How do credit union leaders feel about having a CEO on their board?
The Swoboda Research Centre has surveyed Irish credit unions to gauge the response to a new Credit Union (Amendment) Act 2023 provision, which will allow boards to “appoint the manager of the credit union to be a member of the board of directors for such term as they determine”.
An online survey was distributed to credit unions in the Swoboda network in Ireland, and was followed by semi-structured online interviews with chairs and CEOs.
While the study focused on the Republic of Ireland, interviews were also conducted with British credit unions, where CEOs can already be appointed as an executive director; a small number of credit unions have done so.
To better understand how the issue is viewed internationally, Swoboda also interviewed credit union co-operators in Romania and Poland, two sector experts in Britain and the US, CEOs in a British building society and friendly society, and regulators in Ireland, Britain and the US.
Related: Swoboda conference examines current issues and trends for credit unions
With 47 responses from 29 CEOs and 18 chairs, the survey explored a range of questions, such as the reasons to appoint a CEO as an executive director, the advantages this might bring and concerns credit unions might have about appointing a CEO as a voting board member. Respondents were also asked to weigh in on the impact the appointment of CEOs as executive directors would have on their legal and fiduciary accountabilities.
The paper found that 70% of respondents were in credit unions where the issue was being considered or would be considered soon. Around 51% thought having a CEO as an executive director would strengthen the board strategy and key decision-making, and 57% said that it would make a positive difference to the CEO feeling part of the team. Around 52% of CEOs, but just one chair, felt that being a director would support recruitment.
While the majority of respondents and interviewees viewed the law change positively, some expressed concerns, saying it undermined the historic foundation of a voluntary credit union. Doubts were also raised with regard to the discrete functions of governance and management; board independence; the risk of management capture or domination by the executive; conflict, power and authority; the impact of a possible long tenure of an executive director; a change to CEO’s job description; and a perceived lack of transparency and clarity regarding the legislative change.
International examples
The study also explored how other countries view the issue. In Britain, credit unions can appoint more than one senior manager to the board providing they are ratified at general meetings. Meanwhile, in the US, where credit unions are permitted to appoint management officials to sit on the board, few choose to do so. Similarly, in the Caribbean, no CEOs are executive directors, while in Poland and Romania, the norm is for all credit union CEOs to be executive board members.
Recommendations
In light of these findings, the study makes several recommendations, including reviewing the relationship between the board, chair and CEO to ensure it is an equal and constructive partnership. This partnership should focused on strategy and oversight rather than management, says the report.
It also recommends full evaluation of the optimal role for the CEO in relation to the board. Credit unions should also assess whether the partnership in practice would be strengthened by appointing the CEO to the board.
Swoboda also argues that credit unions should consider whether the recruitment, motivation and retention of a CEO committed to co-operative values would be enhanced by such an arrangement, and identify any risks in terms of board dynamics, organisational culture, compliance and balance.
The full paper is available to purchase on Swoboda’s website and free for its members.
