1. Transformation of Corporate Governance … Bringing Boards to Life

2. Board Governance Commonly asked questions What distinguishes policy from procedure? What is within the Board’s purview, versus operations? Where is the line between oversight and overkill? How do we communicate confidence in management, and still stay involved? Where do fiduciary responsibilities end and meddling in management responsibility begin? How is “good” leadership defined and measured? What are the signs that it is time to make change in Board policy?

3. Individual event decisions Control of management activities Authority shifts between Board and Management Individual members have power and influence Dependence of CEO on Board for approval Focus on detail Representatives Means (HOW) Policy determines decisions Board self-management and self-discipline Clear authority entitlements and behavior prohibitions Only the Board as a whole has power or influence. Board speaks with “one voice”. Empowerment of CEO within defined limits Focus on vision and values Trustees Ends (WHAT) Governance Principles

4. Participate responsibly Attend meetings, arrive on time, prepared and informed. Remain involved and engaged. Identity is with the ownership, not the staff. Represent all owners, not a particular entity or segment. Guide, discipline and take responsibility for group behavior. Be pro-active – make decisions. Honor differences of opinion and encourage constructive debate.

5. Governance Principles Share special talent and expertise with everyone, as appropriate. Stay focused on the big picture – orient discussions to the “whole”, not the parts. Think upward and outward rather than downward or inward Support the Board’s final choice or decision, even if you disagree. Obsess on results / “ends”. Be passionate about what is in the interest of the ownership, not the Board. Support the Chair in board discipline.

6. Board Governance An Overview Fundamental Principles Stakeholder trusteeship “One voice” consensus Governing through policy formulation Define and delegate authority and accountability Ends governance, not means (what, not how) Limiting behaviors, not prescribing them Evaluating CEO performance against established criteria

7. Stakeholder Trusteeship Who do you serve? For whom do you govern? Member / owners Employee / owners Regulatory authorities

8. “One Voice ” Consensus Speak with One Voice or do not speak at all. The importance of self-governance.

9. Governing through Policy Formulation Control what you should, not what you can. Start with largest issues, through levels, to the smaller ones. Delegate whatever is left to the CEO. Example: The Board will address only policy issues The Chair will ensure that all agenda items are within the stated scope of board policy The Chair will ensure that only agenda items are discussed at Board meetings

10. Define and Delegate Authority and Accountability Establish “ends” results and executive limitations, then monitor the major indicators against documented objectives. “Within the box” entitlement enables management decisioning and action Measure what matters – achievement of strategic objectives, adherence to policies

11. “Ends ” Governance “Ends” is defined by: What good we do? For whom? At what cost? ANYTHING WHICH CANNOT BE DEFINED BY ONE OF THESE IS A MEANS, NOT AN ENDS, ISSUE

12. Management (and Board) Limitations Do not tell management or staff how to manage or how to do their jobs Tell the CEO, in writing, what behaviors are unacceptable or off limits Set boundaries Be specific and explicit Follow through with implications and consequences for both CEO and Board

13. Policy Delegation If the policy does not say it cannot be done, then it can be done

14. Monitor CEO Performance Against Policy Criteria Evaluation of CEO performance has two criteria under governance rules: Board-stated criteria relative to its “ends” (what good, for whom, at what cost) Executive limitation policies (violation or compliance)

15. Decisions, Decisions If you go forward, prepare to… Eliminate / replace all existing policies Adopt new policies under governance model Move away from old models immediately Monitor old behaviors – and initiate new ones Police yourselves (and one another)

16. Getting Started Adhere to sequence Executive Limitations policies Board Process policies CEO – Board Linkage policies “Ends” policies

17. “Case” Policy Review Fundamentals: Defining language ensures clarity and empowerment Board policies are positively stated, i.e., “…will and may…” Management policies are negatively stated, i.e., “…can, will or may not…”

18. Global Policy Development Examples

19. Executive Limitation Policy EL#1 The CEO will not cause or allow any practice, activity, decision or circumstance that is either unlawful, imprudent, or in violation of generally accepted business or professional ethics.

20. Executive Limitation Policy EL#2a The CEO may not allow the assets of the credit union to be unprotected, inadequately maintained or unnecessarily risked.

21. Executive Limitation Policy EL#2e The CEO will not fail to submit an annual budget to the Board for approval.

22. Executive Limitation Policy EL#2h The CEO may not purchase, encumber or dispose of credit union real property.

23. Board Governance Policies GP#1 The purpose of this Board is to ensure that the credit union provides quality solutions that benefit its members and avoids unacceptable actions and situations.

24. Board Governance Policies GP#2a The Board will govern with an emphasis on outward vision rather than internal preoccupation; encouragement of diversity in viewpoints; strategic leadership rather than administrative detail; clear distinction of Board and CEO roles; collective rather than individual decisions; future focus rather than past or present; and proactivity rather than reactivity.

25. Board Governance Policies GP#2b The Board will adhere strictly to the Code of Conduct.

26. Board Governance Policies GP#2c The Chair, Directors and Committee members assure the integrity and fulfillment of the Board’s governance process as set forth in their respective position descriptions.

27. Board-CEO Linkage Policies (Delegation Policies) BCL#1 The Board’s only official connection to the operation of the credit union, its achievement and conduct is through its CEO.

28. Board-CEO Linkage Policies (Delegation Policies) BCL#2a Only officially passed motions of the Board are binding on the CEO.

29. Board-CEO Linkage Policies (Delegation Policies) BCL#2b The Chair will act as a direct liaison to the CEO on behalf of the Board.

30. Board-CEO Linkage Policies (Delegation Policies) BCL#2c The Board will instruct the CEO through written policies which prescribe the organizational Ends to be achieved and describe organizational situations and actions to be avoided, allowing the CEO to use any reasonable interpretation of these policies.

31. Board-CEO Linkage Policies (Delegation Policies) BCL#2d Systematic and rigorous monitoring of CEO job performance will be solely against the expected CEO outputs: organizational accomplishment of Board policies on Ends and organizational operation within the boundaries established in Board policies on Executive Limitations.

32. Board Self Assessment Be explicit about expectations for board performance Regularly review the performance by any method Effective evaluation cannot proceed without establishing expectations Establish board job description Are we acting the way we said we would?

33. Board Self Assessment Commit to constant self-evaluation Pointedly address the pre-established criteria found in board policies Avoid mechanical approaches and prefabricated evaluation forms Assign responsibility Choose a policy-driven method

34. Where Do We Go from Here? Board Commitment Statement of Consent Board Job Descriptions Policy Development Ongoing Self Assessments CEO Evaluation