Board Member

Title: Board Member

Description:

This document sets forth the description of the role and responsibilities of an individual member of the Board of Directors (Board) of Seattle Credit Union (Credit Union).

Purpose:

The Board is comprised of individual members (each a Director), elected for a term of years by the members of the Credit Union. The Board is the ultimate legal authority within the governance structure of the Credit Union but can only act through the majority consensus of its individual Directors, who are required to meet on a regular basis, at least 6 (six) times per year, and who are charged with making decisions as fiduciaries, in the best interests of the Credit Union and its members. The Board acts collectively through its members and speaks “with one voice” once the Board has reached a consensus decision by voting. Once a Board has voted, it is the duty of each Director to uphold that decision of the Board, regardless of his or her individual vote on the matter.

The duties and responsibilities of the individual Director are of paramount importance to our Credit Union’s governance, for it is only through the individual Directors, acting as a collective body that a Board can act. Directors are expected to uphold the highest duty under the law that of a fiduciary, and to act at all times in the best interests of the Credit Union. This document clearly establishes the expectations of the Credit Union. Through individual adherence to the duties and standards in this document, a Director helps to foster a well- governed credit union and a highly effective Board.

Authority:

This document is adopted by majority vote of the Board pursuant to the Credit Union’s Bylaws.

The authority of the Board is derived from the Governance Meeting - 2019-04 Washington State Credit Union Act (Act) in RCW Chapter 31.12. Section 31.12.225 of the Act provides that:

“The business and affairs of a credit union shall be managed by a board of not less than five

and not greater than fifteen directors.”

Responsibility:

Directors must effectively carry out their vital leadership, legal, and stewardship responsibilities and act in the best interests of all the members of the Credit Union. As such, Directors are responsible for providing effective governance and leadership to the Credit Union. Directors play a key role based on their shared understanding of the purpose and goals of the Credit Union as well as their vision of how to best serve the evolving needs of the Credit Union’s members.

The most fundamental set of governance responsibilities of the Board include constructively partnering with the Chief Executive Officer (CEO) and senior management team and the Supervisory Committee to:

1. Govern – the Credit Union and promulgate a set of Board level policies, procedures, practices and risk boundaries that collectively empower the Credit Union to (a) productively serve all its members, their families and the communities where the Credit Union operates, (b) foster the ongoing success of the Credit Union’s financial health and operations, (c) maintain the safety and soundness of the assets entrusted to the Credit Union, and (d) validate the Credit Union’s compliance with applicable Federal, state and local laws and regulations. In addition, an important cornerstone of the Credit Union’s effective governance efforts is an aligned – and updated – set of governing documents which include such documents as: the Credit Union’s Bylaws, a comprehensive set of Board-level policies and procedures, Board member and Board officer job descriptions, written committee charters, etc.
2. Articulate – and update as needed – a forward-looking (a) strategic vision, mission and set of values for the direction, work and culture of the Credit Union, as well as (b) agreed-upon set prioritized strategic goals, objectives, and relevant metrics of success designed to forward the Credit Union’s mission.
3. Delegate appropriate authority to the CEO to (a) properly manage and operate the day-to-day affairs of the Credit Union and (b) develop a constructive partnership between the Board and the CEO and senior management team where their respective – or shared – roles and responsibilities are clearly identified, defined, communicated and regularly updated. Such delegation also includes the need to utilize accountability mechanisms such as fiduciary and strategic oversight, a review of the CEO’s performance, independent audits and the like to confirm the proper implementation of any such delegated authority.

Legal Duties:

The fundamental standard for directors’ and officers’ conduct is that each director and officer must perform his or her legal duties in good faith and in a manner, he or she believes to be in the best interests of the Credit Union, and its entire membership. The directors’ and officers’ fiduciary duties to the Credit Union are stated in RCW 31.12.267 of the Act, as set forth below.

Because a Board is comprised of individuals, and can only act as a collective entity, the duties of the Board and the duties of individual Directors are almost identical. Those duties are the duties of: (1) care, (2) loyalty, and (3) obedience.

