Critical Review of Corporate Governance in Credit Unions Globally

This report presents a critical review and assessment of the role of corporate governance in credit unions globally. It begins with an introduction to the research topic, outlining the research question, aim, objectives, methodology, limitations, research value, and outline. The report then delves int...Read More

A CRITICAL REVIEW AND ASSESSMENT OF THE ROLE OF
CORPORATE GOVERNANCE IN CREDIT UNIONS GLOBALLY.
Table of Contents
List of Abbreviations......................................................................................................................iii
List of Tables..................................................................................................................................iii
List of Figures................................................................................................................................iii
List of Graphs.................................................................................................................................iii
1 – Introduction................................................................................................................................1
1.1 Research Topic Introduction.............................................................................................1
1.1.1. Research Question.....................................................................................................1
1.1.2. Research Aim.............................................................................................................2
1.1.3. Research Objective....................................................................................................2
1.2 Methodology.....................................................................................................................2
1.3 Limitations........................................................................................................................3
1.4 Research Value.................................................................................................................3
1.5 Research Outline...............................................................................................................3
2 – Literature Review......................................................................................................................5
2.1 Introduction.......................................................................................................................5
2.2 The History of Credit Unions............................................................................................5
2.3 Importance of Corporate Governance...............................................................................9
3 – The Credit Union Structure.....................................................................................................10
3.1 Introduction.....................................................................................................................11
3.2 The CU Entity.................................................................................................................11
i

3.3 CU Operation Principles.................................................................................................13
3.4 CU Structure...................................................................................................................16
4 – Corporate Governance Theoretical Framework......................................................................19
4.1 Introduction.....................................................................................................................19
4.2 Theories of Corporate Governance.................................................................................19
4.3 Corporate Governance Principles...................................................................................21
4.4 Corporate Governance Models.......................................................................................21
Chapter 5 – Regulatory Frameworks & Action.............................................................................24
5.1 Global Credit Union Regulatory Bodies.........................................................................24
5.2.1. Government.............................................................................................................24
5.2.2. WOCCU..................................................................................................................24
5.2.3. Basel........................................................................................................................25
5.2.4. Other........................................................................................................................25
5.2 Operations.......................................................................................................................26
5.3 Other…............................................................................................................................26
6 – Analysing Corporate Governance in Credit Unions................................................................27
6.1 Findings & Discussion....................................................................................................27
6.2 Exploring Issues of Poor Governance.............................................................................27
6.3 Effectiveness of Application...........................................................................................28
References......................................................................................................................................29
ii

List of Abbreviations
Abbreviation Full Description
CG Corporate Governance
CU Credit Union
WOCCU World Council of Credit Unions
List of Tables
List of Figures
List of Graphs
iii

1 – Introduction
1.1 Research Topic Introduction
This Chapter is built out quite well. Good use of sub-headings and the Research Outline ends of
the chapter well
According to the World Council of Credit Unions (WOCCU)1 2018 statistical report, there are
85,400 credit unions in 118 countries around the world. These statistics represents a global
penetration rate of 9.38%, with an overall asset base of over $2 trillion USD. With the Global
Financial Crisis (2007-2009)2 driving Corporate Governance practices to the forefront, exploring
the role of these practices within this particular sector of the financial industry is quite plausible.
Credit Unions are member-owned, not-for-profit, and democratic institutions where each
member is entitled to a single vote. These members who utilize the service of the Credit Union
are in fact the owners of the institution themselves. This unique composition can be quite
complexed and interesting when investigating Corporate Governance roles and issues on a global
scale.
As such, research into this area can bring to light various aspects of Corporate Governance
within the Credit Union sector around the world .This brings us to the research topic title:
Corporate Governance in Credit Unions - A Critical Review and Assessment of
the role of Corporate Governance in Credit Unions globally.
1.1.1. Research Question
The intention of this research is not to debate the existence of the principles of Corporate
Governance, rather, to examine if they are in fact observed in Credit Unions.
This leads to the research question of this study: (options)
Does Corporate Governance practices exist in Credit Unions globally?
1(Statistical Report | World Council of Credit Unions, 2020)
2(The Global Financial Crisis | Explainer | Education, 2020)
1

