Next month credit unions will have a chance to tell the NCUA what they have been doing to foster diversity in their organizations, including in the boardroom.
The NCUA questionnaire is entirely voluntary. For those responding, the NCUA will publish only anonymous, aggregated data in its annual reports.
Banks, corporations and non-profits have been discussing the issue of board diversity for decades. The advantages of having a diverse board include being able to recruit a broader base of members, and better respond to the needs of those who are already members — fostering “member empathy” among directors, said Stephanie Galligan, a research manager for the nonprofit Filene Research Institute in Madison, Wis.
“It’s going to build a stronger credit union in the end,” said Galligan.
The board of the State Employees’ Credit Union in Raleigh, N.C., considers nominees’ diversity based on ethnicity, gender, age, geography, skills and experience.
“The board considers diversity important,” said Leigh Brady, SECU’s executive vice president for organizational development at SECU ($33.8 billion in assets, 2.1 million members).
“Our board went through extensive succession discussions, with each board member being given an opportunity to rank what they believed as most important for the board in terms of composition, skillsets, etcetera,” Brady said. “The process was invaluable in assuring that board members came to an agreement on important items such as diversity.”
In practice, the board might ask the nominating committee to look for potential candidates who have a skillset held by a retiring board member. “Given the fact that credit unions have become increasingly more complex financial cooperatives over the past 10-plus years, diversity among skillsets will become increasingly important,” she said.
In March, the NCUA approved a diversity checklist as a collection tool for the voluntary responses it will begin collecting from credit unions in October. Questions on the assessment are related to various areas of diversity, including boards, leadership, workforce and supplier diversity.
Canvassing credit unions about their diversity practices should not come as a surprise. The NCUA is required to do so under the Dodd-Frank Act, and it established its guidelines for compliance three years ago.
“NCUA believes diversity is a good investment for credit unions,” said Monica Davy, director of the agency’s Office of Minority and Women Inclusion. “Diversity leads to innovations, which enhances credit unions’ ability to identify business opportunities and capitalize on them in new and more relevant ways.
A Filene Research Institute study, completed in 2014, found that only half of credit unions had diversity policies for their boards. Since then, there has been little change, said Galligan. “It’s definitely slow to move,” she said.
Credit unions have cultural barriers to change in board nominating processes, she said. “It’s easy to get set in your ways and nominate friends with similar mindsets and knowledge. It’s hard to look outside of yourself.”
Galligan advises credit unions to implement a board evaluation process that is regular and repeatable. Boards should be constantly evaluating themselves, including their diversity of age, gender and ethnicity.
Read more about board diversity in the Sept. 14, 2016 print issue of CU Times.
