Lately there’s been some spirited conversations about credit union mergers. For the first time many of these conversations are taking place in the sunlight, including in industry and mainstream media outlets.
People have taken some heat: ask Frank Diekmann at CU Today, Randy Karnes at CU*Answers, or our own Callahan chairman, Chip Filson.
Much of the debate I’ve seen goes something like this: “While the NCUA has processes in place that merging credit unions need to follow, is it enough or is the system rigged to benefit insiders?”
While this makes for a good discussion, I think it may be the wrong question. I think the better question may be: what do we do about the absentee member-owner?
While we may not like to admit it, credit unions and banks exist for the exact same purpose. That’s to produce value for their owners. Unique to credit unions is that our customers are actually member-owners who get a return through their patronage of their credit union.
Higher savings rates, lower loan rates, and smaller, fewer fees. At least that’s how the story goes. You could even throw in more local control and deeper attention to relationship factors in lending decisions. But some might argue that may be too idealistic for our modern movement.
Instead, I would argue that more and more members now see themselves as customers rather than owners. This has led to what many call the absentee owner. Our owners ? our members ? are becoming less and less engaged with the actual role of ownership.
Members are happy to get the economic returns from being an owner. I would argue these returns have never been higher for engaged members. But when it comes to the governance side of ownership, the vast majority of credit union members really don’t care.
I was working with leaders of one credit union recently who told me that if it wasn’t for free food they probably wouldn’t have more than 25 people attend their annual meeting. This is a credit union with well more than 100,000 members.
They’re not alone. In fact, voter turnout for board elections is well below 10% of members for most credit unions.
So why should it be a surprise that a good response for a merger vote is 10-15%, that means 85-90% don’t care if their credit union goes away. At least not enough to vote.
The critic may say the merger process is not transparent enough and if members knew the true story more would turn out and vote. OK, but I think it really highlights the fact that nowadays members are there for the financial benefits, not to participate in governance.
The critic may say that’s because the merger process is not transparent enough and if members knew the true story more would turn out and vote. OK, but I think it really highlights the fact that nowadays members are there for the financial benefits, not to participate in governance.
When an organization faces a tough decision like whether to merge, having a large base of absentee owners makes insider wishes ? no matter how self-dealing ? tough to overcome.
So, how do we get members to care about the organization itself and not just about its products and services?
I’m not sure what the answer is, but I would be curious to know how your credit union is dealing with this absentee owner conundrum. Or if you even think this is an issue.
Reply here or let me know at email@example.com. Please join the discussion. It’s about our future.