Together, these three comprise the classic triad of a Director’s essential legal duties:

1. Duty of Care. The duty of care means that the Director will act as a similarly reasonable Board member would act. The duty of care primarily relates to the responsibility to become and remain reasonably informed in making decisions and overseeing the credit union’s business. The duty of care requires Directors - and senior management - to make good faith informed decisions, which they may do by attending meetings, examining material information and preparing in advance of meetings, asking questions of management, being curious and skeptical when reviewing information, requesting and obtaining professional expert advice and actively participating in the decision-making process.

Making informed decisions requires being informed and prepared for board meetings. To be informed and prepared, Directors should ensure that management provides Directors with sufficient information to consider and take actions, request additional information when appropriate and ask questions necessary to understand the information provided. It means relying on information, opinions, reports, or statements, including financial statements and other financial data of others, including management, legal counsel, accountants and other such experts, if the Director reasonably believes the information is reliable and the person is competent in the matters presented.

Directors should establish clear expectations for management’s provision of meeting materials and submission of those materials to Directors with sufficient advance time, so Directors understand the information before decision-making. In addition, important, time-sensitive information that becomes available between meetings must be promptly distributed and reviewed by Directors.

Delegation of matters to Board committees (e.g., investments, governance, nominating, etc.) does not relieve a Director of oversight responsibility. Directors should keep informed about Board committee activities and information.

Directors are expected to attain financial literacy sufficient to perform their fiduciary duties and keep their knowledge up-to-date through continuous, appropriate training. Directors are expected to use and share their knowledge, experience and expertise so all Directors are informed to make sound decisions. A Director must have at least a working familiarity with basic finance and accounting practices, including the ability to read and understand the Credit Union’s balance sheet and income statement and the ability to ask, as appropriate, substantive questions of management and auditors.

A Director may fail to act in good faith if the Director fails to be informed or obtain necessary information to make a decision or has knowledge concerning the matter in question that makes reliance on such information unwarranted.

Duty of Care – to act as a similarly situated reasonable Board member would act:

• • Actively engage, contribute, participate, and ask questions.
  • Keep informed, prepare for and attend Board meetings.
  • Participate in Board development and educational activities.
  • Support and participate in the Credit Union’s community outreach efforts and activities.
  • Understand and monitor the Credit Union’s finances, safety, and soundness.
  • Assist in shaping the vision, mission, and strategy of the Credit Union.
  • Cast his or her vote independently of other Directors in the best interests of the Credit Union and its members, relying upon his or her best judgment, knowledge and information.

1. Duty of Loyalty. The duty of loyalty focuses on avoidance of improper conflicts of interests and requires fair dealing by Directors involved in transactions where a personal or financial interest may arise. The duty of loyalty requires Directors to act in good faith and in the best interests of the Credit Union and not in their own interests or the interests of persons or organizations with which they are associated.

Directors may not use their position for personal gain or advantage and should avoid conflicts of interest. Therefore, Directors must be sensitive to any interest they may have that might conflict with the interests of the Credit Union. When a Director has a potential conflict of interest (e.g., contract, transaction or relationship affecting or opposed to the Credit Union) the Director must (i) fully disclose his or her interests to the designated Board representative, and (ii) refrain or abstain from participating with the Board during any presentation, deliberation or action on the issue.

A Director may fail to act in good faith when the Director fails to disclose a personal interest, intentionally acts with a purpose other than the Credit Union’s best interests or fails to act when they have a known duty to act.

Duty of Loyalty – A Director’s ultimate duty is to the mission of the organization:

• • Promote and understand the mission of the Credit Union.
  • Publicly support and defend the Credit Union as its ambassador in a highly professional manner, however, this duty will not be interpreted, nor will it be enforced, to restrict or prohibit the free expression of disagreement by any Director.
  • Demonstrate personal and sustained commitment to achieve the vision and mission of the Credit Union.
  • Attend and actively participate in monthly Board meetings, in the annual planning sessions, and in meetings of the membership of the Credit Union.
  • Ensure that all business affairs of the Credit Union and affairs of members are kept in strictest confidence, and refrain from relationships that present a conflict of interest for the Credit Union.

