11 Director Training and Qualifications Oct 26 with NOTES ... · COMPETENCY TIMEFRAMES Option 1:...

Director Training and QualificationsBoard and Director CompetencyBoard and Director Competency

Expectations

DICO WebinarOctober 27, 2011

AGENDA

Introduction Review of initial proposals and stakeholder

feedback Options being explored Feedback on options p Next Steps

INTRODUCTION

The Credit Unions and Caisses Populaires Act

Section 92. (1) The following individuals are disqualified from being directors of a credit union:

13. One who has not met the training requirements or qualifications for directors established by the credit unioncredit union.

INTRODUCTION

Why is guidance needed? y g

Changing landscape and expectations Improved director awareness and confidence Improved director awareness and confidence Improved governance and oversight

Understanding, Confidence, Participation, Challenge C i t t f k Consistent framework

Best practices

INTRODUCTION

What are DICO’s expectations?

Policy on director and Board competencies Appropriately scaled to reflect size andAppropriately scaled to reflect size and

complexity Culture rather than “compliance”Best governance practicesBest governance practices

INTRODUCTION

Overall response level

High number of responses GENERALLY SUPPORTIVE, BUT…concerns on

Director recruitment and turnover Training costs and availability Time frames Time frames Director compensation DICO’s assessment

PLUS many helpful suggestions provided

REVIEW AND DISCUSSION

Board and Director Competencies Competency levels and time frames

T iti l t Transitional arrangements Implementation DICO assessment DICO assessment

CORE COMPETENCIESInitial Draft Proposals

Core Competencies Audit and Compliance Oversight

Board and CEO Performance

C di i iCredit union operations

Financial Literacy

Governance and Ethics

Leadership

Regulatory Environment

Ri k M t O i htRisk Management Oversight

Strategic Planning

CORE COMPETENCIES Initial Draft Proposals

Methodology

Addresses By-law #5 requirements Similar approach to typical governance practices

R fl t t t i i d i t ti Reflects current training and orientation programs available

Consistent with other jurisdictions

Benefits Consistent expectations for ALL institutions andp Covers all critical areas

CORE COMPETENCIES Initial Draft Proposals

Stakeholder Comments Should not apply to all directors Apply to “majority” of Board as a whole Suggest 75% of Board Reduce number to:

Governance & Ethics Financial Literacy and Regulatory Governance & Ethics, Financial Literacy and Regulatory Environment

All others apply to board as a whole Add HR and IT Add HR and IT Consider adding behavioral competencies

CORE COMPETENCIES

Possible Options Reviewed:

Apply competencies to Board as a whole Retain same “core competencies” for each director

CORE COMPETENCIESOption 1: Apply to Board as a whole

May lower individual director competencies y p Potential deficiencies in key areas (Audit Committee,

Chairs) More complex option More complex option May not result in lower costs May impact succession planning y p p g


ISSUESISSUES What overall level is appropriate (minimum)? How is this applied? (per director/per competency How is this applied? (per director/per competency,

both)? May already be accomplished with natural director

turnoverturnover


Director Competencies p

Director 1 2 New

3 4 5 6 New

7

8

9

Core Competencies

Audit and Compliance √ √ √ √ √ √ 67%

√ √ √ √ √Board & CEO Performance √ √ √ √ √ 56%

Credit Union Operations √ √ √ √ √ √ √ √ 89%

Financial Literacy √ √ √ √ √ √ √ 78%

Governance and Ethics √ √ √ √ 44%

Leadership √ √ √ √ √ √ √ 78%

Regulatory Environment √ √ √ √ √ √ 67%

Risk Management √ √ √ √ √ √ 67%

Strategic Planning √ √ √ √ √ 56%g g √ √ √ √ √Overall Competency Level

CORE COMPETENCIESOption 2: Apply to all directors (no change)

DIRECTOR Year 1 Year 2 Year 3 1 √ New √1 √ New √2 √ New √ 3 √ √ √ 4 √ √ √4 √ √ √5 √ √ √ 6 New √ √ 7 New √ √

√ √8 New √ √9 √ √ New

Board % Competency

66% 78% 89% Competency

CORE COMPETENCIES Option 2: Apply to all directors (no change)

OPTION 2: No change – Apply to all directors

Higher level of board competencies Higher level of board competencies Helps succession and appointment process Easier to administer and monitor Not all directors will be (or expected to be) at same

competency level at same time

QUESTIONS?

