In January of 2023, the House passed the Credit Union Board Modernization Bill, which aims to reduce the number of required board meetings from monthly to six times annually and at least once per fiscal quarter.
This news was met with praise and support from credit union groups and advocates who claimed that monthly board meetings were taxing on credit unions and overly burdensome. They argued that they not only took away time and resources from serving members but they were costly and required too much manpower. They saw this long-awaited modernization act as a relief for smaller credit unions in particular who claimed to struggle with current board requirements and saw them as unfairly taxing on them.
Different perspectives on the issue
While all of the above may be true, the move certainly raises a few questions. Reducing board meetings by half is not an insignificant change. What are the potential ramifications of a credit union board that is absent for half the year? What does it say about a credit union that desires its board to meet less? Is this truly a cause for concern?
Or are the supporters of the new bill right? Have the monthly board meetings become repetitive and unnecessary? Have they simply become more of a matter of routine than a matter of consequence? Do they truly take away resources from the member-owners they serve daily? Are there more effective and efficient ways to tackle credit union objectives?
To truly understand the motivation and perspective of credit union boards on the topic, I spoke to two different board members from different credit unions of varying sizes and assets.
The first, Kurt Hansen, is currently the Board Chair of River Valley Credit Union ($133 million, 10K+ members). Hansen has served on his credit union board for over six years, after starting out as an associate board member. After working at a CUSO, Hansen had the desire to learn more about the credit union process and how credit unions operate.
The second, Seth Longcore, is Vice Chair of Tri-Cities Credit Union ($47 million, 4K members). Longcore has been on the board of his credit union for over ten years and was inspired to join his hometown credit union after working at a CUSO and noticing technologies his credit union was not taking advantage of.
Both Hansen and Longcore have served their credit unions in various board positions during their tenures.
The responsibility of a board
First, let’s take a look at how each of these boards operates and how the two board members feel about the Modernization Act. Both credit unions have vastly different strategies when it comes to board meetings. Similarly, both members had different perspectives on the new ruling.
Hansen was not a supporter of the legislation and expressed his surprise at the enthusiasm from trade organizations regarding the bill. He contends that many credit unions will want to continue their monthly meetings, regardless of whether or not the bill succeeds, and feels these monthly meetings are necessary in order to stay on top of credit union objectives. Additionally, he stressed the board’s responsibilities to the credit union and its members in keeping the monthly meetings.
“The purpose of the board is to oversee the credit union, set the strategy, and make sure that strategy is implemented. They also need to look at the numbers regularly and ensure the finances are coming out the way they expected them to,” said Hansen. “The board needs to do those checks monthly, that’s their responsibility.”
Longcore’s credit union, on the other hand, currently operates without twelve monthly board meetings. As Tri-Cities is a state charter, it follows the rules set for Michigan’s state-chartered credit unions, which only require six meetings per year–exactly what the new law is hoping to achieve.
“The board’s job is to say what direction the credit union should go and then the CEO focuses on the daily, operational tasks to make that happen. So when you’re looking at it from that perspective, what’s really going to change from month to month? The board needs to be more big-picture focused,” said Longcore.
While they still meet most months and have yet to limit themselves to the six meetings required, Longcore noted they often do not have meetings in February or the summer months when people are often on vacation. Instead, the board keeps in contact via email and text messaging. If needed, they even vote on certain topics via email. Longcore argues that today’s technology does not require board members to be at a round table every month to be productive.
“Every board is going to be different, but this is what works for us,” Longcore commented.
Arguments for the change
Next, let’s take a look at the claims and arguments laid out by credit unions in support of the Modernization Act. According to them, the problem ultimately boils down to three main pain points: time, money, and resources.
Time: Board meetings require significant staff time and preparation, potentially up to hundreds of hours.
Money: Board meetings can be costly in staff hours, logistics, and travel.
Resources: The combination of manpower and costs takes these resources away from the members and community the credit union is meant to serve.
In the argument of time, it cannot be disputed that preparation–in terms of collecting data and information for the meeting–may take a significant number of hours. But the notion that this takes so much manpower as to not be worth is up for debate.
