Dedicated to scrutinizing the governance of our Credit Union, and protecting our

collective wealth from uncooperative self-interest.

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Democracy Checklist

About Co-operatives

How are co-operatives different than regular companies?

Regular companies are owned by their shareholders. The person—or group of people—with a majority of the shares are able to elect their desired Board of Directors, who can then make the rules and hire and fire whoever they want.

Co-operatives are owned by their members, and each member has exactly one vote. This means that it’s impossible for any one person or group to buy their way into control of the organization.

Regular companies usually get their starting capital by offering shares in the company, which means selling partial ownership and control of the company. Co-operatives cannot do this. Co-operatives are often started with volunteer effort, and grow slowly using only the profits that they earn. A successful and mature co-operative (like Coast Capital) is profitable and has a paid staff running it.

Regular companies return profits to their shareholders through dividends. Co-operatives can do this too—pay dividends to their members—but often they donate some or all of their profits to community groups that their membership is sympathetic to.

What’s the point of being a co-operative?

As I mentioned in the introduction, if nobody is willing or able to start a for-profit enterprise, then a co-operative effort by the community might be the only option. Co-operatives sometimes get tax advantages, too (although the federal government in 2013 moved to eliminate tax advantages for credit unions).

Co-operatives are not appropriate for entrepreneurial ventures where individuals must make large cash infusions, and where the owners hope to reap the rewards of their risky investment.

All else being equal, patronizing a co-operative should be more appealing to customers because profits are returned to the customers, or at least remain within the community.

Does it make sense to have a co-operative financial institution?

Banking is very profitable these days. Banking is also a social necessity: you can’t live without a bank account any more than you can live without water. If you’re aware of what’s going on, you’ll realize that it’s unfair that disproportionate profits are going to the managers and private shareholders of the national banks, just as if private companies were able to reap undue rewards by controlling the water supply. Federal government regulation is complicit in this state of affairs because they want the banking sector to remain strong.

Co-operative banks (i.e., credit unions) are a way for citizens to maintain local control over their banking situation, so that profits don’t get continually shipped back to Toronto.

Why is democracy important to co-operatives?

Please consider this analogy:

Canada is a democracy. That doesn’t mean that all the work is done by individual citizens; we have a paid staff to keep it running. In fact, most citizens are unaware of most details about how the country works. But democracy is important because the political leaders have been vested with great power, such as the power to enact laws, to set each other’s salaries, and to levy taxes. If the political leaders weren’t accountable to the citizens, they would surely abuse their power for their own personal gain, and for that of their friends.

Similarly:

A co-operative (such as Coast Capital) is a democracy. That doesn’t mean that all the work is done by individual members; we have a paid staff to keep it running. In fact, most members are unaware of most details about how the business works. But democracy is important because the directors and management have been vested with great power, such as the power to enact policy, to set each other’s salaries, and to conduct major business deals. If the directors and management weren’t accountable to the members, they would surely abuse their power for their own personal gain, and for that of their friends.

The Problems at Coast Capital      Next: About Banking and Credit Unions