Category: Cooperative Design

                  On Members

” Most economic institutions exist for the capitalists, who are a tiny minority compared with the body of customers.   In such an economic system as now exists around the world, people do not come first.  Money does.

Credit unions are different and always have been. We never came together with notion of making money, but with the notion of helping people and improving their lives.” (pg. 7)

Note: The Coach’s Playbook is a short collection  of Ed Callahan’s observations.  These were collected from his writings and talks working in credit unions:  eight years as a regulator  (including Chairman of NCUA from 1981-1985), co-founder of Callahan & Associates, and as CEO of Patelco.   The book was published in 2006 by Member Value Network, a spontaneous “collection” of credit union leaders and consultants.

Leadership changes are necessary to sustain every organization’s success.   Sometimes changes at the top work well; other times they come with drama and uncertainty.

New CEO’s, especially if brought in from outside an organization, will have a healthy disrespect for the status quo.

But no one wants a job they disrespect.

So the critical performance standard is the leader’s vision of the future.   Is the person equipped with the right motivation, not just relevant professional skill sets?  Or, are they chosen just to break from the past?

A  Difference, If Understood

Credit unions as cooperatives can teach and illuminate human possibility.  But it can only do so to the extent that leaders are determined to use the design for those ends.

Otherwise, it becomes nothing more than an aggregation of financial accounts in a marketplace full of options.

Following the formal board reports and the one hour Member Feedback Forum  (comments limited to two minutes each), the Chair read the results of the contested election.

The three member-nominated  candidates won all open seats by receiving the three highest vote totals of the six candidates.   Overall 13,335 votes were cast, based on the highest total from each group.   Incumbent directors received 47% and the candidates nominated via petition, 53% of all votes cast.

The new directors, left to right, are Michael Clements,  Barbara Perkins,  and Chuck Stone.

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Why the Members Won

Voting is the essence of democracy.   All members had the chance to choose who they wanted to lead this iconic credit union.  That is a choice that rarely occurs in credit unions today.  But now the precedent has been set.

Another fascinating aspect of the meeting was the open Forum.  I counted 32 members who spoke up.  Here are several brief snippets of their remarks, addressed to the full board and CEO.  There were no  responses  given to any of the concerns.

• A retired 47 year SECU employee:  I’m scared to death with what I see at the credit union. . .Risk based lending (RBL) and card rewards are paid by those who overpay interest.  Open your eyes.
• Member since ’75.  Got loan as college grad and no credit score. . . against RBL. . . I’ve attained financial security. We should be a community where we help each other.
• I’m amazed after 85 years that we cannot exist without treating members equally.  RBL is race  based lending.
• Why is the credit card rate increasing?  If a member wants rewards go to a bank.  If the board wants rewards, they should go to a bank.
• Transparency is lacking, especially the bylaw changes.  We have been denied democracy.
• I’ve no prepared comments,  Just hope the board will see that the people here do not support the mindset of this board.
• Retired 41 year senior employee:  Employees need a service heart for the membership.  Last two years has not been for the benefit of the member.   What I’ve seen breaks my heart.
• Congratulated new CEO Brady and asked: Please report these comments online.
• 51 year member.  There’s no term limits for those on stage. Nominating committee selected all board members-an old boys club.  We’re making money, but the members aren’t getting any of it.
• 39 year SECU employee retired in March ’22.  New leadership wanted to turn us into a bank.
• 36 year SECU employee.  Rarely saw a credit report without blemishes.  All members equally important.  We made life changing differences for people.

And many more.  There was no dialogue and no responses from the stage even when members posed a question.

One speaker, a new member,  stated that she wished she had known about these comments before she voted as she knew nothing about the candidates or issues except the information in the ballot.

The cumulative effect of these spontaneous, brief observations was overwhelming.  Speakers cared strongly about the credit union and its change of direction.

A long time credit union advocate who watched the meeting sent me this reaction.

This is What Credit Union Democracy Looks Like

This afternoon, my daily routine was disrupted in a good way by the annual meeting of North Carolina’s State Employees Credit Union (SECU), the  $50-billion, 2.7 million member, 85-year old credit union that is the nation’s second largest.

I became a cooperative idealist in the 1970s, first as a food co-op organizer until I was introduced to credit unions when I was charged with organizing one for the farmworker nonprofit I worked for.. . . I was enthralled with credit unions as democratic, egalitarian institutions, created to empower individuals excluded from the for-profit banking system.

