BACK ON THE BUS

Credit Union Management, Jun 2004 by Pratt, Laura

For the first 60 years of Cornerstone Credit Union's life, its board members were all employees of a single firm. When formed in 1939, the CU was set up to be the credit union for the staff of Microswitch (now a division of Honeywell).

But when the Freeport, Ill.-based credit union (www.cornerstonecu.org) shifted to a community charter in the late 1990s, board members recognized the need to cast their net further afield. "They realized they had to integrate more of what was going on in the community," says Stephen Withington, member development coordinator at the $85 million credit union. "They had to look to the community to broaden the diversity of the board. And they realized they needed to look into more training. Education has always been acknowledged as an important component of our existence."

As well it should, say those with an eye on what makes a healthy board. "Director education is a vital but underestimated contributor to a culture of board independence, and is worthy of systematic attention by those who care about the governance of corporations." So said Constance Horner, a guest scholar in governmental studies at the Brookings Institution, in a recent issue of Directors & Boards, a Philadelphia-based quarterly dedicated to the topics of leadership and corporate governance.

She went on to say that boards need to recognize that, although their basic function has remained unchanged in recent decades, there have been substantial alterations to their "makeup, structure and culture." Many of these changes reflect the heightened value boards are placing on director independence. Making the most of that, she believes, is very much tied up in director education.

But Horner acknowledges that committing to this imperative does not come without strings. For one, it's a costly endeavor. For another, it requires the dedication of time. But "the payoff of such a successful decision ... cannot be overstated," she says. "In contributing to successful, independent board decision-making, director education has important consequences."

Cornerstone CU, with 15,000 members, has 10 active directors supported by a collection of committee members.

Step one in increasing its knowledge base, a mission upon which Cornerstone CU embarked when it became a community charter, was sifting through its membership in pursuit of qualified candidates to recruit for board succession, with a view to diversification. "We had many new board members who had no experience," Withington says. "Something had to be done."

And so the credit union formed a volunteer education committeemade up of a combination of board members and management-and set about rewriting the organization's volunteer education policy.

Now, says Withington, who sits on this committee, directors are given specific expectations about instructional requirements. They're told what they need to study and within what time period. And even volunteers who play roles in the board's various committees are expected to complete certain education modules.

The education committee was also charged with updating the existing education model to put it more in line with modern technology. "The original policy was written several years ago," Withington says, "and we knew that there were more efficient avenues to offer education to our volunteers than the traditional, taking home of the book and filling in the blanks on the test."

Today, Cornerstone CD's directors have a responsibility to keep up with the latest information regarding the credit union industry by "continually educating themselves about topics and issues related to credit union operations, board governance and leadership," Withington says.

All told, he notes, the refurbished policy is designed to ensure that new (and experienced) board members seek opportunities to strengthen the skills needed to effectively serve and lead the credit union. It outlines that each director is expected, after initial certification, to get at least 16 hours of continuing education each year "in appropriate and relevant areas." They can pick their educational pursuits from a comprehensive list in the credit union's "online board room," and avail themselves of a variety of educational opportunities, including completion of nationally recognized certification programs and attendance at professional meetings and conferences.

In addition, each supervisory committee and credit committee member is expected to complete eight hours of continuing education each year. A volunteer must execute minimum certification under CUNA's Volunteer Achievement Program or the CUES Director Education Center within three years of initial appointment, and provide evidence of progress toward certification yearly. Volunteers that fail to complete one of these educational programs within three years of appointment are not re-nominated to the board or reappointed to a committee.

BACK TO BASICS

This kind of commitment to director education, says Anthea Radford, is the only way a modern board can exercise effective governance. Traditionally, says Radford, president/CEO of Arjane Governance Group (www. arjane-com), a governance-consulting company based in Mississauga, Ontario, and author of the CUES Director Education Center, the role of a board member has been perceived as simply showing up at board meetings and reacting to whatever management presents.