3. Duty of Obedience. The duty of obedience requires a Director to faithfully observe and comply with relevant federal, state and local legal requirements, as to ensure that the Credit Union is in legal and regulatory compliance. In addition, the duty of obedience requires a Director to faithfully observe and comply with all properly promulgated policy and procedures of the Credit Union. Most importantly, it requires that the Director ensure that the Credit Union is operating in observance of its stated vision, mission and strategic direction. Directors can exercise their own reasoned judgment in how the Credit Union should best achieve its mission, but they cannot act in a manner that is inconsistent with the Credit Union’s mission.

Duty of Obedience – to obey the laws and policies that pertain to the Credit Union.

• • Exercise due diligence and oversight to assure compliance to all applicable Federal, State and Local laws, rules and regulations.
  • Ensure compliance to the official Bylaws, policies, and rules properly promulgated by the Board.
  • Comply with appropriate requests of the Supervisory Committee and ensure its effectiveness.
  • Participate on any committees or task forces as requested by the Board.

Legal Duties:

The fundamental standard for directors’ and officers’ conduct is that each director and officer must perform his or her legal duties in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner, he or she believes to be in the best interests of the Credit Union, and its entire membership. The directors’ and officers’ fiduciary duties to the Credit Union are stated in RCW 31.12.267 of the Act, as set forth below.

A director must carry out his or her duties in good faith, in a manner reasonably believed to be in the best interests of the membership, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. (Duty of Care)

A director must have at least a working familiarity with basic finance and accounting practices, including the ability to read and understand the credit union’s balance sheet and income statement and the ability to ask, as appropriate, substantive questions of management and auditors. (This is the Federal financial skills requirement but is also part of the Duty of Care.)

A director may rely on information prepared or presented by employees or consultants the director reasonably believes to be reliable and competent and who merit confidence in the particular functions performed. (This is the permission to rely upon expert advice but is also part of the Duty of Care.)

A director must administer the affairs of the credit union fairly and impartially and without discrimination in favor of or against any particular member. (Duty of Loyalty)

A director must direct the operations in accordance with the manner prescribed by the Seattle Credit Union Bylaws, the Washington State Credit Union Act, Rules and Regulations, other applicable laws, and sound business practices. (Duty of Obedience)

Governance Responsibilities:

These legal duties are only the minimum requirements for a Director of the Credit Union. In a well-governed credit union, the overall governance responsibilities of the Board are more expansive. The Director’s governance duties generally involve active leadership and constructive partnership with the CEO and senior management team and the Supervisory Committee in each of the seven following areas (see Figure 1 below).

Governance & Leadership

The Director will:

1. Governance & Leadership

• • Effectively govern and lead the Credit Union in constructive partnership with the CEO and senior management team as well as the Supervisory Committee.
  • Act at all times in good faith and in a manner that the Director believes is in the best interests of all the members of the Credit Union.
  • Develop and continuously improve the Credit Union’s governing policies and procedures.
  • Ensure there are clear and agreed-upon roles and responsibilities for all elements of the Credit Union’s governance structure.
  • Maintain effective relationships with all elements of the Credit Union’s governance structure.
  • Ensure the ongoing effectiveness of all elements of the Credit Union’s governance structure.

1. CEO Support & Oversight:

• • Select the CEO and clearly determine his or her job duties, responsibilities and level of authority.
  • Without limiting the authority of the Board, appropriately delegate operational and management authority to the CEO.
  • Assist, counsel, oversee, and regularly evaluate the performance of the CEO.
  • Foster the CEO’s effective leadership and management of the Credit Union’s personnel, operations and activities.

1. Oversee Performance & Results:

• • Understand finance and accounting practices, the Credit Union’s financial documents.
  • Agree with the CEO and senior management team what the Credit Union’s key metrics of strategic and overall operational success will be – adjust as needed.
  • Ensure the timely and effective gathering of pertinent data and other information to track agreed-upon metrics.
  • Monitor, analyze, and oversee the Board-level metrics, performance indicators, and ultimate results of the Credit Union’s efforts.
  • Be able to ask appropriate substantive questions and provide high-level feedback, policy changes, and suggestions to the CEO and senior management team to enhance the Credit Union’s performance and results.

