A Critical Role for America’s Credit Union Museum

The stay-at-home pandemic induced isolation has caused many to clean out years of storage.  And find forgotten keepsakes, even treasures.

I discovered two complete copies of the July 21, 1969 Boston Globe, with the headline: Man Walks on the Moon.  The half page black and white fuzzy photo was printed right below.

What should I do with them?  Who might find them uniquely useful for instruction or other use? Should they just be put in this week’s recycle bin along with this week’s papers?

In a nutshell this illustrates  an issue every credit union professional will confront in the twilight of their career.  What to do with all the records, memorabilia, recordings and  newsletters one kept of their professional years?

The emotional meaning and possible historical value that caused them to be set aside, will not matter to one’s heirs.  When downsizing, the easiest thing to do with these basement or garage-stored boxes  is to just throw them out.

But might these individual and industry documents, newsletters, and recordings be valuable to future researchers seeking first hand accounts of credit union history and critical events?

Without an ability to easily access historical records–both public documents and private collections–the movement can lose touch with its past.  Most importantly personal records can help future generations appreciate the “human capital” that laid he foundation for today’s system.

One CEO’s View Why History Matters

“I wish I had kept the phone numbers and emails of CEOs that are now gone from view. Ex-CEOs that could tell what they wished they had done when they faced downward curves to the end. I worry that lessons lost and archived outside our industry are what is needed now.

Some might say that we missed nothing; we witnessed progress and the natural march towards an industry’s maturation. But that sounds like short-term winners talking to me.”

Randy Karnes, CEO CU*Answers, February 2018

This valuable, vital role is one the Credit Union Museum is expanding through its archiving and library functions.  This effort warrants everyone’s support, especially those wondering what to do with their personal archives.

 

Timeless Wisdom: Why Small Matters With Two Current Examples

“Credit unions are small, yes very small. But it is vital that America not say they are too small to be worth the effort of keeping them around. Because if nothing else, credit unions keep alive a principle—that principle is freedom of choice.”

Ed Callahan, Callahan Report, June 1997

Two Washington Post news articles present why the choice that Ed championed, even of smaller institutions, is vital for society today.

  1. Efficiency is Not Resilience

The efficiency curse  describes the effectiveness of small farmers adapting more readily to market disruptions of food distribution during the pandemic.   Excerpts follow.

“Efficiency is a wonderful thing. It can result in benefits such as lower prices and better uses of resources. But a hyper specialized system is more vulnerable to disruption; it is not resilient.

“Smaller farmers are doing relatively well. According to Civil Eats, farms with existing CSAs (Community Supported Agriculture) have seen “a massive increase” in memberships since the start of the pandemic, with some reporting a 50 percent bump in sales. One California farmer said, “It took a pandemic for people to support local sustainable agriculture again, and home cooking, and ‘know your farmer.’ ”

“Why don’t we pay as much attention to the benefits of resilience as to the benefits of efficiency? We tend to get good at what we can measure, and it’s easy to produce numbers that support efficiency, such as crop yields per acre. Resilience cannot be easily measured, though. Its benefits are most evident during the catastrophes that can’t be predicted and the trends that haven’t been foreseen.

“One striking thing I’ve learned is that many (industrial scale)farmers and companies lose track of who’s eating their products.

“That sense of interconnectedness is, for me, one of the most powerful and hopeful lessons of the pandemic. People who had never given much thought to where their food comes from suddenly learned something about farms and farmers. Which is to say, they learned about our interconnectedness. The pandemic has shown us that the world is much more connected than we thought.”  END

The “Know Your Farmer,” bumper stickers of the sustainable-food movement might be translated to  “Know Your Member” as the signature phrase for credit unions.

  1. Nimbleness and Local Knowledge Beat Big Chains

A second example, “Small Pharmacies beat big chains at delivering vaccines,”showed  how local independent pharmacies were more effective delivering Covid 19 vaccine shots than large retail chains. The reason: “local owners know their community best.”  More relevant for credit unions is the author’s assertion that government policy makers promote bigness allowing “market power abuses.”   The parallel to today’s merger-sales of long-standing sound credit union charters, could not be clearer. Excerpts follow.

“More than a month into the coronavirus vaccine rollout, only about 60 percent of the doses distributed across the country have actually made it into people’s arms, according to federal data — a discouraging display of inefficiency. But a handful of states are far ahead of the pack. At the top of the list are West Virginia, which had given out 84 percent of its doses as of Friday, and North Dakota, at 81 percent.

