I had a two-hour conversation with a retired CEO yesterday. His observations about the state of the industry are almost like parables, sometimes dense but pointing in the right direction. I paraphrased his thoughts to share with all of you.

An era of untruths

Today, we are living in an era of irresponsible lies. For example, the law is not what common sense says it is; rather, it is just a continuous nuance of interpretations for self-interest.

Co-ops were designed to be an alternative to banking based on intense motivation—a passion to change things. The goal was not to become a tax-exempt back door entry to banking.

We assumed credit unions would be focused on the member, the man in the street, rather than just another financial institution. Today, we have credit unions whose business is brokering and buying other credit unions and/or financial institutions’ assets. It is a corporate strategy, not a retail, member-centric one.

Corporate vs member focus

These corporate business variations are not based on citizens as owners. It is not the traditional credit union model. Rather, these are financial variants built on the tax-exemption, versus cooperative principles.

It is like someone saying they are farmers because they own land. Farming is both owning the land and working on it, not merely buying an asset. These corporate-driven business models want to use the co-op model, but not the responsibility of member-ownership.

One or two CEO transitions from failure

The outcome is that many very successful credit unions are only one or two CEO transitions away from losing their earned market success by building on core principles.

When the new leader arrives, whether from a credit union or other professional background, it is almost inevitable that the unique co-op legacy (and member focus) will be set aside, reaching for some new business initiative. This will not be motivated by member-owners’ needs but rather corporate ambitions for growth, or an entirely different strategic focus, or even personal ambition.

If one looks at the growth of mergers of sound, long-serving credit unions, the motivation seems either a retirement windfall or a growth strategy by the new CEO to enhance their personal goals.

Building vs running a business

These efforts confuse the distinction that makes the coop model so promising. Co-ops offer a unique way to build a business. However, newcomers often believe they have been chosen to run a business versus building on a legacy of passion and purpose.

The key to sustaining the unique credit union model is twofold. First, citizens as owners will need to be at the center of efforts to build on cooperative principles. This requires leaders who are committed to a mission that others may not see as attractive. It may even require cultures that we see in NGOs: entrepreneurial and driven by purpose. That’s how cooperatives become leaders in serving their members as their reason for being.