Lessons from the For-Profit Sector: Corporate Governance

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Republished from chipfilson.com

Following the financial crisis and the periodic failure of public companies (e.g. Enron), the expectations of corporate governance have steadily increased. This increase of mandated activities has occurred through both legislation (Dodd-Frank) and rule making by oversight bodies such as stock exchanges.

The enhanced expectations of corporate oversight provided by elected directors has focused on independence of directors and the structure of board governance.

The following is a partial list of the governance practices one company (Southwest Airlines) has adopted:

  • Qualifications of directors
  • Independence of directors
  • Size of Board and selection process
  • Board leadership
  • Board meetings, agendas and other materials
  • Director responsibilities
  • Executive sessions; communications with non-management directors
  • Board self-evaluation
  • Etc. for ten more policies

Today most credit unions adopt a standard set of bylaws which ordains some of the policies listed above. But beyond the formal requirements, how much policy substance is added? Should boards have a Code of Ethics ? Should there be requirements for directors’ share ownership? How is compensation and expense reimbursement defined?

A critical first step in the oversight of the board’s primary employee, the CEO, is its own self-governance ability. Without this awareness, the tendency is for the board to default to management by the CEO, thus reversing the intended governance relationship. When was the last time your board policy book was evaluated for relevance? What standard was used to determine sufficiency? Are the policies available for members who might wish to know how governance is practiced?

These are questions public companies must routinely disclose. Should members expect less?

Author


  • A nationally recognized leader in the credit union industry, Filson is an astute author, frequent speaker, and consultant for the credit union movement. He has more than 40 years of experience in government, financial institutions, and business. Chip co-founded Callahan and Associates. Filson has held concurrent positions at the NCUA as president of the Central Liquidity Facility and Director of the Office of Programs, which includes the NCUSIF and the examination process. He holds a magna cum laude undergraduate degree in government from Harvard University. After being awarded a Rhodes Scholarship, he earned a master’s degree in politics, philosophy, and economics from Oxford University in England. He also holds an MBA in management from Northwestern University’s Kellogg School in Chicago.

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