“Many factors are slowing distribution.  But one key element appears to be the type of pharmacy states choose to work with. While the federal government partnered with CVS and Walgreens to handle vaccinations at long-term care facilities in the first phase of the rollout, North Dakota and West Virginia have instead turned to independent, locally owned pharmacies. Small drugstores are prevalent in West Virginia, and in North Dakota they’re just about the only game around: A 1963 law mandates that only pharmacies owned by pharmacists may operate in the state (save for a few grandfathered CVS locations).

“These small providers have proved remarkably nimble. Meanwhile, CVS and Walgreens have stumbled.

“The vaccination results in West Virginia and North Dakota have prompted a wave of national news stories, noting how startling it is that two rural states relying on local drugstores — the epitome of the old-timey “mom and pop” stereotype — have rocketed far ahead of states like Massachusetts and Virginia, with their networks of supposedly sophisticated chain pharmacies that have largely replaced the independents.

Public Policy Treats Small as Expendable

“For decades, Americans have been steeped in the idea that big businesses naturally outperform small ones. Indeed, much public policy is predicated on this belief. Our antitrust rules bless most corporate mergers on the grounds that larger companies are more efficient. Our financial regulations grease the flow of capital to the biggest firms. And in unstable times, the federal government almost invariably steps in to ensure their survival, while treating small businesses, local banks and family farms as expendable.

 “So ingrained is this ideology of bigness that we routinely overlook evidence to the contrary. The fact is independent pharmacies have been outperforming their larger rivals all along. According to research by Consumer Reports, for instance, local pharmacies generally offer lower prices than the chains. And while the major chains only recently began offering one- or two-day home delivery, most independents have been providing same-day delivery for more than a decade (and most do it free).

Better Results by Being Small

“Independent pharmacies achieve superior results not despite being small, but because they are small. It’s their local ownership that makes the difference. Their decisions are guided not by the prerogatives of Wall Street but by the healthcare needs of their neighbors. Lacking top-heavy bureaucracy and rich with local knowledge and relationships, independent pharmacies possess what you might call economies of small scale. That helps explain why, in the places where they’ve been tapped to provide vaccinations at nursing homes, they’ve been able to quickly map out a plan and efficiently execute it.

“Like pharmacies, small banks derive advantages by virtue of being locally run that big banks simply cannot match: The owners know their communities and their borrowers, giving them access to a rich trove of “soft” information that enables the institutions to extend loans to new and growing businesses on the basis of factors that aren’t easily quantified and don’t fit the rigid parameters of big-bank lending. This is true not only during crises like the pandemic: Community banks account for less than one-fifth of the industry’s assets, but they supply nearly half of all lending to small businesses.

Regulatory Bias for Bigness

“So, if local pharmacies, banks and other businesses are outcompeting their biggest rivals, why are they losing ground? The number of independent pharmacies, for instance, has dropped by nearly 1,400 over the last decade, to 21,700 — and their market share has fallen from 28 percent to less than 20 percent.

“The answer is that policymakers, convinced of the inherent superiority of bigness, have allowed a few corporations to amass outsize power and wield it with impunity. Rather than compete head-to-head with their smaller rivals on price or service, these huge companies can simply crush them.  (ed. or buy them out via mergers)

“These kinds of market-power abuses are rampant across the economy, but we’ve been conditioned not to see them. Confronted with yet another shuttered storefront, we take it as simply more evidence that small businesses can’t compete.

“It’s not just some hazy nostalgic feeling that we’re losing when independent businesses close. The stakes are much more consequential. We’re trading away some of the most productive and effective parts of our economy. The strong performance by local pharmacies in distributing lifesaving vaccines makes that clear.” END

The Takeaway for Credit Unions

Every time a sound, locally focused and managed credit union merges, the surrounding economy, the cooperative system and the American marketplace is less diverse, nimble and responsive.

“Two Families”–The Strength of Cooperative Relationships

It is common to describe credit unions as family. Sometimes the description is indeed accurate as father or mother passes the profession down to sons and daughters.

But rarely would one expect a regulator, and especially the Chairman of NCUA, to embrace the concept.

On April 9, 1984, the American Banker published a story on credit unions based on an interview with the Chairman: “Callahan mans the credit union helm through the seas of deregulation.”

