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Michigan Credit Union League Home » Information Services » Publications » Contact » 2005 » 4th Quarter » Good Governance  

Good Governance

New League Consulting Service Helps CU Maximize Effectiveness, Efficiency of Their Boards of Directors

Quick quiz: Which one best describes your credit union’s board of directors?

Group A: Involved in virtually every aspect of credit union operations; shows little regard for management’s prerogatives.

Group B: Gives management carte blanche; asks no questions, takes no meaningful actions — and hopes for the best.

Group C: Studies issues carefully, makes policy wisely; embraces change and is not afraid to innovate; does not intrude on management prerogatives but holds CEO accountable as appropriate.

Most every self-respecting credit union board would like to think of itself as a solid candidate for the third category — but reality and perception are not always one in the same. How can credit union policymakers measure their own performance, and ensure that they operate among “Group C” and are not among the boards that micro-manage or serve as a rubber stamp?

Mark Lynch

Recognizing the critical nature of sound governance to a credit union’s success — and the fact that even the most effective boards could still be doing even better — the MCUL is now offering a Governance Consultancy Service. This new service can provide credit unions with a governance assessment; a comprehensive governance program which examines and addresses all governance issues, including training; and a consultancy service that allows credit unions to addresses a range of specific governance issues.

“The majority of credit union boards are doing a good job,” said credit union consultant Mark Lynch, who is coordinating the new service. “But the reality is that some are not, and even the ones that are performing well could be doing better.”

Lynch is a frequent presenter at MCUL conferences, sharing his expertise on both credit union governance and on the volatile issue of credit union taxation, based on his experience in his native Australia. He became an Australian Credit Union Development Educator in March 1999 and a US Development Educator in 2001, returning in 2002 as a course mentor.

A credit union member for 28 years and a board director for 22 years, he served as deputy chairman of Australian National Credit Union, Australia’s largest credit union, and as volunteer and resources manager with the Australian Credit Union Foundation.

Today, he makes his home in Sault Ste Marie, Mich., with his wife, Mary, a credit union employee and member of the MCUL Family Involvement Council. Since moving to the U.S., he has delivered presentations for some 30 state leagues.

Lynch emphasized that credit unions need not be experiencing problems or facing a crisis to benefit from the Governance Consultancy Service. In fact, a proactive approach to effective governance is far preferable to waiting until problems begin to surface.

“The initiative can come from the credit union’s CEO, who believes that the board needs to improve the way it operates,” he said. “Or, it could come from the board itself coming to the realization that it’s not clear about its role or not functioning as well as it could.

“Sometimes, an under-performing board can have a brilliant, high-performing CEO, in which case the flaws in the credit union’s governance aren’t readily apparent. But, what happens when that CEO leaves or retires? Then, the board members are going to be faced with some real problems — and far from knowing the answers, they may not even know the right questions to ask.”

Credit unions are able to choose from a menu of consultancy packages with a fee system based on the asset size of the credit union. Specific areas in which boards often seek assistance include the planning process; risk management; values and ethics; clearly defined functions and responsibilities; board and committee structures; board composition; and performance assessment.

“There are very few boards that couldn’t perform better in some or all of these areas,” Lynch said. “And, considering how different the financial services marketplace is today, it isn’t enough to just stick with what worked years ago. In fact, when you consider how much credit unions have changed over the years, any credit union that is still operating today like it did in the 1950s, ‘60s or ‘70s probably won’t have much of a future.”

The Governance Consultancy Service can address credit union needs through three fundamental approaches:

Governance Assessment — an evaluation of current governance practices and compilation of a report with recommendations to maximize effectiveness and performance.

Comprehensive Consultancy Service — an assessment of current governance practices and submission of a report, followed by working directly with the board and management to implement these recommendations.

General Consultancy Service — applies when a credit union identifies its own governance issues and seeks to have them addressed using the consultancy service.

Lynch noted that the new service will be flexible, adapting to the individual needs of each credit union.

“One board may want some assistance in introducing a performance assessment system for directors, while another may decide to seek help in developing a board education and training policy,” he said. “A chairman might seek assistance in negotiating a remuneration package with the CEO, or a CEO may feel the board is micromanaging and wants some help in dealing with the problem.

Or, a board may want help in developing a governance policy manual — which could range from advice on what it should contain all the way up to actually writing the manual. The approach we take will be determined by the needs of the credit union.

It’s human nature to be uncomfortable with change, and initially many credit union directors approach governance restructuring and performance evaluations with some hesitation,” Lynch added. “But in the end, it’s been my experience that fear of the unknown is normally replaced with a question — ‘Why didn’t we do this earlier?’”

Strategic planning services are also part of the new League service. Once again, credit unions will be able to choose an option which best fits their strategic planning needs.

Strategic planning is a key aspect of a credit union’s governance process, but for the most part is treated separately from the Governance Consultancy Service,” said MCUL Strategic Solutions Consulting Vice President Alan Babcock. “However, for those credit unions that are interested in both, it certainly makes sense from a time and efficiency standpoint to tie them together and have one person providing both services.”

Babcock encouraged credit unions interested in the Governance Consultancy Service to obtain more information by contacting their League consultant, or by contacting him directly at or (800) 262-6285, Ext. 252.

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