Director Expectations and Burden

Recently Central 1 has said that changes are planned for credit union director training. The proposed threefold increase in the size of the program invites real scrutiny and critical discussion.  It would be one more big burden on small credit unions!

In BC currently, directors are required to complete a program that is determined by Central 1.  For many years Central 1 has adopted the Credit Union Director Achievement (“CUDA”) program (level 1) offered through the Canadian Credit Union Association.  New directors are to complete the program within one year of election or appointment.  The program is comprised of 7 self-study modules and one group study workshop.  The new proposal is to require directors to enroll in a three year training program.

The rationale for the proposed changes has not been made clear to me.  However, the initiative is consistent with a larger agenda that has been pursued since 2008.  Legislators and regulators have found it politically convenient to apportion ‘blame’ for the great financial meltdown on weak governance.  Increased emphasis has been placed on getting ‘professionals’ onto boards, training boards, accrediting directors, installing new guidelines, implementing new self assessment tools, and nurturing a new subset of management specialists in the field.  Boards of credit unions, banks, insurance companies and all other financial institutions have been targeted.

Ironically, most of the banks and insurers that failed in 2008 had professional, well credentialed directors; AIG, Lehman Brothers, WAMU, etc.  And no independent research has indicated that consumer (lay person) boards were associated with more failures.  But, the facts sometimes are ignored.

In BC and elsewhere directors are being asked to become more expert in risk management, financial markets, and information technology.  The regulatory authorities press for ‘skills’ and professional qualifications.  This was a big part of the FICOM Governance Guideline published two years ago, and more recently in a workshop hosted by FICOM.  Consequently, boards are being conceived of differently, more like management – where you recruit certain skills.  Less thought is given to the political nature of representative community-based boards, groups that include a diversity of perspectives and experiences that reflect the owners of the credit union.  By screening for select skills, agency, diversity and relevance are undermined.

The changing expectations of, and demands on, directors will have a real negative consequence for smaller and medium size credit unions.  A smaller pool of people will self-select. The trend challenges the fundamental democratic, citizen controlled model of co-operative ownership.

Yes, the CUDA program may need to be upgraded, but a tripling of its size seems excessive and arbitrary.  Let us deal with improvements in an ‘as needed’ way.  If the very large credit unions have a greater role for directors, deal with them directly.  Most credit unions are medium size and small, and they do not need a host of professional skills.  For most credit unions the classic co-operative control structure has been proven and it works.

The time and energy expected of volunteers (even if modestly compensated) has to be reasonable.  Meetings of boards, committees, and sector functions are already significant and adding another 2 years of training is simply piling it on.  Extended training likely will deter working people from putting their names forward.  This kind of added burden on volunteers, and the added costs to be covered by the individual credit unions, will undermine the future of smaller operations.

Let us once again appreciate the strengths of our co-operative ownership model rather than acquiescing to changes that do not make sense.