“ BOARD DUTIES AND RESPONSIBILITIES ”

1. “BOARD DUTIES AND RESPONSIBILITIES”

2. ORGANIZATIONAL CULTURE

3. CULTURE • “Management is doing things right; • Leadership is doing the right things.” • - Peter Drucker

4. WHO WE ARE AND HOW WE DIFFER • “Understanding the how and why of credit union philosophy is the most important thing credit union directors and staff need to know.” 2

5. AN ORGANIZATION OF PEOPLE, NOT DOLLARS “Credit unions are owned and controlled by the people who use them. Decisions are driven primarily by the needs of the members.” 4

6. DISTINGUISHING CHARACTERISTICS • Your credit union is a cooperative, owned by its members, who democratically control it • Your credit union operates on a not-for-profit basis • Your credit union relies heavily on volunteers for direction 6

7. INTERNATIONAL CREDIT UNION OPERATING PRINCIPLES • A Fundamental Set of Values • Democratic Control • Not-for-profit orientation • Open Membership • Neutrality • Financial Stability • Ongoing Education • Social Responsibility • Cooperation with other cooperatives 7

8. BOARD OF DIRECTOR’SPROFILE “The quality of a credit union’s leadership is probably the most important factor in its success.”

9. GENERAL DUTIES OF DIRECTORS • 1. The board of directors is responsible for the general direction and control of a credit union. The board may delegate operational functions to management, but not the responsibility for the credit union’s direction.

10. GENERAL DUTIES OF DIRECTORS • 2. A director must carry out his or her duties in good faith, in a manner reasonably believed to bein the best interests of the membership, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.

11. GENERAL DUTIES OF DIRECTORS • 3. A director must administer the affairs of the credit union fairly and impartially and without discrimination in favor of or against any particular member.

12. GENERAL DUTIES OF DIRECTORS • 4. A director must have at least a working familiarity with basic finance and accounting practices,including the ability to read and understand the credit union’s balance sheet and income statement and the ability to ask, as appropriate, substantive questions of management and auditors.

13. GENERAL DUTIES OF DIRECTORS • 5. A director must direct the operations of the federal credit union in conformity with the appropriate Federal or State Rules and Regulations, along with other applicable laws, and sound business practices.

14. GENERAL DUTIES OF DIRECTORS 6. A director may rely on information prepared or presented by employees or consultants the director reasonably believes to be reliable and competent and who merit confidence in the particular functions performed.

15. Board of Directors Job Description • Title: Director • Reports to: Members • Supervises: President/CEO • Primary Function: To set policy, plan the credit union’s course, make sure the credit union maintains its sound financial condition, keep communication open to educate members on services, review the President’s progress in achieving goals and objectives, and report to the members at the annual meeting. All decisions should be guided by the best interest of the membership. • Specific Duties • Work with the President and Management Team to develop objectives and goals for the credit union. • Make sure the credit union adheres to pertinent laws, regulations, and sound business practices. • Make sure the credit union maintains sound financial conditions and that the credit union’s assets are protected against unauthorized or illegal acts. Designate depositories, authorize borrowing and investing, provide for bonding and other security factors, including internal control procedures. Approve interest rates, dividends, and refunds, or approve policies to guide management in doing so. Approve loan limits and savings minimums. • Develop policies, or make sure they are developed, and then approve them for all credit union programs and activities. Review policies and bylaws at least once a year and update as necessary. • Make sure new products and services are developed as needed. • Approve the credit union’s budget. • Define the scope of the President’s job, hire someone to fill the position, and review his or her progress in attaining goals and objectives. • Attend board meetings, exercise judgment independently from the President, and report to the members at the annual meeting.

16. BOD - Terms of Agreement • I fully understand, and do hereby agree, that to serve on the Board of Directors, I will conform to and abide by the following: • Attend all regular and special meetings of the board when notified, unless prevented by circumstances beyond my control. • Attend the credit union’s annual planning session. • Continually seek to learn more about the credit union organization and its services and about my individual responsibilities as a board member by fulfilling the educational requirements established by the board. • Consider the business of the credit union and its members to be confidential in nature. • Should I ever find myself under obligation to any other group or organization that is in conflict with the credit union, I shall disclose the conflict to the board and refrain from voting on issues related to the conflict. • Participate to the best of my ability in determination of policy and other matters coming before the board, give full attention to problems of the credit union, and vote on all issues submitted or proposed for board action. • Give all assistance possible to my fellow board members, appointed officers, and employees of the credit union in the discharge of the duties of their offices. • ________________________ _____________________ • Signature Date