COMPETENCY LEVELSCOMPETENCY LEVELS Initial Draft Proposals

Institutions set out appropriate competencies Sample descriptions provided Includes combination of understanding, knowledge,

previous board experience and training Minimum expectations outlined Minimum expectations outlined

Class 1 - Good Class 2 - Strong

Methodology Consideration of current director development programs Different scale of operationsp

COMPETENCY DESCRIPTIONS

Stakeholder Comments Increase recognition of previous board experience Should be a consistent standard Is there a requirement for training? Is there a requirement for training? Training availability may not align with credit union’s

timeframe / plan for director training Training e pensi e especiall for smaller instit tions Training expensive, especially for smaller institutions Not enough training opportunities Any funding available?

COMPETENCY DESRIPTIONS

Includes combination of Education Working knowledge Previous board experience Previous board experience Director training

Considerations What type How extensive How extensive When

COMPETENCY LEVELCOMPETENCY LEVEL Individual Director Assessment

EXAMPLE: Class 2 Institution

Competency Education Working Experience

Previous Board

Experience

Training Overall Competency

Additional Training

ExperienceAudit &

ComplianceSecondary

SchoolNone Minimal None Basic Recommended

Financial Secondary 5 years None Some Strong OptionalLiteracy

ySchool

y g p

Strategic Planning

Post Secondary

10 years Extensive None Strong Optional


TRAINING

Addresses gaps in competencies Is an important element for building competencies Is an important element for building competencies

earlier Ensures consistency Simplifies assessment process Simplifies assessment process


Possible ModificationsPossible Modifications

– Separate guidance for Class 1/Class 2Separate guidance for Class 1/Class 2 – Standard competency descriptions– Modify descriptions to clarify board experience

and training elements

QUESTIONS?

COMPETENCY TIMEFRAMESCOMPETENCY TIMEFRAMES Initial Draft Proposals: Minimum Expectations

CLASS 1 All Directors Audit Committee AuditCLASS 1 All Directors Audit Committee Member

Audit Committee/Board

Chair Competency Level Good Good Good

Time Frame Within 15 months of election

Within 12 months of appointment

Prior to appointment

CLASS 2

Competency Level Strong

Strong

Strong



Prior to appointment pp

COMPETENCY TIMEFRAMES

MethodologyMethodology

Review of other jurisdictions M i t i ll b d t i Maintains overall board competencies

Provides for mentoring and “board” experience Ensures directors have required competencies su es d ecto s a e equ ed co pete c es

for critical roles


Stakeholder CommentsI ibl t tt i Impossible to attain

Timeline too short

Timeframes suggested: 15 - 18 months 18 - 24 months 18 - 24 months Use 2 - 3 years Minimum 3 years

B th d f fi t t By the end of first term


Possible Options Reviewed

Adopt common time frame for all directors –18 months18 months

Extend time frames up to 24 months for non-committee directors

Retain proposed timeframes


Option 1: Common timeframe -18 months

Potential reduction and flexibility in “training” costs Consistent for all directors and institutions Extends time to “mid-term”- reasonable Removes “pre appointment” requirement Removes pre-appointment requirement Simple to implement Minimum requirements only Institutions may establish different requirements for Audit

C itt b d Ch i tCommittee members and Chair etc.

