Wednesday, March 21, 2007

UI Held Hostage Day 424 - March 21 UICCU

March 21, 7:30 a.m.

[Note: See below for UICCU Chair Dean Borg's response to yesterday's "Open Letter;" my response to a couple readers' critical comments about the "Open Letter;" and Jeff Cox' statement regarding this evening's meeting and his nomination of Caroline Dieterle as a Board member.]

"Open Letter": Confirmation from World Council of Credit Unions

Every once in awhile I have the delightful experience of discovering that some idea that I have come to instinctively turns out to be virtually identical to the position of those who really are experts on the subject. This has been one of those occasions. (Of course, my more common experience is the discovery that my instinct turns out to be closer to what Stephen Colbert calls "truthiness.")

Yesterday this blog's entry was an "Open Letter to UICCU Board" in Nicholas Johnson, "UI Held Hostage Day 423 - March 20 - UICCU," March 20, 2007.

I advocated, among other things, that we -- Board and membership -- continue to explore the issues of member participation in governance, the "process" questions that seemed to lie at the heart of the "Optiva" controversy and that were resolved in a membership revolt the evening of February 28. I identified three categories of focus: "Board Elections and Membership Meetings," "Ongoing Membership Involvement," and "Membership Outreach and Marketing."

I contrasted our relatively closed process for electing (or re-electing) board members with the much more welcoming and open process of our next door neighbor, the Linn Area Credit Union. I suggested ways we might have more rotation among board members.

Ongoing involvement of members could be encouraged by holding open, rather than closed, board meetings, and publishing on the Web (rather than keeping secret) the minutes of those meetings. I mentioned the possibility of members' committees, online discussion groups and polling of members before controversial board decisions, and creating an ombudsperson position.

Under membership outreach and marketing I mentioned counseling and classes on financial management, videos on public access television and DVDs, social events, "friends inviting friends," and advertising the fact that credit union membership is open to all.

Late in the day, only after I'd written all this, off the top of my head, in a relatively short time, drawing on nothing but what seemed to me to be common sense and my own experience with organizations and boards over the years, I came upon the Web site of the "World Council of Credit Unions" -- http://www.woccu.org -- and its basic confirmation of virtually everything I'd said earlier in the day.

It's true that there are "credit unions in 92 countries [serving] more than 157 million people." But lest an organization representing them sound a little too other worldly for applicability in Iowa, let me reassure you that one of the organization's two main offices is right next door, in Madison, Wisconsin. (The other is in Washington, D.C.)

As you might imagine, the organization provides a range of services for credit unions. (Its Web site has headings, or drop-down menus, for "News," "Development," "Advocacy," "Events and Education," "Development Finance," "Best Practices," and "Publications.")

One of its areas of focus is "governance." See, for example, the publication from which I will be quoting: Karen Cak Niederkohr and John Ikeda, "Credit Union Governance," World Council of Credit Unions White Paper (2005).

In part, credit union governance involves many of the same models and principles of any system of board governance. I worked to apply the John Carver model of board governance for the School Board of the Iowa City Community School District, and have described the Carver theory and the School Board's application of it in Nicholas Johnson, "Board Governance: Theory and Practice" (2001) . It includes setting measurable goals (Carver's "ends policies"), and articulating the relationships between the board and CEO, among other things. And the authors of the World Council white paper were obviously familiar with Carver.

But, as they acknowledge, credit unions and their boards are not like other organizations. Their "customers" are "members" and "owners" of what Congress has described as "democratically operated organizations." That necessarily affects "best practices" when it comes to board-member relations -- which was the focus of my "open letter."

What follows are some of the more relevant quotes from the World Council's "Credit Union Governance" paper.

I keep emphasizing democratic control of credit unions by members. The World Council says, "[C]redit unions are democratic institutions, where a single member receives a single vote, regardless of financial stake in the organization."

* * *

I commented on the extent to which there was inadequate communication from the Board and CEO to the membership, and proposed that there be more member access to Board meetings and minutes. The World Council has a good deal to say about this:

"Transparency

"Transparency requires the actions of the board of directors to be visible to the credit union members . . .. To be transparent, credit unions should commit to regular honest communication of their activities . . . in the spirit of full disclosure.

