Credit union boards of directors are normally protected from charges that they did not perform their duties on behalf of the membership in a faithful manner by following the prudent person doctrine. This means that given the same set of facts, a normal person would act in the same manner. This is best understood by the following example of an approach that a credit union board could utilize to a problem.

 The credit union has a CEO vacancy and is approached by a number of credit unions about a potential merger (this happens quite frequently). The board enters into dialogue with one specific credit union and signs a letter of intent one week prior to the credit union’s annual meeting.

 At the annual meeting, a member asked if a merger is being pursued. The board chairman responds that the credit union has been approached by several credit unions and is weighing its options. No mention is made of the signed letter of intent. A few days after the annual meeting a press release is sent out announcing that the credit union has signed a letter of intent to merge. Needless to say the membership is upset.

 Do you feel that the board followed the prudent person doctrine?

How would you have approached the situation if you were on the board?


About caseywheeler

My interests include: Model trains, Reading, Genealogy, New York Yankees and helping organizations be successful.
This entry was posted in Board Governance, Leadership and tagged , , . Bookmark the permalink.


  1. Tim Bunch says:

    Sounds like a mis-step to me. The best thing the board could have done was to wait until after the annual meeting to sign anything. Also, is there a reason the board would not survey the membership about a merger to get a feel for how it might go over?

  2. caseywheeler says:

    Thanks for the input Tim. Yes waiting until after the annual meeting to sign the letter of intent would have been better. I will be providing my thoughts on the scenario in my next blog post on Monday.

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