Balancing Conflicting Logics in a Canadian Credit Union: Challenges to Co-operative Governance

TOPIC 7–STAGE 4–MICRO Credit unions have historically played a vital role in the Canadian financial services industry as small, community-embedded and co-operatively-owned organizations that developed to correct various... [ view full abstract ]

TOPIC 7–STAGE 4–MICRO

Credit unions have historically played a vital role in the Canadian financial services industry as small, community-embedded and co-operatively-owned organizations that developed to correct various market failures. Credit union values and ownership structures result in a strong alternative to banks, as they are distinctly different in both their purpose and design. Credit unions are more likely to support economic development in local communities, and they have been found to be more resilient in times of global financial turmoil (Birchall & Hammond Ketilson, 2009).

Recent changes to regulatory policy in the financial services industry in Canada, coupled with advances in technology and urbanization of the population, have led to numerous mergers and consolidations among credit unions. As a result, credit unions are facing increasing competition with banks, and even other co-operatives. Tensions and conflicts between logics or ideas associated with co-operatives (e.g., member and community-focus) and investor-owned firms (e.g., efficiency and effectiveness) often arise during difficult decisions faced by the credit union. These pressures may push credit unions to begin to operate more like banks (Liew & Grant, 2014), potentially undermining some of their historic benefits.

This paper investigates how senior leaders (board members and executives) in one large and growing Canadian credit union perceive and are handling these challenges. Using data collected through semi-structured interviews, our study provides insight into senior leaders’ perceptions of and responses to competing logics in a credit union.

Our study highlights the importance of the role played by a credit union’s governance in balancing these tensions. The accountability of credit union board members to the membership ensures that they are able to maintain a balance of logics in line with the needs of the members and their communities, and encourages the development of innovative solutions to ensure ongoing efficiency and effectiveness. It is critical that credit unions establish and reinforce their governance models in ways that will maintain their democratic nature and accountability to key stakeholders. The findings have implications for decision-making surrounding credit union governance, strategy, and organizational design. We will also explore what the broader implications might be for co-operative policy and governance in Canada and beyond.

Birchall, J., & Ketilson, L. H. (2009). Resilience of the cooperative business model in times of crisis. International Labour Organization.

Liew, M., & Grant, M. (2014). Positioning Saskatchewan Credit Unions for Growth. The Conference Board of Canada, Retrieved from http://www.conferenceboard.ca/e-library/abstract.aspx?did=6236