“ Providing Strategies for Success ”

1. “Providing Strategies for Success” Why Good Governance Matters: “The CU Dash-Board Model” Utah Credit Union Association Volunteers Conference October 22nd, 2011 Presented by: John A. Vardallas CAE,CUDE Founder/CEO TheAmericanBoomeR Group, Madison, WI www.theamericanboomer.com 1

2. Welcome Utah Credit Union Leaders! Chevy’s The Green Bay Packers Credit Unions Chevy’s The Green Bay Packers Credit Unions

3. My First Car…

4. My Team…

5. My Credit Unions… • UW Credit Union ($1.3 Billion) • Summit Credit Union ($1.6 Billion)

6. Lets Talk…. Todays Discussion Will Focus on Governance Issues Board Governance Issues 6

7. Governance Defined… The Bridge between the organization and the external world within which it operates and to which it is accountable. Is focused on Group Leadership rather than Individual Leadership controlling through Creating and Monitoring Policies. 7

8. Why Good Governance and Why Are We Here?The Leadership Challenge…… • What do Morgan Stanley Enron, WorldCom,Krispy Kreme, AIG, Tyco, Bear Stearns and Arthur Andersen all have in common? • Impact on Stock Market? • Impact on Public Confidence? • Has caused dramatic Changes in Accountability for America’s institutions! 8

9. Traveling Down the Future Financial Services Highway Lets Check The “Dials” On Your Credit Unions Governance “Dash-Board”

10. Lets Check Your CUs Dash-Board Dials(“Your CUs Dash-Board Checklist”) 10

11. The Strategic Credit Union Board… (Role of the New Good Governance Board) • Analyze Information • Make Data Based Decisions • Pinpoint Your Competitive Advantages • Define the Scope of Your Products / Services • Decide Where You Want to Focus Your Resources • Identify, Prioritize & Implement Change • Continuously Monitor Execution, Performance, Review Strategy and Modify as Needed 11

12. Developing The “Learning Board”… Understanding the Strategic Nature of Your Role • Strategic Thinking / Planning(Roles / Giving Vision / Values / Ethics) • Setting Direction(Formulating Policy & Foresight) • Monitoring the External Environment • Reviewing Key Business Results • Monitoring Budget Control/Safety Soundness • Overseeing Management Performance 12

13. 3 Key Components of Director’s Responsibility 1) Duty of Care • Directors must act in good faith and exercise their duties in a reasonable and prudent manner 13

14. 3 Key Components of Director’s Responsibility 2)“Duty of Loyalty” • Directors must put the interestof the Credit Union above theirown and avoid conflicts of interest. 14

15. 3 Key Components of Director’s Responsibility 3)“Fiduciary Responsibility” • To hold the members trust and act as the trustees of members’ funds. 15

16. Suggested “Good Governance Board Best Practice”– Define Roles/Duties of Board/Committees Define Roles/Duties for Board and Supervisory Committee (Ensure Independence and Integrity) 16

17. Role of the Board of Directors… Primary Function: To Provide General Direction and Governance of the Credit Union, Monitor Overall Affairs of the CU, Establish and Oversee Policy, Plan and Set Short and Long Term Goals, Ensure Financial Soundness and Continuity, Hire and Evaluate the CEO, Report to the Members at the Annual Meeting and Represent the Credit Union in the Community. 17

18. Role of the Supervisory Committee… • Key Link Between Members and Elected Officials. • Policies and Procedures are in place. • Make sure CU assets are properly safeguarded. • In FCU’s Committee is Appointed to this “Watch Dog” Position by the BOD. • Ensure Applicable Laws and Regulations are followed. • Has the Authority / Power to Suspend Board / Committee Members. • Responsible for Reviewing the Performance of Officers, Directors and Committee Members. • Internal Controls are effective. • The CUs Financial Condition is fairly presented in accordance with GAAP. 18

19. Approves what is to be done (strategies/policies) Approves the budget and personnel policies Executes the strategies and policies (“Gitter Done”) Determines how to use the policies Leadership’s Role in Good Governance(Board / CEO Roles) Boards and CEOs are Partners: The Board The CEO 19

20. CEO Succession Board Succession Planning For Leadership Successionis Part of Good Governance You are the Current Custodians of Your CU You Have an Obligation to Hand Over the CU in a Better Condition Than When You Arrived, and to the Best People. Do you have a plan for….. 20

21. Suggested “Board Good Governance Best Practice”-- Create A “CEO/Board Succession Plan” For Your Credit Union 21

22. CU Board Leadership Must Possess“The Will To Govern Well” Through: • Knowledge- the ability to make decisions based on knowledge and data rather than opinion. • Trust- the need to create a culture of trust for staff and volunteers with common agreement on what will define success. • Nimbleness- a nimble infrastructure, with work and decision-making systems that can respond efficiently and effectively to the complex changing dynamics of today’s and tomorrow’s workplace 22

23. “Core Credit Union Values” That Guide Business Conduct Board / Staff Should be In Synch With the Credit Union’s Corporate Values (Example of 5 Core CU Values) • Have a Commitment to Service • Demonstrate Caring for People • Provide Ethical Treatment for All People • Provide Good Value to all Members • Be Ever Changing & Dynamic 23

24. Credit Union Accountable Leadership….. Leadership Anchored by the Credit Union’s “Core Values” They are the principles that shape the behavior, thinking and daily decisions of everyone in the credit union. 24

25. Core Values of the University of Wisconsin Credit Union “Working for Members to Enable Their Financial Dreams” EVERYBODY COUNTS: Every Member, Every Employee, Every Contact EVERYBODY CARES: Show Respect, Project Empathy, Practice Humility EVERYBODY DELIVERS: Excellence with Pride and Excitement EVERY DAY 25

