|Posted by Scott Butterfield on September 11, 2017 at 7:20 PM|
Diversity among your directors provides a competitive advantage.
Democratic membership representation is a hallmark of the credit union movement. Common-bond groups long have elected people from among their ranks to serve as their voice in credit union decisions.
These volunteers understood first-hand their constituency’s needs because they were part of the same socioeconomic demographic.
But the makeup of many credit union boards hasn’t kept pace with the changing face of membership demographics. Statistics indicate—and first-hand experience confirms—that older, white men continue to predominate boards.
These volunteers provide valuable service to their credit unions, but may lack a personal understanding of many current and prospective members’ needs and preferences. Increasingly, credit unions view board diversity as a competitive advantage. Diversity reflects more than just race or ethnicity.
Emerging demographic trends
Consider the demographic landscape of the U.S. as it stands today, and as it will evolve in coming years and decades.
A record 40% of all households with children under the age of 18 include mothers who are either the sole or primary source of income for the family, according to a new Pew Research Center analysis of data from the U.S. Census Bureau. The share was just 11% in 1960.
These “breadwinner moms” are made up of two very different groups: 5.1 million (37%) are married mothers who have a higher income than their husbands, and 8.6 million (63%) are single mothers.
Millennials (born between 1982 and 2004) have surpassed baby boomers (born between 1946 and 1964) as the largest U.S. generation, and differ significantly from their elders in many ways.
They are the most ethnically diverse generation in American history: 43% of millennial adults are nonwhite, the highest share of any generation. And they are on track to be the most educated generation to date.
Americans are more racially and ethnically diverse than in the past, and the U.S. is projected to be even more diverse in the coming decades.
By 2055, the country won’t have a single racial or ethnic majority. Much of this change has been (and will be) driven by immigration. Nearly 59 million immigrants have arrived in the country during the past 50 years, mostly from Latin America and Asia.
Today, a near-record 14% of the country’s population is foreign-born, compared with just 5% in 1965. During the next five decades, the majority of U.S. population growth is projected to be linked to new Asian and Hispanic immigration.
The share of Americans who live in middle-class households is shrinking. The number of adults living in middle-income households fell to 50% during 2015 after more than four decades during which those households served as the nation’s economic majority.
And the financial gaps between middle- and upper-income Americans have widened, with upper-income households holding 49% of U.S. aggregate household income (up from 29% in 1970) and seven times as much wealth as middle-income households (up from three times as much in 1983).
Diversification of diversity
Does your credit union currently serve these groups, and/or do they represent a market you would like to serve better? If you answered yes, does the diversity of your board reflect that group?
When pondering that question, consider all of these groups:
And at a time when credit unions are catching up with remote deposit capture, younger people are focused on digital-first platforms. Technology decisions made in boardrooms today will have lasting impact.
Without appropriate representation on the board, the impact of community service projects to these groups will be limited.
More than half of all consumers have less than prime credit, and predatory lending is growing unchecked.
Consider how important it would be to have someone on the board who has experienced living on lower wages, or who has experienced credit setbacks. Credit union boards that truly understand these situations tend to judge less and more openly support credit union programs directed at credit-challenged consumers.
Take action today
If your board’s representation already reflects your unique membership, congratulations. Remember to assess your board’s makeup as your membership changes.
If you need to make changes, consider these three ideas on how to form a diverse board:
To target millennials, consider contacting local colleges, and reach out to past recipients of your scholarships. Candidates will view activity on a credit union board as a way to represent and serve the people they care about.
Credit unions should mine for female members looking for an opportunity to serve, and could recruit someone serving on the board of a kindred organization.
Albert Einstein said the definition of insanity is doing something over and over again and expecting different results. This holds true for board diversity. If your past activities have yielded low diversity, you’ll need to do something different to get a better response.
Improving board diversity isn’t an option—it’s a necessity. Without democratically elected volunteers, we’d cease to fulfill the credit union mission. Without governance diversity, we cease to be relevant to our members, potential members, and communities.