Energize Members By Revitalizing Elections

Credit unions are unique financial entities, which exist to serve the core principles of membership involvement and control. In a post-Bear Stearns world, financial regulations and governance practices of CUs surely come under intense scrutiny as they will for all financial institutions.

In the current environment, some credit union boards are perceived to perform only rubber stamped or uncontested elections, in essence, continually electing themselves by proxy. Voter participation levels are often less than optimal. Since many CUs cite these core principles when defending their tax status, perhaps it would be appropriate for them to examine how well they are adhering to these principles as they relate to their election practices. The need to uphold credit unions' core principles, in addition to challenges from regulators, are motivating many in the industry to take a fresh look at their entire election process. 

In a recent national survey of credit unions undertaken by the National CO-OP Business Association, (NCBA), several critical issues regarding nominations, elections, and term limits for credit union directors surfaced. The NCBA survey results are clearly a wake-up call for credit union boards, particularly in light of the current credit card and mortgage environment many financial regulators are monitoring closely. 

Let us take a look at some facts relating to CU elections: The NCBA survey indicated almost 80% of CUs use nominating committees; of the responding CUs, 50% indicated that their boards selected nominating committee members, and 45% reported their board chairman selected board nominees! Some of these practices most certainly raise valid concerns as to whether credit union election practices perpetuate their board's current composition. 

The survey further revealed elections were contested "always" or "most of the time" among less than 5% of responding CUs! Board elections were contested "never" or "rarely" in more than 85% of CUs. On the topic of term limits, an astounding 97% of responding credit unions reported they had no consecutive term limits! The dearth of term limits raises many significant concerns. Specifically, in today's dynamic demographic environment, how can credit union boards expect to reflect the changing face of their membership while tapping into the wisdom of their dedicated, experienced volunteers? To an outside observer, these CU election survey results would seem indicative of the Politburo; not exactly a picture of democratic membership involvement and control. 

Let me be clear that we would be the first to acknowledge that there are very real challenges when it comes to tapping and keeping qualified directors with the time and talent to serve. Our experience is that a professionally run, improved election and nominating processes will attract a more robust board gene pool that will be reflective of a credit union's constituents. A healthy organization will almost always have an open nominating process, contested elections and term limit policies.

Of course, credit unions' current nomination, election, and terms of service practices need to be critically evaluated through the lens of political reality and revenue demands faced. However, the need to uphold a credit union's basic democratic principles of membership involvement and control can and should be honored.

By utilizing the services of an independent, proven outsourced elections services provider, more qualified candidates are encouraged to run for director positions. Through a more balanced and robust election process, questions regarding credit union board nominations, elections, and term limits can be effectively addressed.  

As an added by-product of the outsourced election process, a credit union board can more broadly reflect the changing demographics of its membership. And, finally, credit union staffs are greatly relieved of undue task burdens and costs associated with managing elections, while increasing election participation.

Frank Fatone is CEO of Elections Services Corp., Long Island, N.Y. www.ElectionServicesCorp.com. (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com/ http://www.sourcemedia.com/