Start with the Nominating Committee

By CUToday10.09.2017

Seeking greater diversity on your credit union’s board? You may not be starting in the right place.

“When talking about diversity, you might first want to look at the diversity of the nominating committee,” suggested Rafael Stone, an attorney with the law firm Foster Pepper, who is also currently chair of the Seattle Times board of directors, serves on other boards, and was previously a regent with Washington State University.

“I think one of the real keys to your board composition is your philosophy,” he said. “If you’re going to be changing, then probably your nominating committee is going to have to start taking on the look of your membership and being broader and looking like what the real member will look like 10 years from now.”

Stone’s comments came during a day-long Symposium on Current Issues in Credit Union Board Governance that was organized by John Lass of Lass Advisory Services; Parker Cann, former CU CEO and state regulator, and Foster Pepper, which does considerable work with credit unions. The Symposium took place in Foster Pepper’s downtown Seattle offices, and Stone’s remarks here are part of a week-long series in CUToday.info based on the symposium.

Part I on "Failed Bank, Failed Board Governance,” can be found here. Part II on how "Governance Makes a Difference" can be found here. Part III on Reform of Board Subcommittees can be found here. 

As an example of trends taking place, Stone pointed to Seattle itself, noting that in the 1960s it was 94% white. Today, that figure is 64%.

For credit unions, that likely means changes are needed in the board nominating committee first, as members are inclined to nominate people who are most like themselves, he said.

Stone also drew on his experience on other boards and as an attorney to offer these observations related to board governance issues:

  • The “sweet spot” for the number of board members on any board is between six and nine, he said. “You get above nine, and a meeting may never end.”
  • “When looking at your board composition, you really want to look at what each person brings to your board, and you really need to look at your business plan,” he said. “That becomes critical in where you are going and what you should be looking like, and whether you can match that vision.
  • The answer to the question of who should be on a board can be answered by identifying a credit union’s biggest competition, Stone said. “If it’s a large bank, then you’ve got to have a board that looks like that. If it’s a smaller institution, then maybe you’re looking for community leaders and small business leaders. That’s really important.”
  • “The big issue I encounter is boards that are disorganized and not in alignment, often due to one or two strong personalities who are not open to other opinions. And the result of that is you can’t keep your good staff when there is no good chemistry. You have to make sure whomever you are bringing on board, even if they are brilliant, that they can get along with other people.”
  • Boards have to have a process for “exiting out” members who are not contributing. And no one is indispensable, he said, quoting Charles de Gaulle’s observation that “the graveyard is full of irreplaceable people.”
  • The ideal chairman of any board, according to Stone, is “really focused on the plan and where he/she believes the entity needs to go in order to align individuals on that path, and to discourage the pinning of one against the other.”

Reprinted with permission from CUToday.info, a leading source of news and resources for credit union decision-makers.