Who Is Responsible for Cooperative Democracy?

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This week I will attend a special meeting of the members of a coop in which I participate. The purpose is to approve a change in the bylaws prior to the annual meeting. The change will reduce the number of board members from 15 to 12.

The bylaws have not been updated in 20 years. All changes must be approved by the members. Some background for the change was sent in advance:

“While there’s no fixed rule on the number of Directors a Board should have for a group like ours, what makes sense is to have a size that’s both large enough to bring sufficiently diverse viewpoints and skills to bear on accomplishing the work of developing, guiding, and managing the organization, and also small enough to function effectively.

Given that Board service is a three-year commitment, it has also become more difficult to find members willing to stand for election each year. Twelve members will still assure that the Board is flexible and diverse, and provide enough hands to do the work required, while not overtaxing our use of member volunteers.

All members are encouraged to attend.”

Sound familiar? Recruiting volunteer directors is a challenge for many organizations. What is different from credit union practice is that this bylaw change is being discussed and voted on by members. One person, one vote, and a special meeting notice sent 60 days in advance.

Credit union democratic practice

In almost all credit unions, bylaw changes are not voted on by members. This is the purview of the Board, which then submits changes for regulatory approval.

Members may not know of changes, even when it affects their fundamental role as owners in elections procedures or even the number of board members.

In a recent post, I outlined how these non-public changes can go to the heart of member governance.

The two largest federally insured credit unions quietly changed the required number of signatures for member nominations for the board. In both situations, the change removed the 500-signature standard bylaw and replaced it with a percentage of members. For Navy Federal, this new signature requirement was 26,000, and for PenFed 5,800 based on their latest reported member counts.

Regional Director John Kutchey quoted in another context stated, the NCUA considers the right to participate in the director election process a fundamental, material right for members of a federally chartered credit union. 

Howeverthis fundamental change in these two federal credit unions was done without member involvement or any public discussion.

Democracy depends on participation

These behind-the-scenes reductions in member rights are how coop democracy dies, one small step at a time.

Without member governance, boards act like self-perpetuating trustees, subject only to their own sense of duty, versus accountability to member owners.

Democratic practice is hard, requires patience, and can be frustrating. But without it, the required annual board elections become a mere administrative re-appointment of self-selected nominees.

Governance is more than a democratic formality. It is fundamental to safe and sound oversight. By eliminating member involvement in these fundamental bylaw changes. The NCUA is sowing seeds of future member discontent and failures of accountability.

The annual meeting season

As credit unions enter this season of annual meetings and board elections, it is doing so in a political environment in which both camps claim the future of democracy is at stake.

What better way to remind members of our fundamental democratic belief for how we work together in society than in our own credit union’s political process?

Author

  • Chip Filson

    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.

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