Are the roles of Corporate Governance practiced in Credit Unions globally?
This research will explore the Corporate Governancerolesand whether they areadhered to within
this sector of the financial industry.
1.1.2. Research Aim
The aim of this research is therefor to discover and document findings applying to the role of
Corporate Governance in Credit Unions globally. By assessing the findings, recommendations
can be made when the results of such researchare completed as per the parameters outlined for
this study.
The aim of this research can be defined as follows:
To synthesize resourceful recommendations based on findings and analysis of Corporate
Governance roles in the Credit Union industry globally.
1.1.3. Research Objective
In order to achieve the aim of this research, the following objectives are defined:
1. To examine the unique Credit Union structure
2. To critically review Corporate Governance protocols for Credit Unions globally.
3. To assess cases impacting Corporate Governance roles within the Credit Union
movement.
4. To synthesize the gaps between protocols and findings, using the results to produce
recommendations based on analysis.
1.2 Methodology
In order to conduct this research, a doctrinal approach will be used to explore what Corporate
Governance conventions exists for Credit Unions. By utilizing a qualitative method to explore
publicly available literature, statutes and cases, valuable insight can lead to achieve the
objectives set out3.
3 Hennink, M., Hutter, I. and Bailey, A., 2020. Qualitative research methods. SAGE Publications
Limited.
2

1.3 Limitations
To define as the limitation of the qualitative research is that’s it totally depends on the individual
character and researcher. One of the greatest challenges of this research is time. The study is
limited to the time allotted to explore the topic at hand. As such, the paper has been restricted to
findings that have been previously recorded. In addition to the time constrains, the research will
use WOCCU as a bases for global coverage. Another limitation of this doctrinal research implies
the interpretation of the author without collaborations.
Research Value
This research aims to add value to the main subject area of Corporate Governance within a sector
of the financial industry – the Credit Union. It will do so by using a doctrinal approach,
examining legal sources, and relevant case laws globally. By exploring the findings during this
study, it can lead to a better understanding of this growing sector.
By reviewing applicable Corporate Governance literature, this study can benefit the subject area
by further investigating Corporate Governance alignment within the Credit Union movement.
This can be considered an exclusive perspective in this area of study, as exploring the unique
composition of a Credit Union can add meaningful content to the field of Corporate Governance.
Furthermore, this research can inspire additional studies, as well as the development and creation
of policies that aims to improve Corporate Governance roles in Credit Unions globally. Findings
can be documented and developed to subsequently improve the overall functions to the benefit of
these institutions
1.4 Research Outline
The study has outlined: Chapter 2 –a literature review which lays the foundation of the research
by exploring the history of the Credit Union and Corporate Governance theories. It will continue
by further analyse the Credit Union structure, exploring the roles of the various stakeholders in
Chapter 3 as understating this detail will assist in achieving the objective of the research. Chapter
4 will then explore governance within the Credit Union movement, followed by chapter 5 which
will discuss the Regulatory Framework under which Credit Unions operate. After the discussion
3

of the findings in Chapter 6, the research will conclude and present recommendations in Chapter
7.
4

2 – Literature Review
2.1 Introduction
The literature review will first explore the existence of Credit Unions (CUs) as the main body
being explored in this study. It will be followed on bases of Corporate Governance (CG) theories
as to build the foundation of research topic area.
2.2 The History of Credit Unions
Context of study– exploring this area in regards to corporate governance principles.
The board of credit unions have commencement for protecting the member interest along with
keeping member fully informed regarding the performance of the credit union. It will provide
protection and enhancement for the member value. Effective governance will provide the
efficient frameworks to ensure the credibility of credit union to be manager soundly and
prudently4. This will be helping out in creating the reasonable and impartial business judgements
in the best inserts of credit unions which duel impact the decision making of the member.
The principles of the corporate governance are following
 To lay the solid foundation for management and oversights by updating and maintaining
the credit union rules and regulations to keep up in step ranges in the financials
industries.
 To have structured board of the credit union which will add value in it. This is should be
as the effective compositions, size and commitments
 Credit union corporate governance will protect the technical responsible decision making.
 Corporate governance will be providing the safeguarding of credit unions integrity in
financial reporting by asking for timely and balanced disclosures
4 Reserve Bank of Australia. 2020. The Global Financial Crisis | Explainer | Education.
[online] Available at: <https://www.rba.gov.au/education/resources/explainers/the-
global-financial-crisis.html> [Accessed 18 August 2020].
5

