America’s Most Responsible Credit Unions

37 views
0

Read more at chipfilson.com

A headline like that would certainly get lots of attention. That is exactly what got mine: only it actually read, America’s Most Responsible Companies.

The article was based on an analysis by Newsweek and Statista. Companies were ranked on the three criteria of the ESG corporate model, environmental, social, and governance. The process included a pre-screening of a large universe of firms, as well as in-depth corporate social responsibility (CSR) reviews and a consumer survey.

Companies were given a score out of 100 and ranked accordingly. With a score of 93.2, HP placed first as America’s most responsible company. The top 20 included nine tech firms. General Motors received the top score for social as the only firm with women as CEO and CFO.

The full methodology used by Newsweek is described here. The initial pool of over 2,000 companies was narrowed down to 400 which were then evaluated in a four-phase process. One phase was a survey of 7,500 U.S. consumers plus a review of the companies’ published key ESG performance indicators.

Is a credit union responsibility analysis needed or possible?

The purpose of the ESG ranking is to provide another vital perspective on corporate performance beyond the traditional financial and stock price benchmarks. This recent model has been a lens used increasingly by large investors such as pension and mutual fund managers. Many companies are now publishing these additional indicators to enhance investor and public confidence in their business plans.

The primary rankings published on credit unions today are by size (assets, members, branches, etc.) or financial ratio performance (ROA, growth, net worth, etc.).

Recently, like the corporate world, there are efforts to publish DEI (diversity, equity and inclusion) statistics for the credit union’s staff and board. This data has become more important as all organizations respond to systemic inequalities increasingly called out by events. Yet this focus is not unique for co-ops.

As cooperatives, credit unions have positioned themselves as more socially aware and responsible than traditional financial providers. Rate comparisons and how much members save annually are examples of financial value. But should there be more than simple financial markers if this unique design is doing something significant versus competitors?

A cooperative scorecard

Almost a decade ago CU*Answers, a CUSO 100% owned by credit unions, developed a cooperative scorecard providing a self-assessment created using the seven cooperative principles. The complete template is available from their website. The CUSO offered $50 for credit unions to send in their scores to encourage participation.

The scorecard’s purpose was to “operationalize” and measure the seven principles and to assist credit unions who wanted to enhance their cooperative advantage.

The form even included a scoring summary ranking:

Your Score How You Did
More than 104 points Congratulations, you are a shining example of a true cooperative.
80-103 points Not bad, not bad at all. You are doing well.
58-79 points Need to work a little more on your core cooperative values. Step 1: find someone who scored higher than you and ask how they did it.
Less than 58 points You are a cooperative, right?

Today some of the key performance questions under the seven cooperative criteria might need updating, for example in responding to Covid. Note that none of the measures are based on financial performance. Rather the scores are indicators of cooperative conduct.

The need for cooperative measures

With credit union performance today graded almost solely by financial outcomes, the result is an erosion of differences with other financial options. The cooperative “brand” is blurred. Member purpose becomes just “a little better financial deal.”

Most importantly, the advantages of the cooperative charter are minimized, becoming just a 7-part marketing slogan on lobby posters. When in fact the customer-owner relationship has been pivotal in creating the competitive advantage credit unions enjoy today.

A scorecard, thoughtfully designed, is more than a form to create another set of rankings. It should revitalize leaders’ attention on what makes credit unions unique. These co-op measures can then translate into key performance indicators in business plans.

NCUA’s CAMEL ratings focus almost exclusively on financial performance, even when rating M, or management. This lens does not include critical measures of cooperative success, which in turn underwrite most financial outcomes.

This measurement gap is an opportunity for the system’s leaders to really “open eyes” to the credit union difference. And as the corporate headline above suggests, demonstrate each credit union’s “responsible” cooperative role within the American economic system.

Author


  • A nationally recognized leader in the credit union industry, Filson is an astute author, frequent speaker, and consultant for the credit union movement. He has more than 40 years of experience in government, financial institutions, and business. Chip co-founded Callahan and Associates. Filson has held concurrent positions at the NCUA as president of the Central Liquidity Facility and Director of the Office of Programs, which includes the NCUSIF and the examination process. He holds a magna cum laude undergraduate degree in government from Harvard University. After being awarded a Rhodes Scholarship, he earned a master’s degree in politics, philosophy, and economics from Oxford University in England. He also holds an MBA in management from Northwestern University’s Kellogg School in Chicago.

Your email address will not be published. Required fields are marked *