The article closed with this description:

Mr. Callahan, who once held three jobs at the same time and who says he is “used to hustling,” has a varied background. It includes positions as Illinois Deputy Secretary of State, a math teacher and part-time football coach, and a school principal.

He now boasts of having two families, one with over 40 million credit union members and one that includes eight children.

“Just keeping up with a family of eight has kept me running,” he jests.

Two families. That is a regulator who knew where his responsibilities were truly owed.

The Member’s Voice: The Sounds of Silence

One of the most famous trademarks of the 20th century is of a dog, perhaps a terrier mix, looking at a gramophone horn, head tilted quizzically. It’s from an 1898 painting called “His Master’s Voice.” Whenever I recall it, I think of the Coop belief in owner democracy, the vital role of the Member’s Voice.

This branding image was based on an original painting by Francis Barraud of Nipper, a dog he inherited from his brother Mark.

https://www.startribune.com/the-hidden-history-behind-nipper-one-of-the-most-famous-dogs-in-the-world/506221042/

The painting was sold to HMV, an early English recording company. Later the portrayal became a logo for the RCA Company in the United States. The picture was marketed in such a way to suggest that RCA recordings were so lifelike that the dog could not distinguish between the sound of his master’s voice on records versus real life. Years later, the Memorex cassette tape company used this idea with their, “Is it real or is it Memorex?” campaign.

But there is another connotation in the phrase “His Master’s Voice” suggesting a deeply ingrained master-servant loyalty relationship.

Unfortunately that interpretation seems more appropriate when reviewing how the “Member’s Voice” is seen today by many CEOs and boards in credit union mergers. That voice is unwanted and unheard. The relationship is not member-owner, but master-servant. Loyalty expected, but not requited.

A Member’s Voice In High Fidelity

Following is one member’s continuing frustration with his post-merger experience in an email shared with his peers:

“Then there is our favorite subject of the credit union merger. The bill pay system they use — to put it bluntly — really sucks. This system requires you to set the date the payment will be issued, leaving you to guess when the payment might be delivered. There is no unique tracking number to trace individual transactions via bill pay as there had been in my former credit union. I cannot think of *any* system I have ever used involving financial transactions that did not afford some way to distinguish one payment from another to the same payee.

“Considering that this merger was not necessary or advantageous to members, I see this as one major reason it would be best to leave smaller credit unions the hell alone and let them do what they were chartered to do and what members expect them to do. Again, if individuals think their institutional management skills are such they wish to enjoy the perquisites their commercial peers receive, then they should go find a for-profit outfit to destroy and live the life of Riley (or maybe Jamie Dimon).”

I wonder if anyone hears these howls? Maybe it’s  time for a cooperative Roaring Kitty!

 

A Cooperative Opportunity Trifecta

There are three on-going challenges facing the credit union system:

  1. Attracting the next generation of passionate co-op entrepreneurs
  2. Planting new charters to spark innovation and relevance
  3. Enhancing opportunities for those left behind by current financial choices

Credit unions are can now tackle all three with an initiative started by a CEO in California. If successful, the result could usher in a new era in this three-fold challenge.

The Rise of the College-University Innovation Incubators

During the past decade, institutions of higher learning have embraced student interest in starting new businesses by offering courses and funding innovation competitions.

A web newsletter the Times of Entrepreneurship recently published a list of the top 20 US university new venture competitions. Out of a total of 65 collegiate contests, MIT was ranked #1 based on total cash granted, in-kind support and number of participants.

The third ranked institution was George Washington University in DC which listed 423 participants in its most recent premier event.

The irony of this ranking is that four years earlier one of the top ten winners was a group of students seeking to charter a credit union for the GW community. More than three dozen undergrads, several faculty and numerous credit union advisors have worked voluntarily on the project to fulfill this student led ambition. Almost $100,000 capital has been donated.

Yet four years later, after numerous submissions, and receiving a “shout out” from NCUA Chairman Hood at his 2020 CUNA GAC speech, this student startup still waits for NCUA approval.

The Drought of New Cooperative Charters

Students, innovators, and persons passionate about a business idea will not wait four years or longer to receive a governmental OK to launch an idea.

NCUA’s chartering process is one of attrition stifling efforts for new credit unions. In 2020 NCUA issued one new charter. The agency’s performance plan for 2021 has a goal of 2.

