In business and social analysis, the term “tragedy of the commons” is used to describe situations where there is no private, only general public use, of a natural or shared resource. The most common examples are public lands such as national parks or rivers and waterways. Even the air or access to sunlight in a city are considered open resources available to all, until someone tries to take for private advantage..
The following is a private-pubic use model that has not fared well because the public benefit, acknowledged by license, is overtaken by individual abuse, even theft:
Where Have Honolulu’s Bikes Gone? |
| Just 60% of bikes remain in Honolulu’s bike-share system, Biki. That means people often can’t find a bike, making it harder to generate revenue and trapping the system in a sort of doom spiral. |
Other examples are easy to find. Individuals with access to a shared resource act in their own short-term self-interest and ultimately deplete or ruin that resource for everyone.
The Tragedy at Work in Credit Unions
As credit unions’ “ownership” equity is held in common with all other members, there is no individual interest identified. Rather it is a common resource that benefits all. And like common open grazing lands, it is a collective resource intended for future users and their descendants.
The expectation is that through either stewardship by elected or chosen third parties or civic governance, the financial and other benefits would be preserved and protected from individual taking or private abuse.
But when this oversight fails, then individual and even outside private interests will arise to assert the right or control of what was a previous public or community shared resource. The new interested “owners” may even assert they will enhance the resource and its benefit for all because of their better management skills and greater resources.
A Credit Union Example
I recently read the Member Merger Notice for a credit union that urged its members to approve the transfer of control of all their individual and corporate financial resources to another credit union in another state.
The board’s recommendations were all about greater future capabilities and benefits if the members would turn over credit union leadership without any compensation, control or agreement as to what those benefits might be. This credit union was approaching $400 million, a result created through the loyalty and support of their local community for almost 90 years .
The members were not told they were giving up their ability to influence the legal circumstances of their charter as the surviving entity was chartered under a completely different legal and regulatory jurisdiction or that the new leadership team’s office in another state, was over 150 miles away.
The Notice said the reason for not providing members any compensation, other than future promises, was because they still had the same financial stake in the new combination. That is before and after the merger the member share value would be $1.09.
Misleading the Member-Owners
So the merger logic goes you didn’t give up a thing of value. Except the entire future use of a common community resources of almost $400 million created by generations of supporters. The entire investment of these local savings and equity are now controlled by an organization which celebrates its ambition to be a multi-state operation built on a uniform set of products and services.
These ambitions for consolidation are framed for members as in their “enlightened self-interest” instead of blatant commercialism. The entire credit union model has been hijacked by those who are skillful when presenting their institutional accumulations as serving member-owners.
The fact that the merging credit union’s leadership and board would send members such a vacuous, non factual, open ended statements about future benefits, suggests how shallow their grasp of their duty must be. There was no evidence of any fiduciary responsibility, options considered, nor any due diligence on the surviving credit union when recommending members approve the transfer for free of ten decades of locally created wealth.
A Doom Spiral
The tragedy of the commons has infected the cooperative system on multiple levels. However, the wholesale transfer of a valuable cooperative franchises to outsider’s control who have no history, no presence and at most vague intentions is destructive.
It ends the faithful services and support by members who shared their resources for community benefit. And it destroys the reputation of credit unions for those members now at the mercy of those whose institutional ambitions have no alignment with their circumstances.
These events may seem benign at first. But at the core they are creating example after example where the movement has allowed its own actors and so called leaders to betray their core constituents. Selling out members is a tragedy in these specific circumstances. It is not a strategy for future success.