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Road To Success

SUCCESS Next Exit. National Credit Union Administration Office of Small Credit Union Initiatives. Road To Success. Board Governance. What We’ll Cover. Board Governance (What does it mean?). Principles of Board Governance (What are the principles?). Board of Directors

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Road To Success

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  1. SUCCESS Next Exit National Credit Union Administration Office of Small Credit Union Initiatives Road To Success Board Governance

  2. What We’ll Cover Board Governance (What does it mean?) Principles of Board Governance (What are the principles?) Board of Directors (What are their responsibilities?) Board of Directors (How to be an effective director?) Topic 1 Topic 2 Topic 3 Topic 4

  3. Board GovernanceWhat 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.

  4. Principles for Board Governance(Macro Discussion) • Board members must be qualified, understand their role and exercise sound judgment about the credit union’s affairs. • Board members approve and oversee the strategic objectives and values that are communicated throughout the credit union. • Board members set and enforce clear lines of accountability throughout the credit union. • Board members ensure there is appropriate oversight by senior management consistent with board policy. Principle 1 Principle 2 Principle 3 Principle 4

  5. Principles for Board Governance • (Macro Discussion) • Board members and senior management must utilize the work conducted by the Supervisory Committee, internal auditors, if applicable, external auditors, and the NCUA. • Board members must ensure compensation policies are consistent with the credit union’s culture, long term objectives, and environment. • Board members must govern the credit union in a transparent manner. Principle 5 Principle 6 Principle 7

  6. Prerequisite Skills for Directors • Must make a commitment to serve by taking an active role and having an enthusiastic attitude; • Must have the ability to work as a team member; • Must be a credit union member in good standing; • Must be bondable; and • Must understand or have the ability to learn financial statements and the laws governing credit unions.

  7. Smart Art Page Layout Board Structure

  8. Board Effectiveness Dynamics

  9. Directors 4 - Core Responsibilities(Micro Discussion) Select qualified senior management and evaluate management’s performance. Establish, review, and revise business goals, standards, policies and procedures. Review operating results and performance of new and existing products/services. Ensure compliance with applicable laws and regulations, as well as the credit union’s policies. Responsibility #1 Responsibility# 2 Responsibility# 3 Responsibility# 4

  10. 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.

  11. 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

  12. ROUGHECONOMY& TOUGH DECISIONS AHEAD Stormy Road Ahead Challenges Facing Directors

  13. What Makes an Effective Director? Know your credit union’s history, charter, mission statement and bylaws. Know the credit union’s policies and procedures by setting standards of operations. Understand and evaluate the credit union’s financial reports, operating budget, audit and examination reports. Correct any findings identified by the NCUA examiner or auditor. #1 #2 #3 #4

  14. What Makes an Effective Director? Represent and promote the credit union to the potential membership. Avoid any conflicts of interest. Be objective and fair when providing input and participating in decisions. Act on issues only if you thoroughly understand them and know the consequences. #5 #6 #7 #8

  15. Summary The Meaning of Board Governance The Principles of Board Governance The Board of Directors’ Duties and Responsibilities The Requirements for an Effective Director Topic 1 Topic 2 Topic 3 Topic 4

  16. Presentation References 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. YilmazArguden Article – “Board Effectiveness” by Michael Washburn

  17. Questions? More Information? • NCUA’s Office of Small Credit Union Initiatives • 1775 Duke Street • Alexandria, VA 22314 • _OSCUITraining@NCUA.gov • (703) 518-6610 QUESTIONS AHEAD

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