Transcript Document

SUCCESS
Next Exit
National Credit Union Administration
Office of Small Credit Union Initiatives
Board Governance
Road To Success
What We’ll Cover
Topic 1
Board Governance
(What does it mean?)
Topic 2
Principles of Board Governance
(What are the principles?)
Topic 3
Board of Directors
(What are their responsibilities?)
Topic 4
Board of Directors
(How to be an effective director?)
Board Governance
What does it mean?
• Governance is the fulfillment of board
stewardship entrusted in directors.
• Governance means practices that comply
with federal laws, rules, and regulations
consistent with sound operations.
• Governance provides the structure for credit
union objectives, the means of attaining
those objectives and monitoring the
performance.
Principles for Board Governance
(Macro Discussion)
Principle 1
• Board members must be qualified, understand their
role and exercise sound judgment about the credit
union’s affairs.
Principle 2
• Board members approve and oversee the strategic
objectives and values that are communicated
throughout the credit union.
Principle 3
• Board members set and enforce clear lines of
accountability throughout the credit union.
Principle 4
• Board members ensure there is appropriate oversight
by senior management consistent with board policy.
Principles for Board Governance
(Macro Discussion)
Principle 5
• Board members and senior management must utilize
the work conducted by the Supervisory Committee,
internal auditors, if applicable, external auditors, and the
NCUA.
Principle 6
• Board members must ensure compensation policies
are consistent with the credit union’s culture, long term
objectives, and environment.
Principle 7
• Board members must govern the credit union in a
transparent manner.
Prerequisite Skills for Directors
1. Must make a commitment to serve by taking an
active role and having an enthusiastic attitude;
2. Must have the ability to work as a team member;
3. Must be a credit union member in good standing;
4. Must be bondable; and
5. Must understand or have the ability to learn
financial statements and the laws governing credit
unions.
Board Structure
Smart Art
Page Layout
Federal credit unions may not have fewer than five and
no more than 15 board members.
Federal credit unions must have a quorum for board
meetings (50 percent plus one) that a credit union’s
bylaws prescribe, even if the credit union has not yet
elected the prescribed number.
Board Effectiveness Dynamics
Pre-Service
Recruitment
Retire from Board
Engagement
Stay on Board
Mid-Term
End Term
Directors
4 - Core Responsibilities
(Micro Discussion)
Responsibility #1
Select qualified senior management and
evaluate management’s performance.
Responsibility# 2
Establish, review, and revise business goals,
standards, policies and procedures.
Responsibility# 3
Review operating results and performance of
new and existing products/services.
Responsibility# 4
Ensure compliance with applicable laws and
regulations, as well as the credit union’s
policies.
Board Minutes
• Minutes are the primary source by which
examiners evaluate a board and its actions.
• Minutes should support conclusions reached
by the directors.
• Minutes enable the examiner to evaluate how
the directors and management interact and
perform their job responsibilities.
• Minutes help determine the adequacy of
management and the effectiveness of policies.
Board Minutes
Significant Actions
• Delegations to
Management
• Loan Policy Changes
• Allowance for Loan Loss
Account Review
• Collection Problem Loans
• Loan Rate Changes
• Recordkeeping Problems
• Dividend Declarations
• New Programs
• Investment Activities
• Capital Accumulation
• Approval of Charged-Off
Loans
• Asset Liability Management
• Budget Review
• Financial Statement Review
• Fixed Assets Purchased
• Loans to Officials
• Progress in Meeting Goals
• Review of Examination and
Audit Reports
ROUGH
ECONOMY
&
TOUGH
DECISIONS
AHEAD
Stormy Road Ahead
Challenges Facing Directors
What Makes an Effective Director?
#1
Know your credit union’s history, charter, mission
statement and bylaws.
#2
Know the credit union’s policies and procedures by
setting standards of operations.
#3
Understand and evaluate the credit union’s
financial reports, operating budget, audit and
examination reports.
#4
Correct any findings identified by the NCUA
examiner or auditor.
What Makes an Effective Director?
#5
Represent and promote the credit union to the
potential membership.
#6
Avoid any conflicts of interest.
#7
Be objective and fair when providing input and
participating in decisions.
#8
Act on issues only if you thoroughly understand
them and know the consequences.
Summary
Topic 1
The Meaning of Board Governance
Topic 2
The Principles of Board Governance
Topic 3
Topic 4
The Board of Directors’ Duties and
Responsibilities
The Requirements for an Effective
Director
Presentation References
1.
2.
3.
4.
5.
Examiner’s Guide – Chapter 7 (Management)
Corporate Credit Union Guidance Letter #2005-02
Basel Committee on Banking Supervision – “Enhancing
Corporate Governance for Banking Organizations”
Article – “Measuring the Effectiveness of Corporate
Governance” – by Dr. Yilmaz Arguden
Article – “Board Effectiveness” by Michael Washburn
Questions? More Information?
QUESTIONS
AHEAD
NCUA’s Office of Small Credit Union Initiatives
1775 Duke Street
Alexandria, VA 22314
[email protected]
(703) 518-6610