* * *

"The board and management of the credit union should engage in regular, honest communication to explain the actions of the organization to anyone who may be affected by them. This disclosure should include the objectives of the credit union . . .. By ensuring that its decisions are made in the light of day, members have the ability to oversee the actions of the board that represents them.

* * *

"The board or management should then convey the disclosure through communication methods, including but not limited to member meetings, postings, online interaction or newsletters. The communication must occur at regular intervals to members and must provide honest, unvarnished facts.

* * *

"[C]redit unions should make available to members and the public financial statements that are . . . provided in a timely manner to . . . especially credit union members. [p. 3]


* * *

I noted the advantages to the credit union of something in the nature of term limits and rotation in membership on the board, and that the UICCU might seek to emulate the more welcoming and open board election process of the Linn Area Credit Union. The World Council says,

"Structure

"World Council recommends the board be composed of an odd number of members, no less than five and no greater than nine. The purpose of this structure is to prevent tied votes. . . . [M]ore than nine members may make consensus achieving difficult and may increase logistical problems.

"World Council recommends that consideration should be given to the rotation of directors. A rotation approach can encourage fresh viewpoints to enter the boardroom without the potential loss of organizational knowledge. . . .

"[I]nterested credit union members . . . should be allowed to stand for the nominating process. . . . [T]he democratic nature of credit unions requires that general members be allowed . . . on the board. The opening of the process to general members helps regulate the power of the board . . ..


I also noted the UICCU's failure to provide individual members notice of the Wednesday night membership meeting. The World Council says,

"The annual general meeting . . . should be adequately promoted to ensure sufficient member participation. This meeting is the backbone of the internal governance system and is the highest decision making body in the credit union. By providing a forum for . . . members to interact with the board, the annual general meeting of members serves as a check on the power of the board and management. However, the meeting cannot provide this check if members are not aware of it.

"The annual general meeting should also be an opportunity for the directors to receive feedback and guidance from their fellow members. The board should encourage dialogue with general members at the annual general meeting, because it is the ultimate duty of the board to represent the wishes of the . . . members." [p. 5]


* * *

There are other comments in the World Council report I thought worth repeating:

"Balance

"Unlike for-profit institutions, credit unions should strive for a board that responds to the demands of the general membership. By creating a board in this manner, members are more likely to feel that they have a voice on the board and are more likely to feel a stronger connection with the credit union. As a result, a greater likelihood exists that members will continue their membership with the credit union.

"The composition of the board should aim to reflect the demographic makeup of its members . . .. By creating a board that reflects the age, gender and ethnic background of the credit union, the desires of the [members] can more easily be developed by directors.

* * *

"Accountability

"[T]he board, first and foremost, has a duty to the [members]. As the ultimate owners of the credit union, the members . . . delegate the board directors to function on their behalf. The [members] then [have] the ability to question the actions of the board and to hold the board accountable. . . .

"[T]he board must . . . follow up with management regularly to chart its progress against predefined measures of success. . . . Since both the board of directors and credit union management are held accountable . . . the ultimate goal of serving the members becomes obtainable. [p. 7]

* * *

"To fully understand and complete their responsibilities, individual [board] members should have . . . a member-focused viewpoint.
[p. 9]

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Now the mere fact that the World Council advocates many of the same things I was writing about yesterday does not mean that either of us is correct. Hopefully, however, this level of agreement may at least be taken as some evidence that I am not advocating some radical, bonkers, off-the-wall set of proposals that no one who knows anything about credit unions would ever try to advance.
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For the record, and in fairness to the Board, here is the response Board Chair Dean Borg promptly provided by email to my "Open Letter" yesterday. I think it speaks for itself without comment from me:

"I greatly appreciate the time and thought you have given to the document you provided to us.

"I also greatly value your compliments for the Board's overall intent and pursuit of excellence, without ulterior motives. You are correct in intimating that this is a highly motivated, very hardworking group of women and men representing a cross-section of the greater Iowa City community.

"We are actively--and currently--pursuing use of absentee balloting, although the Iowa Code does specify restrictions with which we must comply. This is not the first time we have explored the absentee option.

"Your suggestion about involving members in social events is a part of our culture and practice. Our Prime Club members meet regularly, and social events are structured for that age group.

"Even our annual meeting is historically a social event, with entertainment, gifts for all members, and valuable door prizes. Many people attend the annual meeting just for the social component.

