By Ray Birch
WASHINGTON—The percentage of women serving on credit union boards is increasing, as is the number of minorities, but a majority of boards have no minorities represented, according to a new study from CUCollaborate.
But the study’s findings also support an issue within credit unions that many have been raising, that some credit union boards are not representative of their membership base and lack diversity. That issue has sparked controversy over the years, including for Santa Ana, Calif.-based $25.2-billion SchoolsFirst CU’s board, where one person has been agitating for change.
The CU Collaborate study—Credit Union Boards of Directors: Board Size, Gender, Race, and Institutional Performance, 2012–2021—found both women and minorities remain underrepresented among directors across the industry. The report was produced by CUCollaborate Chief Economist Luis Dopico and Data Analyst Moriah Taylor and was sponsored by Humanidei President/CEO Jill Nowacki.
The team analyzed NCUA Call Reports and developed demographic data modeled from board member data obtained from the NCUA under the Freedom of Information Act, to produce its findings.
Dopico told CUToday.info the research shows that greater diversity on credit union boards improves credit inclusion and asset growth performance.
“We're simply reporting the fact that we find having more minority members on the credit union’s board will lead to greater inclusion in credit union lending policies,” said Dopico. “Many minority members of boards may have experienced exclusion before and, therefore, would drive their financial institution in the direction of more inclusive lending.”
With 5,006 minorities among 36,543 directors across the industry, the report shows there are 1.0 minorities per board—accounting for 14% of all board members. Dopico told CUToday.info that number is similar to the average for corporations in the Russell 3000 Index, which reported that 13% of board members were minorities.
“But that still is well below the 42% figure that reflects the share of minorities in communities that credit unions serve,” Dopico said.
Dopico added that CUCollaborate chose the Russell Index, a small-cap stock market index, to make its comparison.
“This index focuses on smaller companies, and therefore their board compositions are more relevant for comparisons with credit unions,” Dopico explained.
A Majority Have No Minorities
Despite credit union strides in improving minority representation among their directors, the CUCollaborate report reveals the majority of credit unions (60%) have no minority representation on their boards.
Credit unions, according to the study, have been doing better in adding women to their boards. During 2012–2021, women’s representation on CU boards increased substantially from 26% to 32%, on an asset-weighted basis. With 12,758 women among the 36,543 total directors, there are 2.5 women per board.
Dopico said that number is above the average for corporations in the Russell 3000 Index (27%), but still substantially below the percentage of female members in credit unions, which is close to 50%.
The study did show 29% of credit unions have boards that are close to gender parity, having between 40% and 60% women. However, credit unions with less representation are far more common, accounting for 56%.
A Growth Driver
Dopico said the data show that having more women on the credit union’s board can lead to higher growth rates.
“While women are often reported to be more risk-averse in financial decision-making, we do not find that credit unions with more women representation reduce risk taking,” Dopico said. “Instead, we find credit unions with more women representation to have somewhat higher asset growth rates.”
Taylor believes one reason for the slow rate of change in gender and race among CU boards is the slow turnover of credit union board directors.
“Once board members are first elected, they tend to stay for a long time, and turnover is very low. So, it's hard to enact change in gender and race if you have little change in board memberships,” said Taylor. Dopico also mentioned that unpaid directorships make it more difficult for credit unions to attract candidates than in other for-profit, non-profit, or cooperative endeavors.”
‘Moving Slowly’
But, again, the data points to an industry problem—that women remain underrepresented in CU boardrooms, according to CU Collaborate.
“We are moving slowly in the direction of greater inclusion,” said Dopico. “Over the last nine years, for which we have data, we do find sizable increases in women's representations on boards. We also find increases in minority representation, but these are far smaller.”
The report further found credit union boards averaged 7.2 members in 2021, a number that was found not to have changed substantially over the period investigated. While larger credit unions may tend to have more board members, the report notes that “average board sizes do not differ markedly across asset size ranges,” with 95% of boards composed of between five and 11 members.
Board size was not shown to have any meaningful corrleation to credit union performance, with the researchers concluding that, “increasing a credit union’s board size would not mechanically yield the performance associated with larger asset size.”
Additional Links Examined
The report also examined the links between these demographic factors and several key measures of member-centric and financial institutional performance.
Overall, the study found that “with very few exceptions, variation in board size, women’s representation, and minority representation has few measurable impacts across most of the key measures of performance that we explored.”
The report adds, however, this does “not imply that board size and composition do not matter,” as the metrics calculated do not offer a complete picture of a credit union’s performance.
“To best serve their memberships, credit unions should seek boards that are both professionally qualified and representative of their current or potential memberships,” Dopico said.
Additional Findings
Other study findings:
- Credit unions with under $10 million in assets average 6.4 directors, and credit unions with over $10 billion in assets average 10.2 directors.
- The average credit union member is served by a board with 8.9 directors.
- During 2012–2021, minority representation on boards increased modestly from 12.6% to 14.2%, but far below the increase in the minority share in the US population, which grew from 37% to 42%.
For more information: https://www.cucollaborate.com/credit-union-resources/board-composition-research