Three Buffett Observations Relevant for Credit Unions

One of history’s many lessons is that organizations, institutions and even countries rarely end their existence because of external forces.

Leadership failures, not competition, cause the demise of most businesses and non-profits.

In the credit union system today it is easy to see examples of this failure of leadership oversight described by Warren Buffett.  The technical term for this activity is governance.

Rarely do credit unions have elections for directors; CEO’s end their reign and opt for one more big payday by  selling their coop to another; CEO’s buy banks with members’ savings without disclosing relevant details or future returns to their nominal owners; etc.

Here are Buffett’s view of these institutional failures.  The question is whether your credit union could be fairly characterized by one, or all?

  1. “A CEO that wants a puppet board can still get one, I’ll put it that way.” (he notes that executives can prevent their directors from questioning them by wasting their time.)
  2. “It isn’t fundamental dishonesty that causes people to go in a different direction. It’s human nature. There are plenty of people who are really decent people, intelligent people. I’d be happy if they married my daughter, or if they moved in next door to me. But they just don’t come to grips with reality. And boards usually don’t push them to.”
  3. “Picking the right CEO is 10 times more important than the compensation. But somebody has to be there to represent the shareholders in terms of overreaching by even competent executives.”

How are the member-owners represented in your credit union?  Are they are just well-served customers?  What is necessary for credit unions to reverse the all too frequent examples of leadership and governance failures now occurring? And accepted as “usual and customary”?

It is not a shortfall of capital that causes most credit unions to turn in their charters.   It is the absence of character and  awareness of the member’s “common good” by leadership.

When every credit union performance measure is a number, one consequence is that everyone has a price.

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