Democracy Debased

The May 2019 Central 1 Triennial Governance Review report has provoked too little discussion. Unfortunately, it reflects another incremental shift away from models of democratic ownership upon which the co-operative business model is based. This is another step in the effective ‘dis-mantling’ of second tier credit union entities as political agents for credit union members.

The white paper has three big weaknesses. It defaults to a corporate governance framework to define what a desirable director should be. It wipes out the references to distinct provincial credit union systems, which will favour the proportionally large credit unions. And it moves away from representational democracy by opening up 4 of 15 seats to candidates from outside the credit union system.

Managerial Bias

On page 5 the paper explores the size of the Central 1 board at 15 directors, “…which is comparatively large in relation to the average in Canadian corporations.” While no change is proposed, the reference makes it clear that the standards that are to be applied are those preferred by the Institute for Corporate Directors and other similar bodies. This framing immediately leads to a review of “skills and experience needed”. This is a framing with a political bias.

The credit union model is one in which ordinary people, working people, move to take ownership of the ‘bank’. Ownership is a powerful word and concept. Ownership grants discretion to the holder(s) and breadth of decision-making. Democratic ownership marries together a citizen constituency and the primary property rights of ownership.

Notably, in Canada we do not introduce the need for certain ‘skills and experience’ in the election of city councillors, school boards or any other similar citizen-based democratic bodies. Within our democratic traditions, generally, we are aware that such positions should be open to all, without qualification. That is at the heart of an open democracy.

The rationale for using qualifications at Central 1 is thin. Such a move favours managerial elites and dissuades ordinary people from taking part. Emphasising the need for technical skills such as “risk management” or “regulatory experience” will bring more managers in a as directors. The outcome will also reduce the diversity of views and life experiences at the table.

Paradoxically, that was exactly what credit union pioneers were trying to challenge through consumer ownership. Credit unions were created as an alternative to ‘financier’ dominated banks, trust companies, and finance companies. This is somehow forgotten – both at Central 1 and at many of Canada’s monster credit unions.

The challenge is not ‘how to get more managers’ to be directors, it is ‘how to make ownership – and directorships – more relevant to our member-owners’. How do we make the unique ownership model work optimally? On a supplementary note, we must be critical of executive managers seeking more ‘people like them’ on boards, because that is a natural bias.

A Federal Case

The removal of provincial Central 1 board representation may appear innocent, but it is part of the consolidation agenda. The report proposes that only 3 seats are reserved for officers from smaller credit unions, down from 5. These three positions , and four ‘other’ seats, are to be elected on a one-member one-vote method, which does give smaller credit unions greater voting power than in a proportional system. Eight Central 1 directors would be elected/appointed on a proportional basis.

This ‘at large’ system for voting will disadvantage small credit unions’ candidates as they will have to campaign nationally rather than provincially. Consequently, particular interests that may be provincial or regional would be marginalised. The only constituency with a secured voice at the table is large players. It would be possible for the Central 1 board to have no director from smaller credit unions in one of the provinces, either BC or Ontario; if the ‘three’ reserved seat were filled from one province only.

And on the flip side, large credit unions (with more substantial campaigning resources) could lobby for ‘external’ candidates of their choice to be nominated for the four positions that are, in the proposal, not exclusively reserved for officers of credit unions.

The report implies that smaller, local, and regional credit unions are not viewed as part of a successful future. Small and medium size provincial credit unions, the bulk of credit unions, would not be well served.

Further, to the extent that other provincial credit union systems may be integrated into Central 1, the absence of provincial representation may have broader negative implications.


The co-operative model is rooted in mutual aid and self-help at the community level. The democratic ideals say that decisions are made by the members of that community and their elected representatives.

The proposals at Central 1 steer away from that legacy; from directors as ‘representatives of members interests’, to directors as ‘prudential risk managers’. It confuses ‘why’ the central credit union exists with ‘how’ it should manage its affairs. And it sets aside more than 25% of the board seats on the rationale that representatives from credit unions will not have the ‘technical skills’.

It would be odd to see a similar proposal be proposed for provincial legislatures. The idea subverts democratic fundamentals.

Representative democracy is a well tested, principled model for governing all kinds of projects. It may have weaknesses, but that does not mean that the system itself is not capable of coping. Other measures can be implemented to ensure ‘technical skills’ are at hand at Central 1. Other measures may be considered to cultivate and train prospective directors, from all walks of life.

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