Wednesday, June 28, 2023

SECU New Culture/New Direction - A Question Of Trust, Part 6

http://www.dailypublic.com/sites/default/files/2016/Sep/it-cant-happen-here.jpg


  Baseline. Prior to September, 2021, SECU had an uninterrupted 85-year record of growth in assets and membership, un-besmirched by sanction or scandal.

Timeline.  ­čö║September, 2021 - "New/New" arrives at SECU. ­čö║2022 - Chaos Ensues. ­čö║October, 2022 - Annual meeting resolution ­čö║November/December, 2022 - Fireside Chats ­čö║LGFCU Merger - Ayers/Naylor­čö║January, 2023 Ad Campaign/SuperBowl­čö║February, 2023 Financials - Soaring Budget/Delinquency/Headcount ­čö║March, 2023 - RBL/SEANC ­čö║April, 2023 - H.410 ­čö║June, 2023 CEO Exit ­čö║July, 2023  New Election Procedures/"Facilitator"

­čöć In 1935 Sinclair Lewis published "It Can't Happen Here", a send up of the growing dangers of anti-democratic movements in Europe - particularly in Germany and Italy - and addressed the question of how such governance can seep into and takeover an organization or social system. Of course who has read that book lately and who cares about what happened in the 1930/1940's? That's so "last century"!

For the "sum it up in 15 seconds" world of 2023, here's the synopsis of "It Can't Happen Here": ..."that home‐grown hypocrisy leads to a nice brand of home‐grown authoritarianism."

 ­čöć A fellow named Chip Filson writes a blog on the credit union industry [link: Chip Filson - Just a Member]. If you're into credentials, Mr. Filson was a top regulatory leader at NCUA, founded and led the #1 credit union think-tank in the U.S. for a quarter of century, a data wonk, a convinced credit union advocate, president of his class at Harvard, a Rhodes Scholar, and a "sings in the choir" Presbyterian - well, you know the type. Someone you might listen to...here are some excerpts from a recent post on credit unions [blue = my inserts]:

✅ "One of the challenges both reporters and credit union members confront is that credit unions easily fly under the radar of the press, both local and mainstream, business and general media. Only scandal seems to attract coverage. The result is that credit unions' evolving roles and diverse business efforts are largely unknown to the mainstream public.

You may be familiar from mutual and cooperative models (where required disclosures and/or stock price check and balance do not exist) in other sectors of the economy, that the member-owner governance process is easily gamed.  There is no ongoing oversight of institutional performance.

Many credit unions today are becoming "private companies" where owners have no role except to be customers. There are no disclosures of basic financial goals or performance, as required of public companies. Yet they wheel and deal with abandon in purchasing banks and creating mergers of large well-capitalized, long serving credit unions without any member benefit.

The outcome is that some CEO’s [and Boards] are fulfilling their business ambitions without checks and balances. One of the most glaring recent examples of self-dealing is the addition of “change of control” clauses to CEO contracts. Remember credit unions are mutuals, there is no “change of control” in the market sense of that term.  All subsequent changes such as mergers, are CEO [or Board] self- initiated.  But consultants keep recommending them as “standard business practice” [the infamous "industry standards" at SECU] when advising on CEO contracts.

This morning [January 1, 2023!] the $1.1 billion Vermont State Employees [NCSECU's peer in Vermont], after eight decades, went out of business. I wrote multiple articles about its fate and the member opposition. This merger pattern is being replicated over and over across the country.   Most examples of self-enrichment are not disclosed.  In one case where it was, a credit union with 16% capital, the CEO literally took $10 million of the members’ equity and transferred it to a private, newly incorporated “non profit” under the control of the CEO and Chair, chartered the month prior to the merger.   It later converted to a private foundation so there is no disclosure compared to a public foundation in IRS 990’s. The members’ money.

One way to view the current SECU [don't panic (yet!) he's talking about VSECU!] controversy is the lack of transparency to the owners about these fundamental business changes.   A meaningful governance process seems to be absent.  These changes were believed to be the sole prerogative of the CEO with board concurrence. 

Sadly, I think this is the practice in the vast majority of credit unions.  Democracy is dormant.  Boards today are self-perpetuating. "

 

..."home-grown hypocrisy".... It Can't Happen Here! ...well, ...