At the Western CUNA Management Scoool, students are discussing the future of credit unions. Is the cooperative system just another financial option for Americans or does it have a different public priority from its founding and subsequent tax exemption?
Some assert what makes credit unions different is that the system is based on values. Some would point to the seven or eight cooperative principles as one indicator of the difference from for-profits.
But can institutions have values? America was founded on values, especially the freedoms and rights founders asserted were enabled by democratic rule, that is the consent of he governed.
Are Organizations People?
The Supreme Court has repeatedly ruled that organizations (such as corporations and unions) are “legal persons” and possess First Amendment free speech rights. Landmark cases like First National Bank of Boston v. Bellotti (1978) and Citizens United v. FEC (2010) established that political spending and advocacy by organizations are protected forms of free speech.
But institutional design, or legal character, do not guarantee virtuous conduct. Individuals are the source for corporate decision making. All organizations need individuals to participate and in some instance, to get their future back on track. Even credit unions.
The Challenge of Power
Calling credit unions financial service providers is not incorrect, but the issue is why we believe that is credit unions’ defining characteristic. The challenge is not that the description is wrong, but why is it the primary focus.
People can lead credit unions but may have their outcomes set on the wrong things. Some believe and act as if it the size of the balance sheet along with the supposed advantages of scale are the critical factors in credit union success. Size denotes market power and can lead to market and financial dominance.
But credit unions succeed not with conventional approaches to market conquest, but with relational power. That is the trust and service that promotes members’ financial well being. Trust does not come in big or small packages. It is present or not in an organization’s action. A lesson Rudy Hanley used to guide his tenure at Schools First for almost 30 years.
Institutions don’t have values. People do. The responsibility for ethics and justice lie not in some abstract organizational concept, but directly with the individuals who design, participate in, and regulate that system.
The democratic credit union governance can be an advantage in achieving this relationship power. For democratic participation should enable constant debate to restate what ethical boundaries and values should be embedded in the financial rules of the game. Is this how your credit union acts?
Discuss with your fellow students.