Does signing a pledge give you the moral license to continue to do what you’ve always done? Or does hypocrisy not matter as long as you say the right things and keep the profits flowing?
Organizations of all kinds rushed to pledge their allegiance to the principles of diversity, equity, and inclusion (DEI) in the social reckoning that has followed the death of George Floyd and other unarmed Black Americans at the hands, knees, and guns of police officers.
The credit union movement has joined in in the form of the CU DEI Collective, but the overwhelming events of the past several months, in combination with a global pandemic that has dwarfed all else, make it easy to forget many of America’s boardrooms had already started down the path of promises to do better.
In August 2019, the Business Roundtable issued a statement signed by more than 180 CEOs pledging to lead their “companies for the benefit of all stakeholders — customers, employees, suppliers, communities, and shareholders.” This was before COVID-19 and seems a hundred years ago, but my Callahan colleague Jon Jeffreys wrote about the pledge earlier this year.
“Credit unions’ strong sense of purpose is codified in the seven cooperative principles,” Jon wrote. “Although these principles are not identical to the corporate ambitions expressed by BlackRock and the Business Roundtable — which recently redefined the purpose of a corporation to promote ‘an economy that serves all Americans’ — they’re similar enough that the credit union movement risks its message being co-opted by distinctly non-cooperatives.”
Credit unions have notched a decade of growth since the Great Recession, an economic calamity largely brought on by the excesses of Wall Street, including its big banks. So, how do credit unions avoid having their message and their meaning co-opted?
By keeping it real.
A recent article in The Atlantic makes that point in an abject lesson for the financial cooperative movement’s members who want to avoid the “do as I say, not as I do” trap.
The title reveals the bottom line: “Beware of Corporate Promises: When Firms Issue Statements of Support for Social Causes They Don’t Always Follow Through.” The author examines how much those blue-chip signees of the Business Roundtable followed up on their pledges in the wake of the pandemic.
As it turns out: not much. The article says signers paid out 20% more capital to shareholders, in the forms of dividends and stock buybacks, than did similar companies that did not sign the statement. However, in the first few weeks of the coronavirus crisis, the signers were nearly 20% more likely to have announced layoffs and furloughs and were less likely to donate to relief efforts or offer customer discounts.
The Atlantic article relies heavily on research by management professor Tyler Wry at The Wharton School, who said, “Signing this statement had zero positive effect.”
But why? Wry told the magazine he found no evidence that pushback from institutional investors was to blame and he had no “causal explanation” except to point to a possible psychological phenomenon called “moral self-licensing.”
Here’s what the article says about that: “Behavioral psychologists have observed an effect they call ‘moral self-licensing:’ If people are allowed to make a token gesture of moral behavior — or simply imagine they’ve done something good — they then feel freer to do something morally dubious because they’ve reassured themselves that they’re on the side of the angels.”
I’m not arguing that credit unions are always on “the side of the angels,” but I certainly can point to multiple examples of financial cooperatives protecting jobs over profits, providing hazard pay to employees who had to be there, waiving fees, going out of their way to ensure members received relief checks, and stepping up to help tens of thousands of members and non-members alike get emergency loans from the government.
That response is built into the structure of credit unions. For example, they can’t buy back stock because there is no stock, and they are, by definition and law, not-for-profit ventures that answer to the member-owners.
They also operate according to the seven cooperative principles, at least in theory, and my decades of experience in the movement tells me it’s more than just in theory. Members know that and have responded by growing in number and deepening their engagement.
There’s a reasonable assumption among industry stakeholders that credit unions don’t get the message about the movement out well enough to compete with the banks and non-banks that could co-opt that message.
But the movement’s actions speak every bit as loudly as its words. Members hear, and that’s why they keep turning to credit unions in growing numbers. It’s about more than profits.
Credit unions operate at the unique intersection of financial profit and social welfare. The dual crises of COVID-19 and race-related social unrest present an opportunity to show the movement’s ability to respond in unique, empowering ways.
They’re already good at the financial side of this, and the social welfare side, too, but the corporate C-suite response to the Business Roundtable pledge speaks to yet another opportunity: senior-most leadership.
Credit unions need to seize this moment to ensure their own C-suites and boardrooms reflect the diversity of their membership and their communities.
Doing that, along with doubling down on doing the right thing financially and as employers, will help avoid the conundrum outlined in The Atlantic:
“And therein lies the danger of tokenistic statements. They carry little risk of fooling the public and a lot of risk of fooling the people who issue them.”
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