17. Board of Directors Code of Ethics • Management and Control • Review the bylaws and the policies at least once a year • Prior to each business meeting, study the financial statements and other reports. Be prepared to discuss and ask questions at the meeting • Maintain extreme confidentiality of any oral discussions or written reports depicting the financial records of the individual CU members • Set policies and make decisions which are in the best interest of the membership. Fully support decisions made by the Board • Work in harmony with the President. Allow the President flexibility in managing the operations of the credit union as per policies set by the Board • Understand thoroughly all of the services provided by the credit union • Be an active participant of any assigned committee • Education • At a minimum, attend two meetings per year of the local CU chapter • At a minimum, complete the “Board of Directors – Duties and Responsibilities” module of the VAP • To keep updated on the events and concerns of the credit union industry, read all periodicals and newsletters provided • Become familiar with the services provided through State and National associations • Attend at least two industry training opportunities per year • Participation and Involvement • Attend all regular and special meetings of the Board • Participate in all meetings of the credit union membership • Participant in the annual planning session of the credit union • Participate in community organizations or organizations of sponsoring companies, representing the CU in the best manner possible • Participate in the legislative and political activities of the CU industry • ________________________ _____________________ • Signature Date 15

18. MISSION, VISION, CORE VALUES…

19. BOARD RISK FACTORS - MITIGATE • Market Risk • Credit • Liquidity • Interest Rate • Institutional Risks • Compliance • Strategic • Transaction • Reputation • Concentration

20. DEFINITIONS…

21. GOVERNANCE • Governance is the distribution of legitimate authority to influence and enact policies and decisions; it defines who has the power, who is in charge, and who is responsible. To govern is to exercise sovereign authority; to make and administer public policy; to exercise a deciding or determining influence on. The board governs to exercise its sovereign authority over the organization. Its primary governing roles include setting the direction, ensuring adequate resources, and overseeing the health of the organization .

22. MACRO GOVERNANCE • Macro governance encompasses activities to define, deliberate, and decide matters most consequential to an organization’s short or long-term well-being. When macro governing, the board manages to make discernible differences in advancing the mission of the organization.

23. MANAGEMENT • Management is the practice of directing or supervising. To manage is to direct or exert control; to handle, administer, or be in charge of. The board delegates the management role to the chief executive who becomes responsible for the daily operations of the organization.

24. MICROMANAGEMENT • Micromanagement usually means paying too much attention to details and not focusing on the big picture. A micromanager is not able to delegate but feels obliged to get involved in the actual implementation of the work. When a board micromanages, it steps out of its governance role and engages in the actual operations of the organization or into implementation of strategic plans, forgetting that the chief executive is responsible for managing the organization according to guidelines set by the board.

25. IN ORDER TO BE EFFECTIVE… • In order to be effective and balance their responsibilities appropriately, boards must understand how to practice macro governance and avoid micromanagement, despite increasing scrutiny and demands for accountability.

26. GOOD GOVERNANCE IS… • about providing critical capital – intellect, reputation, resources, and access – to strengthen the organization and in turn the community it serves. An exceptional board recognizes the impact of its leadership, and board members understand that they must be thoughtful and engaged leaders, not passive but compentent stewards.

27. REASONS BOARDS MANAGE • Legal requirements dictate that the board manage certain areas. • Operational responsibilities may lead the board to some areas of management. • The lack of staff may cause the boards to take on management functions. • Understaffed organizations often require more board management. • The Board loses confidence in the chief executive.

28. REASONS BOARD MANAGE • The board is structured along management lines. • The board meets too often. • Governance is not their day job, but management is. • Board members are recruited for their business skill. • Board members relish the sense of accomplishment that comes with management.

29. BOARD MEMBERS NEED… • To consider themselves overseers, not implementers. Monitoring activities in the organization can be facilitated by clear reporting guidelines and clarification of the roles of the board and the staff. When boards overstep the line between governance and management, they can easily become micromanagers rather than macro governors.

30. WHAT IS NOT MICROMANAGEMENT? • Like any supervisor, the board is there to support the chief executive, set performance expectations, challenge him or her to propel the organization forward, and support him or her in those endeavors.

