Compliance Question of the Week: CU Boards and Personnel Issues
Posted: Oct 16, 2024 | Author:
Cornerstone League
Read time: 2 mins, 10 secs
Cornerstone’s compliance team fields credit unions’ most pressing questions every day—a dues-supported benefit for Cornerstone members. Some of those questions are spotlighted as a Question of the Week featured in the InfoSight weekly newsletter and on our website.
This week, we present one of the most timely and relevant questions, answered by Cornerstone Regulatory Compliance Counsel Suzanne Yashewski.
Question:
Is it appropriate for credit union board members to be involved in personnel matters at the credit union?
Answer:
Generally speaking, no; credit union board members should not be involved in personnel issues at the credit union. Instead, personnel issues should be handled by the credit union CEO, management, and human resources staff.
The issue here is “governance” vs. “management.”
The duty of the credit union board of directors is “governance.” A CU board should focus on high-level strategy, oversight, and accountability of the credit union. Regarding personnel issues, the board has one employee, the CEO. The board is responsible for hiring the CEO, providing strategic guidance to the CEO, appraising the CEO’s performance, setting the CEO’s salary and benefits, etc.
In contrast, the CEO’s job is “management” of the credit union. The CEO is in charge of managing the credit union, including hiring and managing the staff and overseeing other related personnel matters such as staff compensation and other personnel matters (with the assistance of human resources staff, if such an HR position exists).
The board’s role regarding compensation matters for the staff should be limited to approving the compensation plan developed by the CEO. This process should include ensuring that the plan aligns with organizational values, supports the organization’s recruitment efforts, and is realistic relative to the organization’s overall budget and resources. It is inappropriate for the board to review line-item details of individual employee salaries or become involved in salary negotiations.
Regarding performance appraisals, the board will appraise the CEO, while the CEO and management team will appraise the staff’s performance.
Staff grievances or whistleblower claims should follow the CU policy and will generally be handled by HR or upper management. In rare circumstances (such as a claim of a violation of law by the CEO), it may be appropriate for the board to get involved. In those instances, it may be appropriate for the board to hire experienced, impartial employment law investigators to assist with an investigation and legal advice.
The board has a right to access the books and records of the credit union to perform its fiduciary duties. Generally speaking, that duty will not include accessing the personnel files of individual employees reporting below the CEO. CU boards should keep in mind that much of the information included in a personnel file should be kept confidential by the HR department due to various employment law requirements. Personnel files may contain private confidential matters, including medical information, etc., which must be protected. Sharing such information beyond a “need to know” basis can introduce legal risk to the credit union.
Questions regarding board responsibilities or employment matters? Contact Cornerstone League Regulatory Compliance Counsel Suzanne Yashewski at [email protected] or Information Central at [email protected].
