEO comp and CEO retention,” he added.
It was noted that the CEO properly compensated also has the benefit of letting that leader know that he or she is well regarded by the board, and it conveys appreciation.A properly compensated CEO also insures that “compensation compression” will be prevented for other C-Level executives at the credit union. ‘
Mike Higgins was the third KNG partner to carry on the group’s discussion. Entitled Seeking CU Wisdom, Mike described the “Downward Slide” of Lacking Characteristics in six steps:
- Credit union lacks knowledge, skill and ability to grow revenue.
- Cost cutting ensues (becomes outdated if protracted).
- Reaches for revenue (credit risk, interest rate risk).
- Net charge0offs increase.
- Net worth declines.
- Merge or liquidate.
And, on the positive side, Mike also described the “Characteristics of Healthy Financial Institution”
- Knowledge, skill and ability to consistently grow revenue.
- Discipline to achieve a high level of operating leverage.
- Awareness and acumen to sustain sufficient margin.
- Produces enough return to maintain adequate reserves.
Mike went on to explain things like the CU Yield and Cost of Funds Trend, ROA to Maintain Target Net Worth @ 8% Asset Growth, and the Circle of Life or Spiral of Death Business Model.
Editor’s Note: SPOILER ALERT! While I thoroughly enjoyed every minute of my two day adventure at the The Board Governance Institute, I have to confess that, as an English major, I fought hard to keep up with every word, but some of the information flew over my head. For that reason, I am including the KNG Company, Inc. PowerPoint presentations for your viewing pleasure.
Thanks for reading!
Tim O’Hara, Editor & Publisher