 The principle followed up with the respecting the right of shareholders along with
recognizing and managing risk in perfect manner.
 This will be also helping out in encouraging enhance performances and remunerate fairly
and responsible as to keep the employee motivated.
Ownership = membership
Credit union have been considered as the economic democracy by providing each and every
member with equal membership and one vote. This will be stated as how much the member have
invested as the part of deposit at the credit unions. Every customer is both as member and union.
What is a cooperative (CU vs corporative bank – distinguish)
The credit unions are corporative banks which is owned and managed by its own member by
taking all amount in banks. There are all over the 50000-credit union worldwide holding the
asset ranging from over 10 billion dollars and under 1 million dollars5.CU are not the non-profit
organization existing to serve members along with maximizing corporate profits. CU need to pay
the major level of focus on providing the safe place to borrow at the reasonable rate. Unlike
banks the CU will have returning of repulsions to the members in the form of dividends.
In the chapter 3 we will have the detailed analysis of The Credit Union Structure by exploring
entity for better understanding of overall CG application to the institution6. This will aim as
provide solutions for the need of financial services at competitive and fair rates for those who
wish to join the entity.
Firm case for exploration of CG compliance
5 Lydra, C., 2019. Transformation of the Laborie Flower Societies: Intervention of the
Laborie Co operative Credit Union between 2007-2017.
6 Malikov, E., Restrepo-Tobón, D.A. and Kumbhakar, S.C., 2018. Heterogeneous credit
union production technologies with endogenous switching and correlated
effects. Econometric Reviews. 37(10). pp.1095-1119.
6

The credit union compliance obligation not only for inclusion in the state law and regulations but
also have the systematise expectation with regulator7.This is the expectation which is particularly
in the critical upsets of the compliance years. So , credit union is relay on business leaders.
7 DeYoung, R., and et. al., 2019. Who Consumes the Credit Union Tax
Subsidy?. Available at SSRN 3429208.
7

History
Credit union todays are thriving level of expansions having the billions of credit union holder
account around the world. In order to understand the essence of the CU movement, it is
important to explore its origins. The CU can be traced back to 19th century Germany, where
exploration of the co-operative began to meet the needs of the common man.
The birth of the credit union
Herman Schulze-Delitzsch 1950 have the establishment of the first credit unions in1850 to
provide who are lacking the access financial services. This is opportunity to have borrowing
solving to be pooled themselves and pooled members. Frederick William Raiffeisen have the
transportation of the financials corporative concepts to rural Germany a decade later8.Italy –
Luigi Luzzatti 1866founded credit societies and other small institution in the Germanys.CU have
been identified as the forerunners for the corporative banks abound in Europe todays
The ideas go west
Over the years the credit union have its spread to the around world communities. Alphonse
Desjardins 1900 – Canada have started the credit union (caissepopulaire) in Lévis, Quebec.
shortly after the durations the Alphonso along with Edward Filene – USA and pay F Bergengren
have establish the credit unions in the united states.
The first credit Union Day
On January 17, 1927, the Credit Union League of Massachusetts celebrated the first official
holiday for credit union members and workers. the rapid growth NA credit union movements to
have the establish the busy to celebrates to have the recrowning the significances of the
celebration.
The second chance
8 Robertson, S., 2016. An Application of Knowledge Management and Human Capital
Valuation: The Case of Credit Unions. In Quantitative Multidisciplinary Approaches in
Human Capital and Asset Management (pp. 201-233). IGI Global.
8