I was fortunate enough to be hired by the National Federation of Community Development Credit Unions (rebranded as Inclusiv after I left), becoming CEO in 1983 and serving for nearly 30 years. . .

Over the years , , , I went to my share of annual meetings of our member credit unions, usually not very well attended (except if there were refreshments). It was great to meet members, and it was my job, but truth be told, it was not the liveliest way to spend an evening or weekend afternoon.  

My Life’s Work

The 90-minutes I spent watching SECU’s annual meeting on YouTube reminded me why credit unions became my life work. One after another, SECU members debated recent changes instituted by the board,  most controversially, the introduction of risk-based pricing—the nearly universal practice of U.S. credit unions which  charge members different rates according to the credit score-informed tier they fell into.

Not SECU. For nearly its entire history, it offered the same price for the same loan product for all members.  It was a simple, time-honored, financially successful practice, that fueled SECU’s steady growth. . .

But for some members and the credit union’s recent leadership, that was not good enough. Several speakers argued that the credit union’s savings rates were not competitive; one spoke of his children leaving SECU for better rates at a bank. How would the credit union grow and—well, compete—if it didn’t raise savings rates to retain members? . . .

Speaker after speaker—members of 30 years, 40 years, 50 years—spoke passionately about what SECU had meant to them and others, a place to get the best possible rate even when they were starting out in life, were struggling financially, or had marred credit.

True, risk-based pricing was everywhere in credit unions today—but for those with long memories, it had not always been so. They fully understood that better returns on savings were available elsewhere. But they were staying.

One-tier pricing is radically egalitarian—providing those with fewer financial means the same rates enjoyed by those with immaculate credit scores and ample resources. Except it is hardly radical, and hardly new.

One speaker denounced the strategy as “socialist”: This was North Carolina, he argued, not Russia, China, or Cuba. But I heard no “woke” or progressive rhetoric, only the testimony of people who cared deeply about their fellow North Carolinians and wanted to help them better their lives. “People helping people”—not simply a brand slogan, but an expression of human solidarity.

I spent my career working with small, community-based institutions. As the credit union “movement” became the credit union “industry,” with assets and membership disproportionately concentrated in a minority of institutions, I reluctantly concluded that my ideals and passion were nothing more than a relic.

Today, I thank the members of SECU for the inspiration and hope they gave me.

© Clifford N. Rosenthal

The credit union democratic cooperative model  is simple. The legal equality of each member’s voting role is intended to facilitate economic equality.

The intent of the one-person-one-vote in governance is that when accessing common resources, each member is on the same footing.  If one person is better or worse off than another, that should not affect their ability to access credit.

In almost all other for-profit organizations, control is exercised by who holds the most shares, or through classes with special voting rights.

Member Rights

A credit unions’s bylaws is the primary document implementing member rights.  NCUA’s bylaw description runs 45 pages. “The FCU Bylaws address a broad range of matters concerning a credit union’s organization and governance, the relationship of the credit union to its members, and the procedures and rules a credit union follows.”

But who ensures that the bylaws are followed, both in letter and spirit?   Here is NCUA’s description of their role:

“The NCUA has discretion to take administrative actions when a credit union is not in compliance with its bylaws. If a potential violation is identified, the NCUA will carefully consider all of the facts and circumstances in deciding whether to take enforcement action. The NCUA will not generally take action against minor or technical violations, but emphasizes that it retains discretion to enforce the FCU Bylaws in appropriate cases, such as safety and soundness concerns or threats to fundamental, material credit union member rights.”  (emphasis added)

What happens when the bylaw procedures for nomination and election are administered so as to form without substance?  Or interpreted to enable incumbent directors to protect their positions and prerogatives?

A Live Case Study

Today, October 9,  an actual situation will be discussed.  The North Carolina Credit  Union  Commission will hold a special public meeting at 1:00 p.m. (dial in # (877)-402-9753, access code – 6601929.)

The primary purpose as published in the Notice:

“Discussion about concerns raised by a member of the public regarding recently approved changes to the State Employees’ Credit Union by-laws.”

This is how Jim Blaine sees the issue to be discussed in a recent post.

This will be another way the Annual Meeting and election of directors at SECU could have an impact far beyond this credit union’s circumstances.

The Annual meeting occurs tomorrow October 10th and will be lived stream.