A credit union’s board of directors is generally responsible for the overall direction and control of the credit union. While the board may delegate the day-to-day operation of the credit union to management and staff, NCUA regulations, bylaws and principles of corporate law generally require a board to provide oversight. NCUA has explained that this means the board must direct the operation of the credit union, ensure safety and soundness and establish programs to achieve the credit union’s purpose. NCUA has also provided a catch-all provision that requires the board to perform all other acts that may be required.
In carrying out these responsibilities, Section 701.4 of NCUA’s regulations requires each director to act in good faith and in the best interests of the credit union membership. This rule, also known as the fiduciary duty rule, creates a fiduciary relationship between each director and the credit union membership. As a fiduciary, each director must set aside his or her own needs for the needs of the credit union membership and manage the credit union for the benefit of the members. While there are numerous responsibilities a fiduciary must undertake, these generally boil down to two main duties: loyalty and reasonable care.
From the March-April 2018 issue of The NAFCU Journal magazine.