ISSUES Lowers overall board competenciesp

COMPTENCY TIMEFRAMES Option 2: Modified Timeframes

CLASS 1 All Di t A dit A dit C ittCLASS 1 All Directors Audit Committee

Member

Audit Committee Chair/ Board

Chair Competency

Level Good

Good

Good

Time Frame Within 24 Within 12 Within 6 months ofTime Frame Within 24months of election

Within 12 months of

appointment


CLASS 2

C t St St StCompetency Level

Strong

Strong

Strong


Within 12 months of

appointment



Option 2: Modify Time frames UP TO 24 months

Potential reduction and flexibility in “training” costs Provides greater time to reach competency levels

R “ i t t” i t f Ch i Removes “pre-appointment” requirements for Chairs Ensures that directors in key positions (Audit

Committee and Chairs) have required competencies earlierearlier

ISSUES Lowers overall board competencies

QUESTIONS?

Sample Board Competencies

Important for broad range of competencies in addition to CORE competenciescompetencies

Additional “specialized” OTHER competencies might berequired: Information technology Information technology Human Resources Marketing Legalg Entrepreneurship Economics.

Directors should complete a self-assessment at least annually Use established “competency” descriptions

B d C t iBoard Competencies Sample Board Competency Matrix

Director Competencies

Director 1 2 3 4 5 6 7Audit

Committee Chair

Board Chair

Core Competencies Audit and Compliance G G S G G E S

Board and CEO Performance G G G G S S SBoard and CEO Performance G G G G S S SCredit Union Operations G G G G G S S

Financial Literacy G G G G G E S Governance and Ethics B B G B G S S

Leadership B B G G G S E Regulatory Environment B G G G G S SRegulatory Environment B G G G G S S

Risk Management B B S E S E S Strategic Planning B B B G G S E

Overall Core Competency Level B B B G G S S Other Competencies

Information Technology B G B B G S GInformation Technology B G B B G S GMarketing B B B S G B G

Legal B B G B B G S Entrepreneurship E G B B G G S

Economics B G S G G B S

Transitional Arrangements

Proposed

Existing directors meet minimum required competency levels within 12 months unless current t d ithi 12 th d t l iterm ends within 12 months and not planning on seeking re-election.

Directors seeking re-election or re-appointment should attain required competency levels within time frames for new directors or appointeespp

Transitional Arrangements

Proposed Modifications

Existing directors grandfathered to the end of the existing termexisting term

New requirements applied as with any other “new director” if re-electedC t i h ld th l t d i d Competencies should then evaluated in accordance with credit union policy

Training may be required to address any “gaps”

QUESTIONS?

DICO’S ASSESSMENT CRITERIA

DICO’s assessment may include interviews with Chair and th di t d l id ti d i fother directors, and also consideration and review of:

Credit union’s policy and practices on director training and qualificationsqualifications

Director competencies and competency levels, including members of Audit Committee and Board Chair

Director assessment criteria and assessment processes Director competency levels and development programs

including required training and time frames Board competencies and assessment criteria Continuing director education and development requirements Continuing director education and development requirements


Stakeholder Feedback How will competencies be assessed? What documentation is required? Training policy might be questioned by inspectors with

limited knowledge Will formal training programs be accepted as Will formal training programs be accepted as

equivalents Should recognize value of training from different sources

(i h t i i d f i l d l t)(in-house training and professional development)


Focus on policy requirements approach and Focus on policy requirements, approach and practices

Confirm appropriateness based on size and Confirm appropriateness based on size and complexity

Identify any gaps, weaknessesy y g p , Confirm adherence to policy and procedures

ADDITIONAL GUIDANCE

Application Guide Application Guide Director’s Handbook Self-Assessment Workbooks Self-Assessment Workbooks Governance Guidance Examination Guide Examination Guide Workshops Webinars Webinars

NEXT STEPS

Publish Feedback and Response Nov. 18, 2011 Submit revised guidance for comment Nov. 18, 2011 Review feedback Dec. 31, 2011 Webinar Jan. 18, 2012 Publish Final Guidance Jan. 31, 2012 Publish additional tools, best practices Publish additional tools, best practices

and director self-assessment tools May 31, 2012 Effective July 1, 2012

B d d Di t C tBoard and Director Competency Requirements

Thank you!

Questions?Questions?

11 Director Training and Qualifications Oct 26 with NOTES ... · COMPETENCY TIMEFRAMES Option 1:...

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