26. Best Practices “Grassroots”Credit Union Governance Key Values of A Credit Union Board “Stewardship – Accountability – Integrity” (Board Members Must Share This Passion) • Balancing Putting Members’ Interests First and • the Safety & Soundness of the Credit Union • Having Strong Corporate Governance Policies 26

27. Best Practices “Grassroots”Credit Union Governance This Corporate Governance System Honors the “Trust” Members Place in the Hands of the BOD. This is the Process through which the MEMBERS Hold Management Accountable In Order to Ensure Their Interests Are Well Protected. 27

28. Suggested “Good Governance Best Practice”-- “Create A Set of Core Values/Operating Principles for Your Credit Union” 28

29. 3 Categories of Good Governance… 1. External- Responsibility to the Public at Large. • This includes: • Full financial disclosure • Transparency / safeguards / oversight in place. • Independent audits & compliance with legal / regulatory requirements. 29

30. Good Governance Categories (continued) 2. Internal Governance - addresses the internal democratic process of the credit union regarding the election of the Board / Committees • This includes: • Defining the Responsibilities and Accountabilities of the BD / Management / Staff. • Provides Guidelines for Fiscal Responsibility and Continuity Issues (Strategic Planning, Business Plan & Budget. 30

31. Integrity Code of Conduct Conflict of Interest Qualifications Speaking with One Voice Commitment Skills to Fulfill Duties Good Governance Categories 3. Individual Governance – deals with individual Board & Committee members on issues. This includes: 31

32. Creative Group Discussion IDENTIFY THE CHARACTERISTICS OF YOUR IDEAL “Dream Board” 32

33. Ethics/Good Governance Go Together GOVERNANCE MATTERS ! 33

34. What Do We Mean By Ethics? From the Greek word Ethos: The distinguishing character, sentiment, moral nature or guiding beliefs of a person, group or institution. . . . a system of moral principles. And Ethical Behavior is accordance with professional standards for right conduct/practice. 34

35. Ethics is about… • Doing the right thing • Statements about Core Moral Values of an Organization or Individual • Setting a Standard to Follow and Having the Will to Follow It • Making the Right Choice without Compromising Integrity • Following the Golden Rule 35

36. Breaching The Value System… A Zero Tolerance Policy must be in place to uphold the value system and deal with the ethically challenged or risk reputation killing embarrassment, unraveling customer / member loyalty, unmotivated employees and public mistrust. “Enron had it all right on paper, but did not put good governance into practice,” Sharon Watkins Whistleblower & former VP Corporate Development (Enron) 36

37. Result of Unethical Corporate Practices: We Now Have “Sarbanes-Oxley Act” Signed into law in 2002, revises corporate governance laws in U.S. by increasing the responsibilities of corporate management, ruling boards and committees, with respect to external auditing practices. 37

38. Result of Unethical Corporate Practices: We Now Have “Sarbanes-Oxley Act” Impact on Credit Unions: Use as a guide in updating governance policies and Board of Director’s responsibility to be informed and their duty to inquire. Institutional Integrity and Oversight are now at a premium for Boards and stakeholders demand transparency and accountability. 38

39. Impact of SOX on Credit Union Boards… • Transparency / Nothing Hidden. Make decisions available to others • Assert Who is Accountable for Controls & Procedures (Outside Auditors) • Make Things (Actions/Decisions) as Independent as Possible • Perform Self/Peer Evaluations of Directors Focusing on Competency

40. Impact of SOX on Credit Union Boards… Other Implications of SOX: Insuring Records of Retention (Minutes of Meetings / General Ledger) Whistle-Blower Policies 40

41. Whenever it doubt, follow . . . “The Golden Rule” Did we Base Our Actions In the Best Interests of Our Members and the Credit Union? 41

42. Suggested “Board Good Governance Best Practice”-- “Adopt A Code of Ethics and Conduct for all Officers/Staff/ Board and Committees for Your Credit Union” 42

43. “CU Board Competencies” What Should Board Members Do? -- Formulating/Evaluating Policies -- Strategic Planning/Evaluating CU Effectiveness -- Serve as Trustees/Stewards for the Members -- Ensuring Continuity -- Hiring/Evaluating the CEO -- Governing CU Finances -- Community Representation/Sponsor Relations (Source: Filene Research Institute) 43

44. Characteristics of High Performing CU Boards • Commitment to Duties • Board Unity (speak with one voice) • Efficiency • Good Feedback style • Tolerance & Constructive Communication • Risk Taking (Source: Filene Research Institute) 44

45. Continuing Director Education… • Suggested Good Governance Practice: Design a Continuing Education/Recognition program for new and experienced Volunteers (recommended continuing educational opportunities (Reg 701) periodical readings, web site resources, board home page) Budget training dollars for directors just as your credit union does for employees. 45

46. Keys To Being Effective Future Directors…. -- Love Yourself -- Love What You Do -- Model the Behavior You Expect -- Value Diversity in your Members/BD/Staff -- Keep A Shared Vision for the CU & Focus on the Future -- Speak with One Voice -- Keep Yourself Growing & Learning And Transfer the Higher Calling Passion to Serve to the Next Generation of Volunteers! 46

47. And Finally…Good Governance Principles That Empower Exceptional Organizations • Service Driven Mission • Strategic Thinking • Culture of Inquiry • Independent-Mindedness • Compliance With Integrity • Results Oriented • Continuous Learning 47

48. Commit to Making “Good Governance” Practices A Priority for Your CU • Your Next Step - Actions? • Open Forum Q&A Time 48

49. Thank You For Your Attention.I wish you Future Success!Feel free to contact me 24/7 at jvardallas@aol.com