With this option largely shut down, the energy, curiosity and passions of the next generation of leaders and innovators will go elsewhere. In a generation in which many seek to address vexing social problems with business solutions, the credit union door is closed.

As a result,  students interested in finance opportunities are looking elsewhere-traditional wall street options, hedge funds, venture capital firms and even banks.

Colleges and universities across the country are teaching and encouraging student and faculty interest to undertake innovative business solutions. To compete in the future, cooperatives must be an option for this creative energy.

The Inclusion Challenge

Today’s $1.8 trillion credit union movement was founded on the belief that ordinary citizens could own and control their own financial institution.

This was especially important for those left out of existing financial options. In North Carolina, for example, at one time over 55 credit unions were serving the black communities cut off by Jim Crow laws and practices from banks serving only whites.

As described in UNC’s Southern Oral History Program: https://sohp.org/research/african-american-credit-unions/

“The first credit union in North Carolina was founded in 1916 in a rural community in Durham County, most likely for white farmers, while the first credit union established by black North Carolinians was founded two years later in Rowan County. Black citizens had set up another eight credit unions by 1920. During the 1940s, the number of black credit unions rose to fifty-five, giving North Carolina nearly as many as all other states combined.”

One example of this from an oral recording:

“St. Luke Credit Union in Bertie County was established in 1944 by a group of about twelve African American men with $500. James T. Mountain remembers his father, James T. Mountain Sr., as part of that founding group, explaining why they felt it was necessary because the white-owned local bank would not deal with African Americans.”

Today only one of these black sponsored credit unions remains.

The Trifecta Opportunity

However, a California credit union CEO is trying to do something about engaging this generation of collegiate entrepreneurs, bring new charters to life and enable groups left behind in pursuit of the American dream.

Gary Perez, the CEO of USC FCU launched a project in the post George Floyd awakening to bring credit union services to the historically black colleges and universities (HBCU’s) in America.

There are 107 HBCU’s in 19 states plus DC and the Virgin Islands (http://www.thehundred-seven.org/hbculist.html). Vice President Harris graduated from Howard University in DC which has a credit union, but according to its web site, does not serve students.

Gary brought together a group of nine young leaders (from Filene, CUNA, CUES, the CCUL and several natural person CUs), many of whom are HBCU graduates, to do the critical concept research. His five-page paper describes the need, the opportunity and questions to be answered. (contact information: gperez@usccreditunion.org and direct line is 213-821-7122)

Several of Gary’s young leaders expressed interest in migrating to a new venture startup, just as the GW students have undertaken.

This effort may be furthered by another group of leaders trying to promote credit union solutions for new generations of member owners. De novo charters is one of NACUSO’s “challenge” goals—to mobilize support for new coop startups within the CUSO community.

The Stars Align for a Credit Union Renaissance

College campuses are a vital source for the next generation of credit union leaders should the movement embrace these new venture competitions. Think of the appeal of Start Your Own Credit Union! The self-help model is the ideal path for inclusion for those seeking to realize America’s promise of opportunity.

Credit union leaders, CUSO’s and trade groups recognize these three enduring movement challenges. NCUA’s 1983 Annual Report (pg. 8) “Student Credit Unions Welcomed” demonstrated the regulator’s willingness to support student charters. It described new credit unions at Georgetown, Skidmore, and the University of Chicago promoted by designating them as low income, thereby enabling nonmember alumni deposits to fund low-cost student loans.

That regulatory support today seems to be the only missing piece to launch a new, more diverse and noteworthy era of credit union relevance. This effort could be a winning bet for all three races the movement is in–if NCUA would only step up to the window!

A Cooperative Community Park

Collaboration is the unique cooperative advantage. What one credit union would be unable to do, several working together can accomplish.

This latest example, a cooperative community park adjacent to Los Alamos Schools Credit Union’s new head office, was enabled by seeds planted almost a decade earlier.

In 2012 Del Norte CU learned that members believed their cooperative structure mattered. Their Net Promoter Score surveys revealed that “promoters” valued service and that the credit union was locally owned–a co-op not a bank.

Their marketing department used that finding to differentiate themselves. In Los Alamos, New Mexico where DNCU in 1954 began serving the Los Alamos National Lab employees, they discovered three other co-ops: Little Forest Playschool, founded in 1951 by the wives of the Los Alamos National “Labbers,” Los Alamos CO-OP Market and the newly formed Bathtub Row Brewery CO-OP.

