A Board Succession Plan That Works

By Huey May

In the past few years, several board members at City Credit Union, Dallas, considered leaving the board for various reasons. We wanted to be proactive, so we developed a board succession plan, which has been in effect since 2001. Here’s how we prepared the plan.

Developing the plan

When a succession plan became a priority for our board, we first created a succession planning committee, which the board asked me to chair. Having worked in the human resource and training fields for more than 30 years, I have a lot of experience in succession and strategic planning. That was helpful in getting us started.

The purpose of the succession planning committee is to:

• Generate a continuous list of eligible candidates to appoint to the board;
• Interview potential candidates regarding their interest in serving on the board;
• Recommend candidates to the full board when a vacancy of an unexpired term occurs; and
• Ensure each candidate receives orientation and training.

We consulted with our credit union general counsel to ensure the plan allowed for maximum member participation and was fully compliant with state and federal regulations. The Texas Credit Union Department, our state regulator, mandates board compliance with state financial codes, which spell out certain fiduciary and governance responsibilities. In addition, our compliance officer reviewed all aspects of the board succession plan.

Finding candidates

Once the committee was in place, the board determined the characteristics that would make an effective director. Our standards are high. We developed these key criteria for board service:

• Credit union member in good standing;
• Credit score comparable to "A" paper;
• Debt ratio appropriately reflected in above score;
• No criminal record or current indictment;
• Background in commerce or board experience;
• Formal education and/or excellent practical life experience (including work history and community involvement);
• Management experience; and
• Understanding of basic financial concepts.

We evaluate candidates by considering whether it’s necessary to replace certain competencies that may be leaving the board. For example, if someone with a strong financial background retires from the board, we believe it’s important to fill that void.

In 2001, City Credit Union received a community charter. So in addition to identifying certain skills potential board members have, we also want to consider how well we’re representing members from the communities we serve and select board members accordingly.

We encourage every board member to recruit prospective directors. We currently have a list of about 17 "potentials." Directors communicate regularly with the individuals they recommend to determine their continuing interest in joining should a vacancy occur. We frequently assign to committees someone from the candidates’ list when appropriate. It’s a way to introduce them to the board governance process.

Since 2002, four of nine City Credit Union board members have been appointed as a result of the board succession plan. One appointment was due to a director’s untimely death.

This plan helps appoint new directors quickly, and the board can continue its business without prolonged disruption. The continuity allows us to meet the business challenges we encounter.

"The succession plan has given our board of directors a tool that continually provides City Credit Union with strong leadership as we face the challenges ahead," says Roel Ornelas, board chair. "The plan has been tested, and it works."

Huey May is vice chair of $180 million asset City Credit Union in Dallas. Contact him at 888-324-2328. This article first appeared in Credit Union Directors Newsletter.