What is the Difference?

The National Credit Union conference next week has been pitched as exploring the credit union ‘difference’.  It is common to hear the CCUA and some other advocates for credit unions make a general reference to the ‘difference’.  The CCUA home page includes this text:

Credit unions are full service financial co-operatives. Like other financial institutions, they provide chequing accounts, mortgages, business loans and investment advice. But, every credit union’s Board of Directors consists of democratically elected members from their community. Locally elected boards of directors are how we understand what’s important to our members and how we keep our decisions based on local realities. Rooted in this co-operative structure, the credit union difference is all about service – to members and to communities.

Indeed, the real, fundamental, radical difference is the credit union ownership model.  And so I am dismayed that the a conference that says it wants to celebrate the credit union ‘difference’ has not one presentation, workshop or breakout session that gives us a chance to critically discuss member-ownership and the co-operative model.

Credit unions are political projects.  The history is one of communities saying ‘we can provide for ourselves’, using a democratic ownership model.  They determined that large national and international entities did not serve them well, or left too many to be exploited by loan sharks.  Secondarily, local ownership also had the ability to make the enterprise responsive to local needs generally.

But now this ‘difference’, this ownership model, gets little thoughtful attention.  The nice text quoted above is ironic, given that the image of credit unions portrayed is no longer the fact. The largest 10 credit unions in BC comprise 86% of the total assets.  The biggest ones serve many different communities, and many communities have no representation on the board of directors. These credit unions are no longer local enterprises. The advent of ‘federal credit unions’ further subverts this picture.

So, does the co-operative ownership model work well at scale?  What are the measures that should be introduced to ensure the vitality of member-ownership? These are questions that are neither asked nor invited.

In large measure, the accountability to owner-members has broken down at larger credit unions. The concept of a members meeting, a ‘deliberative assembly’, where important measures are to be debated and decided has waned.  The members’ access to information,  and participation levels in governance, have declined. The means by which directors are recruited, elected and held accountable has moved from the ‘public square’ to private communication.

The role of owner-members as decision-makers has been hollowed out.  Unlike any other decision-making group – boards, credit committees, tribunals, etc. – memberships are simply asked to rubber stamp proposals placed before them by credit union directors (/executive management),  This was obvious when Coast Capital directors presented a special resolution on federal continuance to that membership, and recently when Vancity directors presented a special resolutions to change the constitution and rules of that credit union.  Surprisingly little information was circulated to members, there was almost no opportunity for open questioning and debate, and procedures effectively denied those with opposing views access to the voting members.

The protections of owner-member rights are largely set out in the Credit Union Incorporation Act.  However, in recent legislative reform consultations in BC these rights have received too little attention.  Two items are worthy of note.  Ministry proposals would require publication of more information – some online – that should enhance the ability of members to scrutinize the actions of boards and management.  But the proposals also increase the number of members required to ‘petition’ and force a members meeting or resolution.

I suggest that this issue needs more debate.  The perplexing counterpoint is that this erosion of accountability to members is causing a shift in perspectives.  Who really has a stake in ensuring good decisions are being made by directors and CEOs?  Increasingly, directors and management are being held to account by regulators, and deposit insurers, in lieu of owner-members.  BUT, those players are not necessarily acting in the best interests of owner-members.


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