Tuesday, March 16, 2010

Is This “Owner-Thing” Really Lip Service?

I was in Las Vegas last weekend on a family outing and from all that I had observed I’d have to say we’ve emerged from recession and are on the road to recovery!

Although there seemed to me to be a lot more penny slots on the gaming floors, all my other empirical observations—crowds of people gambling, dining, and going to shows—suggested that either all these folks, representing a cross-section of America, were out for their last binge or they all had their fill of the recessionary blues. My guess is the latter. It’s time to move on. Anyway, who would want to lag behind and wallow in the pain of the past few years?

Yet, amidst all the encouraging signs I witnessed, I still couldn’t help but think about my own recessionary pain and how it had gnawed away a sizable chunk of my 401k savings. "Should I really be in Vegas," I thought.

Yet, the truth of the matter is this—life goes on.

There’s nothing more I can do about the losses in my 401k account now. What’s done is done. Surely I can’t point a finger at CUNA Mutual, even though they manage the various portfolios that make up my 401k account. Nope, that’s not going to work. I just have to accept the fact that I sat there like a lug and did not take any precautions like rearranging my investments, placing them in the safest portfolios before the world was rocked by the financial collapse. Why is it always so hard to come to that conclusion—to accept the responsibility and do what needs to be done, no matter what.

I read the Wall Street Journal every day. I follow the commentaries of many economists. All the trends pointed in a negative direction. Yet, I just sat there.

With ownership comes a price—responsibility—and in this particular case, I failed to exercise it. You can now bet going forward, though, that I won’t be making that mistake again. I promise you.

And, I’ve also come to conclude that the same lessons I learned about ownership and responsibility also apply to a world governed by the principles of the cooperative business model. In that world, should it not be true that the responsibility for the governance of the organization extend well beyond a board of directors to the owners as well?

If indeed those who participate in a co-op are considered its owners, then shouldn’t they enjoy a primacy in determining how the business is run? At what point should they exercise that responsibility?

If that is not the case, particularly among credit union owners, why then are the owners willing to surrender that right? Or is it that this "owner" thing is really lip service?

Come on now, how many owners showed up at your credit union’s last annual meeting? Or, maybe I should ask, how many owners did you want to show up at your credit union’s last annual meeting?

Ownership brings with it a level of responsibility; a responsibility for the end-results and for the performance of the board and management. Ownership by the members is a critical distinction that makes a cooperative business model different from an investor-shareholder model.

Put yourself in the shoes of a restaurant owner. While you might hire a chef and perhaps someone to manage the business for you, I’d be willing to bet that you would still not sit idly by but make sure your expectations for what’s on the menu, for how customers are treated, and for how the business is earning a profit are all met. After all, it’s your restaurant. You are the owner! Ultimately, you are responsible. If something goes badly wrong, you know whose phone will be ringing off the hook.

Perhaps this is why I have become more troubled than ever these days when I read articles in the credit union trades calling for an investigation into the causes that fueled the losses within our industry. Who’s to blame? Would any investigation serve as an indictment of the owners as well?

While I agree it’s vitally important to understand what contributed to the demise of so many portfolios (so that we can take the proper corrective action to ensure this does not occur again), I hear nothing being discussed about the role of ownership at a financial cooperative. What are the owner’s rights, responsibilities and yes, even the expectations? How does that get passed on to the board? And most important, should the board at a credit union function in an identical manner to a board at, let’s say, a bank?

Has the role of the member/owner in the credit union segment of all the world’s cooperatives been reshaped where today the responsibilities of ownership are no longer viable; no longer reflective of the Rochdale principle by which a credit union is defined?

1 comment:

  1. Very thoughtful Walt. To be sure, there is plenty of blame to go around to all in this economic crisis. No one source is at fault for all the problems but there are certainly some easy targets. Credit unions need to look outside their own shops at the national and global economy and corporates and trends in whatever industry or community their credit union is serving in order to not get caught in this type of crisis again. However, my gut tells me that 5 years from now, when the wounds aren't so raw, everyone will go back to their laissez-faire ways and within 20 years from now, we'll face another one of these cyclical down turns. Who'll be caught asleep at the wheel then?