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    Social Impact Matters

    When the dust clears from our economic calamity, what will we learn? What business models will emerge from the carnage inflicted by greed, lack of oversight, and profit maximization driven by Wall Street? According to Strategy & Business Magazine, the cooperative business model is being re-examined and gaining prominence as a viable alternative.

    In an article entitled “Not Just for Profit,” written by Marjorie Kelly of the Tellus Institute, social mission-driven business models like cooperatives (including credit unions) are being talked about as part of the new world business order that Microsoft Founder Bill Gates dubbed “creative capitalism” in his 2008 World Economic Forum speech.

    In her article, Kelly makes the case that the long-held belief that publicly held companies are the stalwart of capitalism is being challenged. This is not a new challenge by any means, but clearly the current economic crisis has drawn new attention to the debate.

    In a section of the piece called “The Soul of a New Design”, Kelly points to the obvious: The financial implosion is a direct result of the actions of many investment bankers and mortgage brokers who operated without a governor or sense of ethics or responsibility. Worse – and as we’ve seen in countless media reports – those who tried to operate ethically in these industries were shouted down or terminated.

    Kelly also points out that the current corporate design places “…the greatest governance power on short-term shareholders, the stakeholders with the least interest in long-term performance or the external community.”

    Is the current corporate design unchangeable? Are there viable alternatives that can be brought to scale or perhaps are already at scale, but under-utilized? The article suggests the answer is . . . “yes, BUT…” The “BUT” is the current thinking around ownership and governance must evolve to include and embrace alternatives to the Wall Street centric model.

    The article goes on to discuss a range of more socially responsible alternatives including employee-owned companies, private partnerships, and credit unions and other cooperative businesses.

    This isn’t the first time Strategy &Business has focused on the cooperative model. In July 2006, Strategy &Business published an article called “ A Cooperative Solution ”. It made the case nearly three years ago that cooperatives’ “self-governing corporate structure protects communities and prospers in a globalizing world.”

    In social responsibility parlance, the concept of “sustainability” is nothing new. In fact a term we know quite well in the credit union world is “sustainable development.” When you “wiki” it (as in Wikipedia), sustainable development is defined this way:

    “Sustainable development is a pattern of resource use that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but in the indefinite future.”

    Wikipedia also says:

    “The field of sustainable development can be conceptually broken into three constituent parts: environmental sustainability, economic sustainability and sociopolitical sustainability.

    As the current world economic crisis is demonstrating, these three constituent parts are interconnected on a global scale with each part impacting the others in ways not totally understood or anticipated – until now.

    So what does this have to do with credit unions and the National Credit Union Foundation (NCUF)? Everything.

    While NCUF makes grants and is proud of our REAL Solutions program helping credit unions serve lower-wealth households and working Americans, the program we feel is most important but least recognized is our Development Education (DE) program.

    The DE program is the credit union movement’s equivalent of a cooperative principles and credit union philosophy “boot camp”. On the NCUF website, we talk about how the DE program “sustains” credit unions by emphasizing the contemporary relevance and inherent power of their socially responsible and sustainable cooperative financial services business model.

    There is, of course, much more to DE. The program is both intense and rejuvenating. But most importantly, it has helped over 800 credit union executives and volunteers better understand and apply the unique advantages that credit unions enjoy because of their governance structure, core values, and social responsibility.

    Now think about this in the context of the Strategy & Business article and what’s been going on in the economy as a result of those who acted in a socially irresponsible manner. Think about the value proposition that credit unions can leverage right now. Think about where young adults should be looking for a fair deal.

    When I was working in a big management consulting firm, we didn’t do much advertising. Instead we invested in our employees so they would not only understand but embrace the unique value proposition that we brought to our clients. We viewed the company’s employees as our best sales agents and recruiters. And to arm them we provided training that was unique to our core values, unique to our culture, and emphasized our ethics and commitment to transparency and socially responsible behavior. This basic strategy kept our overhead low, employee moral and dedication high (very little turnover), and created a proud corps of employee evangelists for the company.

    I’m sure many credit unions have a similar philosophy and marketing plan. But wouldn’t it be more effective if more and more credit union employees and volunteers had the “boot camp” training in the core values and principles that make credit unions and cooperative businesses more relevant and vital today than ever?

    I know. It’s a rhetorical question leading you to say, “Of course! Where do I sign up? What does it cost?”

    For all of that information and more, go to the NCUF website.

    To get started, e-mail me (sdelfin@ncuf.coop) and I’ll get you on the list.

    P.S. More Americans are members of cooperatives than own stock.

DiscussionLeave a Comment

  1. When the Soviet empire dissolved, and people proclaimed that it was the end of communism, I wondered how long capitalism would last – because it is built on an assumption of endless growth in population, resource consumption, and appetite for goods and services. While capitalism is not “dead,” it mustl enevitably give way to a steady-state economy if it is to survive – though what such an economy would look like is hard to imagine. Our system right now looks like a high-wire bicyclist who must keep peddling furiously to avoid falling.

    I have been working on two projects that have given me some perspective on credit unionism in all this. I’m doing final editing on a novel, “Tne Credit Union Lady,” about the early days of the credit union movement and the ideals that sustained it. And I’m working on a history of how the movement has dealt with the various crises, financial and otherwise, of the past 30 years. The lesson of both is that credit unions do best when they keep their eye on the ball of serving the needs of members with honesty and forthrightness, and other objectives, such as growth and executive privileges, are secondary.

    Paul Thompson, CUDE 1995

  2. Hello Marjorie, How right you are about the DE Programme, I did the programme in Edinburgh in 2005 (Best Class Ever) and it changed my life. I have always been drawn to social issues and have now been in the credit union movement for over 16 years, here in England. Because I attended the DEUK it opened out my perspective on the CU Movement worldwide, suddenly here were like minded people who understood the challenges facing our movement, who were enthusiastic during our ‘boot camp’, who contributed so much from their own experiences, who should be held up as torch bearers worldwide. It is our passion and committment that makes us unique and this will only enrich us all in the times to come. Best wishes Una

  3. Something I thought striking from Steve’s comments through Marjorie Kelly’s article, is that for the length of time cooperatives, especially financial cooperatives, have been around…they may now be viewed as innovative and in a sense, a new design that captures the soul (core values) of the organization/business as well as providing a sound business plan. This is something that those who put together the master design of the CUDE Program were keenly aware of and understood well. I’m looking forward to reading Paul’s “The Credit Union Lady”...as well as the historical piece. Lastly, as Una suggests, the impact is far greater than the boundaries of the U.S.

    Tom Decker, CUDE

  4. Steve, thanks for writing this thoughful and informative piece. I’m impressed that more Americans are members of a cooperative then own stock. The universal principles of the credit union movement have served us well. One of the furstrations I’ve heard through-out the years working in the movement is why don’t more people know about us and understand who and what we are. Today we are getting lots of publicity and interest which is because of our principles and track record. Thanks to our founders, and those who carried forth the principles and to the future generations who will carry on this successful movement that provides a bright light in these challenging times. Around the world credi unions demonstrate that cooperatives are vital and valuable contirubtors to the communities they serve.

    Loretta Saarine, CUDE

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