In just one meeting in a coffee shop, adding Zia and Los Alamos Schools Credit Unions, all agreed that co-ops should support each other. Over the years they worked together to invest in their communities, serve their members and educate the public about the cooperative difference. https://www.keepitcoop.com

Building a Cooperative “Commons”

Matt Schmidt, CEO of $23M Los Alamos Schools CU purchased land in the town’s center to build out a new main office. The site included adjacent space that Matt believed could be converted to a CO-OP Park and community gathering place.

The concept was reinforced by the pandemic. “Isolation, he stated, had led to a craving for connection.”

The two-phase plan includes a community gathering space, outdoor concert stage and room for a beer garden. It was a bigger concept than his credit union alone could realize, so Matt approached the Keep It CO-OP group. They gave their immediate support.

Cooperative Education

Each contributing organization believes cooperation among cooperatives is vital. Matt said the group and this project are like planting seeds. “We trust they will grow, for these projects show our belief in each other and the community.”

Matt believes his credit union’s focus on educational employees and students makes its role in informing the community about cooperative design even more appropriate. “This shared space allows us to tell the story of why you should join a co-op; the value we bring together. It is a concept that could be adapted to any community in America.”

A gathering place in the wake of a pandemic that drove us apart.

*The six cooperatives in Los Alamos that make up the Keep It Co-Op movement have deep roots in the history of Los Alamos, New Mexico. They are:

Little Forest Playschool. Founded in 1951 by a group of local moms in the American Association of University Women. The first playgroup was composed of 15 children and cost 10 cents for juice and supplies. Little Forest is a cooperatively managed preschool for children aged two to five. Children are given the opportunity to learn the same way they do naturally, through exploration and play.

Del Norte Credit Union. Founded in 1954 as Los Alamos Scientific Lab Credit Union and serving as the first financial institution in Los Alamos. The organization became a community charter in 1981 and expanded financial services and offerings to surrounding communities.

Los Alamos Schools Credit Union. In January of 1955, Ruby Meaders founded the Los Alamos Schools Credit Union out of her home just after the unveiling of the “Secret City” of Los Alamos. She was more than glad to help with the need for non-governmental businesses like grocery stores and financial institutions.

Zia Credit Union: In 1955, a group of approximately 200 individuals from Zia Company, support contractors for the Los Alamos National Laboratory, organized and founded Zia Credit Union as a special interest group, a common practice for that time in the credit union movement. The contractors felt they needed their own financial institution. In 1975, management at Zia CU decided to expand its field of membership by serving the entire community.

Los Alamos CO-OP Market. Opened in 2011, their mission is to serve Los Alamos County and surrounding communities by providing fairly priced, wholesome foods and other goods in an ecologically sustainable, socially responsible and economically appropriate manner.

Bathtub Row Brewing CO-OP. Thanks to three years of hard work and the investment of its membership, Bathtub Row Brewery CO-OP was up and running in 2015 as Los Alamos’ first craft brewery and the fourth cooperatively run brewery in the United States.

Note: Thanks to Denise Wymore who alerted me to this project.

A 50th Anniversary “Framing Story”: Tomorrow—We’ll Meet You There

A “framing story” gives people direction, values, vision, and inspiration by providing a framework for their lives. It tells them who they are, where they come from, where they are, what’s going on, where things are going, and what they should do.

“The story we believe and live in today has a lot to do with the world we create for our children, our grandchildren, and our descendants hundreds of years from now.” – Richard Rohr

One Annual Report Celebrating 50 Years

Communicating an organization’s yearly results is hard. This CUSO’s 30-page 2020 Report to Owners is one of best conceived documents I have seen.

The information is accessible at a glance, easy to follow, well-organized and delivers a powerful message. That is a difficult task when telling one year’s performance let alone summarizing five decades.

The details go from artistic portraits of the leadership team to the prosaic summary of financials with ratios showing two decades of double-digit balance sheet growth.

It portrays a 50-year timeline from 1970 as WESCO, the origin story, to today’s footprint . The current scope is outlined on a US map, showing a “Community” in 25 states, of 179 credit unions, serving 1.9 million members with just 290 employees.