31. PROPER ROLES… You must delegate both responsibility and authority. Once the board has set direction by adopting a policy or goal, it MUST allow the CEO the freedom to reach that goal. In other words: • The board approves what is to be done; the CEO gets it done • The board determines the budget and operational policies; the CEO determines how to use them • The board delegates tasks by giving complete, clear, and effective instructions; the CEO carries them out • The board establishes performance standards and controls the CEO; the CEO establishes performance standards and controls the staff 17

32. WHAT CAN BLUR THE LINE OF DUTIES? • Chief Executive Transition • Strategic Planning • Time of Crisis

33. GOVERN MORE AND MANAGE LESS… • Create clear expectations for the board. • Create clear expectations for the chief executive. • Structure meetings to direct the board’s attention to matters of policy and strategy. • Collect feedback on the board’s performance.

34. BOARD/CEO RELATIONSHIPS “The key to successful Board/CEO relations is an open and honest relationship, one that is built on mutual trust and respect.” 17

35. PROPER ROLES You must delegate both responsibility and authority. Once the board has set direction by adopting a policy or goal, it MUST allow the CEO the freedom to reach that goal. In other words: • The board approves what is to be done; the CEO gets it done • The board determines the budget and operational policies; the CEO determines how to use them • The board delegates tasks by giving complete, clear, and effective instructions; the CEO carries them out • The board establishes performance standards and controls the CEO; the CEO establishes performance standards and controls the staff 17

36. What BOARDS Want In A CEO • Committed to credit union ideals • Respectful of the board • A good communicator • Results-oriented • Innovative • Leader • Good Listener • Open-Minded • Team-player • An Educator • Career-minded 17

37. What CEOs Want In A BOARD • Gives fair and honest periodic evaluations; recognizes CEO/staff for job well done • Comes to meetings prepared and acts decisively • Supports, trusts, and respects the CEO; listens • Provides resources to get the job done • Sets firm but clear policies • Holds planning sessions that allow CEO and others to participate as full partners in setting strategic goals • Is available when needed • Avoids usurping the CEO’s role; does not interfere directly with staff • Gives positive as well as constructive feedback • Avoids being self-serving or seeking special favors • Avoids hiding concerns and offering only superficial comments • Makes sure directors are qualified and knowledgeable • Is motivated and interested in growing personally • Is ready to innovate, make decisions, and stand by them 17

38. BOARD COMMUNICATIONS “Communication plays a vital part in every board task and responsibility.” 17

39. BOARD COMMUNICATIONS The key to your board’s success is effective communication. You must develop and maintain solid working relationships with: • MANAGEMENT (Teamwork is Essential) • MEMBERSHIP • Annual Meeting • Newsletters • Notices of Special Meetings • Special reports included with statements • Special mailings on important matters • One-on-one contacts • COMMITTEES • Define functions and goals • Follow progress • MEETINGS 17

40. Common Communication Breakdowns • The Board fails to develop a manual of responsibilities and pertinent bylaws and minutes • A minority of directors speak on issues at board meetings, and others make their position known only by raising their hands during a formal vote • Management fails to give directors the information necessary to enable them to deal with controversial or sensitive issues • The board abdicates its responsibilities and vests too much authority to Management 17

41. Management proposes, and the board adopts, new services without researching members’ needs or interests • Management fails to distribute materials to directors in advance of a meeting. Directors are then unprepared to discuss issues • Annual evaluation of the CEO tends to be superficial and not comprehensive or critical • Directors disrupt the professional staff by trying to exercise authority that belongs to the CEO 17

42. Board Tasks & Their Relationship to CU Performance Strongest Positive Relationships • Planning & Evaluating Effectiveness • Managing CEO Accountability Other Positive Relationships • Making and Evaluating Policies • Member Service • Community Representation Neutral Relationship • Financial Governance Negative Relationship • Micromanaging 17

43. #1 Positive Relationship Planning and Evaluating Effectiveness • Strategic planning • Clear 3-5 year financial goals • Forward looking • Clear annual financial plans • Clear member service goals • Vision for CU • Self-evaluation of Board • Succession Planning • Evaluating all goals and accomplishments 17

44. #2 Positive RelationshipManaging CEO Accountability • Setting and evaluating CEO standards of performance or goals • Setting CEO compensation • Holding management responsible for meeting goals 17

45. #1 Negative RelationshipMicro Management • Advising staff how to do jobs • Helping staff do day-to-day tasks • Managing personnel disputes • Going over most purchasing decisions 17

46. SIX CHARACTERISTICS OF EFFECTIVE BOARDS • Contextual • Educational • Interpersonal • Analytical • Political • Strategic

47. THANK YOU! Howard Bufe AVP OnBalance 800-442-5762 Ext 6820 hbufe@curesources.coop