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Corporate Governance in Canadian and US Credit Unions

This study examines governance practices among North American credit unions. The aim is to better understand the historical structure of credit unions and to inform policy that will allow them to flourish in the future.

Executive Summary

Governance should be the lifeblood of the credit union system. Democratic representation by a board of directors should guarantee two basic things: that members’ interests are served and protected and that the cooperative can serve them competitively and sustain-ably. With an aim for fruitful comparisons, this wide- ranging report draws on survey responses from hundreds of North American credit unions in the United States, the central- affiliated cohort in Canada, and the federated Desjardins Group.

What is the research about?

This report follows on two recent governance projects: Tracking the Relationship Between Credit Union Governance and Performance and a three-part series by Professor Robert Hoel about how boards can add more value. Beyond these, the academic literature of corporate governance is well developed, so this study includes an in-depth review of financial institution governance research and calls out the differences between credit unions and other firms. Also, because surveys can only go so far in teasing out insights, the authors followed up with a dozen interviews with credit unions of all sizes across all three major North American credit union systems.

What are the credit union implications?

Because the report is survey- based, large swaths of the findings com-pare major and minor details of different (and often not-so- different) approaches to governance in the three systems and among differently sized credit unions. From those comparisons, some interesting differences emerge. For example, as a federated system, Desjardins excels at some aspects of board development and system governance in ways that the more atomized US and Canadian credit union systems do not. 

More important than the differences, however, is a troubling drift away from truly cooperative and democratic governance. This sample of findings and recommendations previews the extended discussion in the full report.

This report is sponsored by Credit Union Central of Canada.