Smaller credit unions argue that due to having fewer staff members–many of whom wear multiple hats at the credit union–they do not have the time to compile the data and information needed for monthly meetings. Using such time to do so, they say, detracts from their employees’ everyday job responsibilities and from serving members.
While this argument is not without merit and weight, having fewer meetings is not a guaranteed fix for the issue. Longcore notes that when his credit union (and it should be mentioned that his credit union is the exact kind of credit union this bill is aimed toward) misses a monthly meeting, the following month’s meeting always has the information for both the current month and the missed month. Meaning that despite not having a meeting, the credit union employees are still required to compile the materials for the skipped month in addition to the current month.
Though other credit unions might not operate this way, it does call into question how much manpower is truly saved overall if, at the end of the day, the data for all twelve months still need to be compiled regardless of how often the board meets. And if the credit union does not include data from both the current and missed months, that means the board is operating blind and without data from half the year.
As for the argument that this preparation takes time away from serving members and the credit union’s community, this seems to be a bit of an overstatement. It has never been said that a credit union failed to host another community event or complete a loan because of a board meeting. And while it’s understandable that smaller credit unions may be hesitant to dedicate that time and effort, board meetings are important enough to merit that time.
According to Financial Regulation News, the Credit Union Board Modernization bill is meant to “lower costs for credit unions, as board meetings are costly to produce, particularly for smaller credit unions in rural areas. A single board meeting typically requires hundreds of hours of staff time to pull together, in addition to travel, per diem, and other related logistics costs for credit unions.”
There’s no doubt that time is money, but as we have already discussed the value of staff time in preparing for board meetings, let’s focus on the travel and logistics costs aspect of this debate. Remembering that this legislation is specifically meant to help small credit unions in rural areas, where exactly do travel, accommodation costs, and per diems fit into this puzzle?
If credit unions are meant to be local–if they’re meant to serve their communities–why would a small, rural credit union have board members who are not local to the credit union? Why would a credit union have board members who are not close enough to the credit union to attend board meetings without significant travel costs?
Neither Hansen nor Longcore could offer insight on this facet of the bill. Hansen noted that he only knows of one board member who needs to travel to meetings and that travel time is less than an hour. Nor could he account for any other costs that might factor in. Similarly, Longcore could not think of any significant travel needed and the only cost he could think of would be the pizza they sometimes order for meetings. It seems these travel and logistics costs probably only apply to much larger credit unions that may cover a wide geographic area, and not the small rural credit unions as the article claims.
Though if the question truly is about resources and money and not being able to get people together regularly, then why not take advantage of the technology credit unions have? One of the few benefits of the pandemic was the widespread adaptation of Zoom and similar products. Three years later, we are all essentially experts on virtual meetings at this point. Would a better alternative to skipping meetings altogether to save money be to meet via Zoom every other month? It is certainly an option all credit unions should take into consideration.
The final piece of the argument is that these two previous aspects–time and money–overall result in too many resources being taken away from the credit union and more specifically, the members and community they are meant to serve.
However, that argument seems contradictory. Board meetings are meant to make key decisions regarding the direction and strategy of the credit union which ultimately affects the members–the true owners and stakeholders of the credit union. In that way, board meetings do serve the members. After all, you cannot serve your members as customers without also serving them as owners. While conducting transactions, offering loans, and increasing income for the credit union are all important to the daily operations of the credit union, they should not be seen as the only way to provide for your members.
Although board meetings do not provide monetary value to the credit union the way loans and transactions do, they should not be seen as competition for the credit union’s resources. They work together for the overall benefit of the credit union and its member owners.
To meet or not to meet
So what is the solution here? While decreasing meeting requirements from twelve to six seems like an overcorrection of the problem, there may be a happy medium to be found. As Hansen remarked, the board’s responsibility is too great to not have monthly meetings, but does that mean all “meetings” must be in person? Or can boards adapt to a method similar to Longcore’s–meeting most months and supplementing missed months with email, messaging, and digital voting?
There is no right or wrong answer here. Each credit union is different–different sizes, different communities, and different needs–and the decision on the best way to move forward is ultimately theirs to make alone. However, I would caution against assuming your board needs and member needs are in opposition to one another.