Good Governance: A ‘Digital-First’ Director & Officer Questionnaire Process

There’s no denying that board members are vital to any credit union. A robust and effective board of directors is key to a credit union’s success, ensuring it is consistently making strides toward achieving its mission and reaching its key objectives.

Unfortunately, credit union boards often get bogged down by outdated, inefficient, and lengthy processes and procedures. Board books and other materials are compiled by hand—often at the last minute as a way to keep them from becoming dated by the time of the meeting. Sensitive documents are distributed via email, which sometimes causes board members to question whether they are referencing the latest version. Moreover, many times essential processes like the annual collection of director and officer questionnaires remain paper-based.

Such antiquated, chunky paper-based processes slow progress and stand in the way of a board reaching its full potential. Additionally, paper-based procedures invite risk, as printouts—especially those sent in the mail–could easily get into the wrong hands.

The pandemic has accelerated digital transformation at many organizations. Now is the time for boards of directors to follow suit by ditching outdated processes in favor of digital-first board management—including D&O questionnaires. Credit union boards that do so will be better equipped to move more quickly, collaborate more effectively and accomplish more for the organizations they serve.

D&O Questionnaires: An Essential Process for Credit Unions

D&O questionnaires are distributed to directors and officers (typically, on an annual basis) to identify conflicts of interest, often as a regulatory requirement. The questions focus on such matters as the board member’s background and experience, independence and compensation, to name a few.

Many people associate the phrase “D&O questionnaire” with publicly traded companies, and they’re certainly not wrong. Publicly traded companies are required to complete D&O questionnaires on an annual basis as part of their filings with the U.S. Securities and Exchange Commission. However, these questionnaires are also used by a number of other types of businesses—including credit unions and other financial institutions. Doing so can be beneficial, even if not required.

Manual D&O Questionnaire Processes are Rife with Inefficiencies

Though the D&O questionnaire process is often useful, it’s often one that directors and senior legal counsel alike dread, especially when the process is manual and entirely paper-based. Creating, distributing, collecting and reviewing D&O questionnaires can take days or even weeks to complete.

Typically, the board liaison prepares a D&O questionnaire, prints copies for each board member, and then distributes them at the next board meeting. However, many board meetings now take place remotely, so it’s common for the questionnaires to be dropped in the mail. That adds even more time to the process.

While some board members complete and return the questionnaires right away, that’s not always the case. Frequently, administrators must chase down outstanding questionnaires.

When administrators receive the completed questionnaires, they must review them for completeness and accuracy. If an error is found, they must restart the process.

To further complicate matters, the D&O questionnaire process isn’t a one-and-done thing. Board members—even directors who have been around a long time—must complete the questionnaire every year. That means administrative teams must refer to scanned copies of the previous year’s disclosures to pre-populate the current year’s version, a process that can take several hours.

How Credit Unions are Streamlining and Digitizing the D&O Process

Clearly, the D&O questionnaire process is necessary but frequently complicated and time-consuming. So it’s no wonder that a growing number of boards are transitioning this effort to digital platforms.

According to the 2021 Board Effectiveness survey, 81% of organizations that used board management solutions indicated that their effectiveness improved over the last year, compared to 58% of those that didn’t use digital platforms. Furthermore, 94% of those who used board management software indicated that their boards were well-prepared. And, of course, well-prepared board members are better equipped to take the action that will move a credit union closer to its goals.

With board software, the D&O questionnaire process takes minutes rather than weeks. Board members can access and complete their annual D&O questionnaire right from the platform. After submission, the administrative team can quickly and easily review the disclosures and, if an error crops up, it can easily be fixed in digital form.

What’s more, D&O questionnaires are stored digitally and can be accessed at any time. That means the current year’s questionnaire can easily be pre-populated with information from the previous year—with the click of a button—no need to move over information from a scanned printout manually.
 
Of course, digitizing D&O questionnaires on a secure, encrypted board software platform significantly reduces the risk of sensitive information falling into the wrong hands than with a paper-based process.

Streamlining and digitizing the D&O process can lead to big-time savings. Board members and administrators can spend less time on a clunky yet necessary process, freeing them to make decisions and take meaningful action to move credit unions closer to their goals.

Access to mission-critical information is critical for credit union boards to take bold and impactful action. Leaning into the digital transformation boards can streamline the D&O questionnaire process. This will improve not only the effectiveness and efficiency of the board for this task but across all areas of management.

Adarsh Mantravadi is general counsel and director of government strategy to Passageways OnBoard, a CUES Supplier member based in Indianapolis. He brings over 10 years of public sector experience at both the state and federal levels. Most recently, he served as a senior director of policy and research for Indiana Governor Eric J. Holcomb, where he spearheaded the creation of the Next Level Fund, the state’s $250 million private equity and venture capital investment vehicle. Mantravadi holds a J.D. and master’s of public affairs from Indiana University-Bloomington, and has served the community in numerous board and volunteer roles and is a two-time recipient of the Sagamore of the Wabash.