About ten years ago a Stanford professor opined that credit unions might not survive because of the absence of market pressure on CEO’s and boards. Co-ops are not focused on financial performance as the number one priority, but member service. This is OK until a credit union looses its competitive edge and is unable to change. Financial markets, this professor argued, create incredible efficiency and encourage quick action by management when performance is lagging. By design credit unions are somewhat insulated from these market forces.
Through complacency or a lack of understanding by boards, many credit unions are going through a very slow, drawn out business death spiral. The credit unions are not unsafe as capital levels are probably rising. But are they sound?
One CEO commenting on the Wings effort said that “It has given license to Leagues and others to put poison pill barriers to hostile takeovers. Well maybe we need a few hostile takeovers. The alternative is hostile occupations-the board and management hold onto a credit union for their own reasons, rather than seeking alternatives that will provide members with the level of service they need.”
Today members vote with their feet. Rather than try to replace a board, unhappy members will just move their account to someplace that offers them what they want. Over 55% of all credit unions lost members in 2006.
So the critical question is how does the system respond to underperformance? Is the industry in fact taking an anti-member position in reaction to the Wings effort?
There is no doubt about the anger, maybe fear, in the reaction by most credit union organizations to Wings’ effort. Many fiercely opposed the idea that someone would even try a hostile takeover. The initiative disrupted credit union tradition.
If Wings' approach is not the best way, then how does the system challenge its own underperformance? Who will rock the boat to force boards and management to do the right thing for members?
Chip Filson will moderate a discussion of the merger climate including recent trends and three case studies of successful mergers that increased member value. Part of the online learning event will be a discussion about merger tactics. When must members be apprised of a merger offer, even if not supported by management and board?