More than Portraits and Numbers on Paper

To have meaning any report must tell a story. One that uses that past and present to prepare for tomorrow. Throughout the pages are words of timeless wisdom:

  • “Ownership sets us apart”
  • “Participation is an investment”
  • “A community with power to influence and nurture the organization”
  • “Cooperative ideas that work for anyone, anytime, anywhere”
  • “Members define their success. . .therefore members define our success”
  • “A bond of fellowship, commitment and loyalty”
  • “The way we use the investment of patronage must multiply”
  • “Driven by a set of principles—coops are distinct from all other enterprises”
  • “A constant work in progress, a place for dreamers, planners, innovators and even sometimes for anarchists”
  • “Be passionate and fairytale careers will be made”

As for the next 50 years: “A cooperative is a magical thing. A consumer’s audacity to reach out and grab ownership-the means of production-for themselves can change everything. It’s magical because often the consumer doesn’t even realize what they own and the power of that ownership. It just is. Powerful.”

To see the entire Report, visit https://www.cuanswers.com/about/report-to-owners/.

Credit Unions: Two Members Debate Cooperative Democracy

Freedom and democracy. Most believe these two concepts are inseparable. How could any society be considered free if the people do not have a real say in how they are ruled?

Government operationalizes these two ideas. There are multiple theories (conservative, liberal, libertarian, et al) and personal views on government’s role and authority.

Combined these foundational ideas are both powerful and fragile. However, current and historical events demonstrate the need for “eternal vigilance.”

The ritual of inauguration, the peaceful transfer of power and leadership changes, is the outward sign of the democratic covenant between citizens and their government.

Credit unions were conceived on these two foundations. Freedom means the opportunity to control one’s resources in community, to enhance economic opportunity. Especially in a market economy dominated by large private firms pursuing their financial self-interest, not the consumers.

Democracy is how this collaborative alternative to private wealth creation is to be governed. One person, one vote, with leaders chosen from and by the members.

A Credit Union Crossroad?

As many countries have shown, economic progress can occur without democratic government. China is a current example. Democracy is not just a set of bylaws or regulations that automatically self-execute. It is a process administered by those in authority. That oversight can be faithful to the concepts or manipulated while all the time professing democratic values.

America’s credit union system is at crossroads in democratic governance. For annual elections are frequently nothing more than exercises in self-selection by incumbent boards. Voting in mergers is a process manipulated to discourage informed choice let alone active member engagement.

The result is that many large credit union boards govern like self-perpetuating “trustees” as for a hospital, university or other not-or-profit organization. Access to leadership positions is tightly controlled. Institutional and individual success supersede the role of member-owners. Accountability is simply executing member transactions safely.

Recently two long standing credit union members exchanged emails on this erosion of cooperative democracy. One’s concern was the absence of board elections; the second member had just experienced the unanticipated downsides of a merger.

Two Members’ Thoughts on the State of Credit Union Democracy

I was copied on their exchanges which are edited for length.

One Member’s Critique of Board Elections

If the credit union directors were challenged, each would probably explain that anyone can serve on the Board of Directors and that is true. A nomination requires a petition signed by 500 credit union members; a completed application packet (with materials only available on request for a short period of time) and the approval by a “Nominating Committee” whose names cannot be disclosed.

The details and application packet are only posted once a year in January and are removed from the credit union’s website in May. The materials must be submitted to the nominating committee 90 days prior to the annual election which is scheduled in May. This gives the applicant just weeks to prepare for a nomination. The nominating committee then determines the names to put “in nomination”. For years only one name per open seat has been recommended avoiding any elections. From 2004 through 2018 there were only three open seats.

By creating a path riddled with obstacles with no term limits, the Board of Directors has created a culture of exclusion that ensures these same seven individuals will be able to continue sitting as directors for their lifetime while controlling the process for those who may serve alongside them.

A Member’s Cites Athenian Democracy

Last night right after reading your critiques (of credit union board elections), something dawned on me. Would you be familiar with ancient Athenian democracy? I want to test an idea with you.

I was “browsing” – in an old store, in an old town, when I came across a volume entitled The Constitution of the Athenians, written by Aristotle. I remember, vaguely, learning about the ancient world in history class in high school.

I stood there flipping through pages when I came to the chapter on Aristotle’s constitution. I was immediately stunned by the most unexpected aspect of the Athenian democracy. Get this: They did not elect their leaders; they were selected by lot!

Yes, literally drawn by lot. I’m talking about shards of old pottery that were used as tokens to be drawn at random to select the 9 archons. Naturally, my first response was one of utter disbelief that just anybody could be the material of solid leadership for a nation, much less the one system of governance touted as the prototype for modern democracy.

