Carefully Consider Your Nominations and Re-Nominations

It’s more important these days for boards to give a critical eye to every director that is that is up for re-nomination. Too often this is treated as inevitable rather than a privilege to be earned. Too often boards don’t express candor to underperforming directors. Creating a checklist of expectations establishes transparency  that pushes towards higher performance.

by Kevin Smith

Succession Planning
So … the NCUA has new proposed rules about the board’s involvement in succession planning. (You do know that, right?) They’re concerned that the board’s relative lack of involvement is undermining the futures of some credit unions. As a last resort from lack of plans, some merge away. We’re not big fans of that.

Succession planning is about preparing to have the right people in place for the future of the organization. That includes discussion of the directors currently in their positions now. We are here today, friends, to talk about incumbents and the re-nomination process. And we’re here to suggest that re-nomination isn’t or shouldn’t be the result of simply asking the incumbent if they want to run again. Re-nomination should be tied to criteria about the board member’s performance over their term.

Recently, Tim created the “Incumbent Director Re-nomination Checklist” that you see here. It came out of his desire to see board members holding each other accountable and setting a transparent process that outlines the responsibilities of directors who want to be renominated for another term. In 18 questions Tim has created a comprehensive review of the incumbent’s performance. This checklist is to be filled out by all other board members. The checklist sets a (fairly minimal) standard for directors to live up to.

Click for a copy of the Incumbent Director Re-nomination Checklist

The Fatal Flaw of our Checklist
This is tricky territory we acknowledge. And we’re here to head off your criticisms from the get-go. This checklist clearly has a fatal flaw. Pause for a minute and consider what you think that flaw is. (I’m happy to wait.)

OK, did you think of something?

So, in my opinion, the fatal flaw is the fact that most directors won’t be candid enough in their responses in the checklist to make it work. Directors won’t be truthful enough in their ratings. They aren’t candid enough with underperforming directors as it is. What makes us think that a checklist is going to change that? That is my very real fear. But that’s no reason not the have the checklist anyway. I’m here to argue that having the checklist is still worthwhile and that it will nudge progress in the right direction. Simply by adopting the checklist, by having a discussion about using it and agreeing to take it on begins setting a tone about the requirements and need to hit them. When the first re-nominations come around on the calendar after you’ve adopted these, you’ll have to have that reminder conversation about the expectations that the board agreed to. That is already progress. Now, if you go through all of this and directors are still overly soft on incumbents, it’s not ideal. But it’s a starting point for another conversation.

So … that was the fatal flaw that you came up with, right? Oh, it wasn’t? Well then, I’m going to need you to write your own version in the comments below. Tim and I think this is a good idea and it’s relatively new. But if you see issues here, tell us. We like to think things through and hear from you.

The Other Complaint You’re Waiting to Lob at Us
I know you’re just chomping at the bit to let us know your other concern about this checklist approach. (This is going to circle right back to the new succession planning regs.) It’s something along the lines of, “we have a hard enough time trying to recruit directors, and now you want us to make it harder for the ones we have to stay in place?!” We hear you and know the recruiting struggles that boards are having, but the answer is still “yes.” Recruiting and succession planning is more important than ever (see the NCUA letter linked above). The fact that it’s difficult is not an excuse to lower the bar of qualifications and expectations of effort.

Setting the Tone
All of this is about setting the tone of the board and creating clear expectations for performance. Boards have no bosses and have to hold each other accountable. From our vantage point working with boards all over the country, there are not enough candid conversations about performance and not enough accountability. Directors are too easy on colleagues who are not doing their duty. We are a polite, well-meaning crowd that doesn’t like confrontation. It doesn’t have to be difficult. It doesn’t have to be mean-spirited. It does have to be honest and transparent. This is based on trust and candor. A simple checklist can move you in that direction. Download it. Share it with your crew. Have a conversation. Let us know how it goes.