1. Strategic Thinking, Learning & Planning:

• • Consistently foster a leadership culture that regularly engages in effective strategic thinking, learning, and dialogue.
  • Craft an effective ongoing process for strategic efforts to be discussed, agreed upon, and executed.
  • Together with the CEO and senior management team, formally establish the vision, mission and strategic goals, objectives and metrics of success for the Credit Union.
  • Establish a means for the Board to regularly monitor strategic progress, ask questions and help understand – and overcome – key challenges.

1. Budget, Resource & Risk Approval:

• • Working with the CEO and senior management team, help to develop an annual budget for the Credit Union consistent with moving forward its strategic vision, mission and goals.
  • Approve the annual budget of the Credit Union.
  • Monitor the revenues, expenses and key financial ratios of the Credit Union on a regular basis.
  • Ensure a clear delegation of authority policy is promulgated by the Board place to clarify the authority of the CEO and senior management team to make sizeable expenditures or – due to changing circumstances - any expenditures not contemplated by the budget.
  • Make adjustments to the budget as may be appropriate.
  • Working with the CEO and senior management team, to ensure appropriate risk management for the Credit Union and ensure policies, budget, the strategic plan, and other relevant documents are consistent with risk management.

1. Membership & Community Outreach:

• In alignment with the Credit Union’s strategic direction, mission, vision and values, and Communications Procedures Board Members should:
• • Thoughtfully represent the members’ interests.
  • Act as active ambassadors to the Credit Union’s membership on behalf of the Credit Union.
  • Help to improve and communicate the Credit Union’s brand, image, and benefits to members, prospective members, and the community at large.
  • Find appropriate opportunities for the Board to reach out to the communities where the Credit Union operates.
  • Assist the Credit Union in identifying and forming crucial partnerships with other Credit Unions, organizations, groups, etc.

1. Stewardship, Ethics & Financial Integrity:

• • Maintain, monitor, and protect the safety and soundness of the Credit Union and its assets.
  • Ensure the proper maintenance and security of all assets, accounts, and written information entrusted to the Credit Union.
  • In partnership with the CEO and senior management team and the Supervisory Committee, retain independent auditors, accountants, and legal or governance counsel as needed.
  • Ensure that the Credit Union acts ethically and with genuine financial integrity consistent with a cooperative, non-for-profit institution.
  • Ensure ongoing monitoring and compliance with all laws, rules, and regulations applicable to the Credit Union and all its activities.

Description of the “Constructive Partnership” with the CEO and Senior Management Team

Effective Credit Union governance requires a high level of collaboration between the Board and the CEO and senior management team. Directors must play an important leadership role with the CEO and senior management team in establishing the mission, vision, and long-term strategic direction of the Credit Union, as well as share common responsibility for determining the Credit Union’s strategic goals, objectives, success metrics, and its risk tolerance.

The Board’s oversight functions involve actively and effectively monitoring the Credit Union’s business and affairs, including its financial performance, management performance, as well as risk management efforts. The Board must also ensure legal and regulatory compliance as well as adherence with the Credit Union’s established policies and procedures. These oversight functions also require that the Board collectively and individually understand the Credit Union’s finances and how to balance their fundamental leadership role as well with the CEO and senior management team’s role in conducting the day-to-day operations of the Credit Union.

A well-governed board will not be involved in day-to-day tactical, operational issues. Rather, the Board should oversee the Credit Union’s operations effectively and make informed decisions - without exercising the role of management. Knowledgeable oversight entails monitoring how well activities, decisions and results align with the established governance framework, policies and strategic plan of the Credit Union. Exercising knowledgeable oversight over the CEO and senior management team’s efforts does not normally entail getting “deep into the weeds” (i.e., the details of how the CEO and senior management team is operating), although some operational knowledge is needed so that the Board may have informed discussions and make informed decisions.

In carrying out a Director’s duty to manage the business and affairs, the Director must exercise his or her own objective and independent judgment. This means engaging in robust discussions with other Board members, the CEO and senior management team, and others – and even challenging recommendations at certain times, rather than simply deferring to others’ judgment.