I finally caught onto the idea that it might be safe to regard most people as competent enough to lead. Especially if a lot of other eyes are watching them in a transparent process.

Curiosity drove me to devour the rest of that constitution. Checks and balances were built into that system to prevent the sort of mayhem and corruption one might conclude would be the possible outcome of a system of leadership drawn by lot.

Archons only served certain weeks of certain months of the year, at randomized times. At the end of their one-year term of service to Athens, they were subjected to an audit. Every dime had to be accounted for, and every decision made had to be justified.

Here’s the bottom line: In some 2 centuries that Aristotle discusses he notes that there were only 2 very brief periods of corruption, largely due to these systems of controls which he lays out in exquisite detail.

So, I have to wonder… if such a system could work for centuries, where democracy was first tried out on live subjects, then could it work for a credit union.

How would a credit union apply these procedures?

An outside auditor would draw however many names to fill the board, all performed in front of a live membership audience (even by Zoom if necessary).

We would select persons for the board to serve for certain periods, but no one would know exactly who, when, or in what order. This would prevent anyone from taking deleterious actions, since other board member (also randomly picked) would be relieving them next, whose duty would be to check that everything was in order upon their taking their turn at the helm.

Each board member would be accountable, individually, by way of a public audit of their activities during their staggered and unpredictable periods of duty.

Any dealings with other organizations — such as potential mergers, e.g. — would be open to question and discussion at that time.

The key is that members of the CU could only serve ONCE, and only for a limited period of service.

Term limits would prevent endless manipulation and personal betterment on the backs of members of the coop. The end of endless terms. The end of non-diversity, since board members will be chosen at random from applicants desiring to serve. The end of unilateral and secretive decision-making without membership input. Those self-serving possibilities stand little chance this way.

I believe this model has a chance of working. At the very least, any alternative system to the current approach would be a welcome improvement.

PS As an interesting aside, recent research into Koine Greek seems to indicate that the word democracy does not mean “the people rule” as is often purported. It more accurately appears to mean “the power of the common people” — and note that the word common is essential here. The word democracy intends all-inclusiveness, and I strongly feel that this point is perfectly relevant to cooperative systems of governance.

The First Member Responds

The “bottom line” is simple…the credit union is not bound by anything, so the directors operate their credit union like the Politburo. The NCUA provides broad guidelines for elections that would provide each of the over 1 million members an opportunity to serve in a board position. Instead, the credit union has chosen an election path that makes it impossible for anyone, other than the incumbents to serve. Consequently, you have a board made up of individuals who have served for over 20 years and will never give up their seats. The most recent vacancies were a result of death and illness.

The Proponent of Cooperative “Athenian” Democratic Reform

You are right; perhaps the board is not required to perform its duties in any particular fashion. But what sort of model would one use to ensure that members will never again be abused the way they have been historically? My ideas are an attempt at implementing democracy, albeit in a manner unlike what passes for democracy in the world today.

Judging from the lukewarm response, I’ll take that as a cue to push this no further.

The First Member

My lukewarm responses are based on the fact that fighting this is an uphill battle. Personally, I will continue to push. The best way to ensure that members will never again be abused by a group of leaders who value their power over diversity and democracy. That’s my objective.

My Takeaway: Term Limits

By law NCUA board members are limited to one term, a maximum of six years. Or until a successor is appointed. All three board terms are staggered.

Is NCUA’s Board structure an application of Athenian democratic governance described above? Should term limits apply to credit union boards? What is the role of “common people” in a cooperative organization?

From the Field: The Source for AI?

A CEO shared some new data runs his team had prepared. The analysis was trying to identify potential auto loan prospects. His response:

“Love to have some thinkers give me 20 more routines for the programmers to crunch on. Where are the people who are thinking like AI?”

5 Years Old and Selling Cookies Online

The annual Girl Scout cookie fund drive is underway virtually, as most office and on-site sales are under quarantine restrictions.

The email announcing this event from is from my 5 year old great grandniece.   Olivia already “attends” virtual kindergarten. She does virtual exercises and I presume is a virtual Girl Scout.

My first reaction was virtual cookies? We already have those!

Beginning school, social and business skills via the Internet means this generation will be one of the most virtually enabled ever. What else will this early mastery of digital reality change for this generation and society? And what are the implications for every organization hoping to attract their engagement?

Thoughts?