"Again, thanks Nick."

_______________

There were two essentially critical comments from readers attached to yesterday's blog entry from "John Barleykorn" and "Anonymous." They argue, basically, that (a) no one really cares about credit union management and "process," and (b) in effect, we can be grateful this is the case, as chaos would reign if various groups of members were actually permitted to micromanage the daily operation of the credit union in ways contrary to the best judgment of the Board (I am "arguing for mob rule of the credit union").

I can't really disagree with either point. I expressly noted that roughly half the electorate won't even bother to vote for president of the United States 18 months from now -- but that their disinterest is no reason to cancel the election for those who do take it seriously. And I suggest the same principle is applicable to what Congress has described as those "democratically operated organizations" called credit unions. ("Democracy within credit unions is not just a good idea, it's the law.") And as I have now discovered, the World Council of Credit Unions apparently agrees with me.

And, of course, I'm not advocating the straw man that "John Barleykorn" builds and then destroys. I can't imagine that anyone would advocate that. But I think anyone who reads through the World Council quotes, above, will see a consistent theme that seems to run through all of them regarding the responsibility of a board member of membership organizations in general, and credit unions in particular, to ascertain and then effectuate the desires of the membership.
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Meanwhile, Jeff Cox issued the following statement yesterday regarding his proposed nomination of Caroline Dieterle for a UICCU Board position at the membership meeting this evening:

"The UICCU Credit Union annual members' meeting will be held on Wednesday, March 21, 7 p.m., at the Quality Inn & Suites Highlander Conference Center, 2525 N. Dodge Street. Credit Union Board members are elected at the membership meeting. The Credit Union Board's nominating committee has nominated three board incumbents for re-election to the three open positions. In the past, the board has from time to time nominated more candidates than positions in order to guarantee a contested election, but this year they have decided upon an uncontested election.

"Candidates can be nominated from the floor at the meeting, and I intend to nominate Caroline Dieterle. She has long experience as a member of the board of the New Pioneer Cooperative, which has grown to 16,000 members while maintaining, and even strengthening, its democratic character.

"I hope we can have some discussion at the Members' Meeting of the need for future Credit Union boards to promote (1) contested elections each year, (2) open and transparent board meetings, (3) mail ballots for board elections, and (4) credit union literature that lists among the "benefits of membership" the rights and obligations that members have to participate in a democratic, member-owned cooperative.

"I hope you can find time to attend the membership meeting, and vote for Caroline.

"jeffcox@inavia.net
"
_____________

UICCU and "Optiva"

The UICCU-Optiva story is essentially behind us. There may be occasional additions "for the record," but for the most part the last major entry, with links to the prior material from October 2006 through March 2007, is
"UICCU and 'Optiva'" in Nicholas Johnson, "UI Held Hostage Day 406 - March 3 - Optiva," March 3, 2007.

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[Note: If you're new to this blog, and interested in the whole UI President Search story . . .

These blog entries begin with Nicholas Johnson, "UI President Search I," November 18, 2006.

Wondering where the "UI Held Hostage" came from? Click here. (As of January 25 the count has run from January 21, 2006, rather than last November.)

For any given entry, links to the prior 10 will be found in the left-most column. Going directly to FromDC2Iowa.Blogspot.com will take you to the latest. Each contains links to the full text of virtually all known media stories and commentary, including mine, since the last blog entry. Together they represent what The Chronicle of Higher Education has called "one of the most comprehensive analyses of the controversy." The last time there was an entry containing the summary of prior entries' commentary (with the heading "This Blog's Focus on Regents' Presidential Search") is Nicholas Johnson, "UI President Search XIII -- Last Week," December 11, 2006.

My early proposed solution to the conflict is provided in Nicholas Johnson, "UI President Search VII: The Answer," November 26, 2006.

Searching: the fullest collection of basic documents related to the search is contained in Nicholas Johnson, "UI President Search - Dec. 21-25," December 21, 2006 (and updated thereafter), at the bottom of that blog entry under "References." A Blog Index of entries on all subjects since June 2006 is also available. And note that if you know (or can guess at) a word to search on, the "Blogger" bar near the top of your browser has a blank, followed by "SEARCH THIS BLOG," that enables you to search all entries in this Blog since June 2006.]

# # #

Media Stories and Commentary

See above.
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