CUNA
The credit union idea has its expansion to the north America in the early 20 th century with as
association CUNA (credit union nation association) which is the national association for credits
in the US funded in 1934. After the time of 20 times CUNA president and CO have approves
overseas credit union assistances programme in expansion organization’s existing outreach to
countries outside of North America.
WOCCU
In the later year US agency for the international development (USAID) have funded for different
department for progress in credit union activities. Between the years 1962 and 1970 the
movements in the US, Canada and Australia have stated for systematise expansions and joining
for the international credit union systems. so WOCCU (World council of credit union)
incorporated in the set of the Wiscoin as he results of vote in confines among the credits union
association from all overworld9.Todays, this is the leading voice for global advocacy and
development on the behalf of international credit union community.
So, to have the proper discussion, in the chapter 3 there will discussion on the structuring of the
credit unions. in addition to which there will be proper specification in Roles of all the
stakeholders of credit union have been explained below with roles, responsibilities and
uniqueness of all the members under credit union structure sub heading
The graphs below indicates that CUs have been on an increase over the years.
9 Outa, E.R. and Waweru, N.M., 2016. Corporate governance guidelines compliance and
firm financial performance. Managerial Auditing Journal.
Anginer, D., Demirguc-Kunt, A., Huizinga, H. and Ma, K., 2018. Corporate governance of banks
and financial stability. Journal of Financial Economics, 130(2), pp.327-346.
Yermack, D., 2017. Corporate governance and blockchains. Review of Finance, 21(1), pp.7-31.
9

10

https://www.woccu.org/our_network/global_reach
CREDI
T
UNION
MEMBER
S
SAVINGS &
SHARES (USD)
LOANS
(USD)
RESERVES
(USD)
ASSETS
(USD)
PENETRATIO
N
AFRICA 39,447 35,783,426 9,595,813,824 8,132,652,469 1,059,830,173 10,779,858,693 13.80%
ASIA 33,004 57,450,343 147,233,062,766 138,186,890,645 5,772,510,614 180,826,196,923 4.34%
CARIBBEAN 374 3,427,989 6,273,109,421 4,996,348,670 774,155,171 7,662,485,742 65.21%
EUROPE 3,491 9,103,706 24,095,263,189 11,647,800,039 4,068,672,603 32,959,363,165 9.16%
LATIN AMERICA 2,891 35,807,657 59,840,058,722 54,211,967,398 17,209,651,828 90,863,871,023 14.57%
NORTH AMERICA 6,010 127,970,07
2
1,485,177,518,977 1,326,185,315,04
2
170,218,748,40
4
1,786,602,160,17
7
48.88%
OCEANIA 183 4,683,829 70,025,707,370 66,763,843,431 6,423,711,640 81,392,410,285 3.85%
TOTAL 85,400 274,227,02
2
1,802,240,534,268 1,610,124,817,69
4
205,527,280,43
2
2,191,086,346,00
6
9.38%
11

12

2.3 Importance of Corporate Governance
Corporate governance is the structure of rules, practices, and processes used to direct and
manage a company. A company's board of directors is the primary force influencing corporate
governance. The history of corporate governance and includes an historical perspective on
corporate governance. It starts with the emergence of corporate governance during the 1970s in
the United States, and then continues to study the developments that occurred sometime during
the mid-1970s and the end of the 1990s. Basically, corporate governance is set of rules,
regulation, process which is followed by organisation in their operations. This is done within
interest of stakeholder, government, society, customers, etc. Moreover, it is necessary to for
management to set or develop a specific structure or process. this will allow in ensuring
transparency, accountability etc of operation within company. Furthermore, there are 4 pillars of
corporate governance. Thus, it entirely depends on them to follow and apply rules, practices, in
order to manage company. In addition, there are some vital components of corporate governance
that are common in it. they are transparency, diversity, shareholder rights, etc. Besides that, there
are several principles as well which is applied in it. The corporate governance is similar in all
companies because it helps in creating a good image in market. Every company have to follow
certain process or rules which monitor and control their operations.
In the chapter 4 , there ill b discussion on the WOCCU principle related to management of the
corporate governance of the credit unions in perfect manner.
13

3 – The Credit Union Structure
3.1 Introduction
It is pertinent to not only to know the history of the CU movement, but also to explore this entity
as to better understand overall CG application to the institution. In light of this, this chapter
explored the unique structure as well as the key players within the organization. Roles of all the
stakeholders of credit union have been explained below with roles, responsibilities and
uniqueness of all the members under credit union structure sub heading
3.2 The CU Entity
As initially explored in the Literature Review, a CU is the joining of a group of people with a
‘common bond’ to save money and give loans to each other at a lower rate of interest 10. The aim
is to provide solutions for the need of financial services at competitive and fair rates for those
who wish to join the entity.
The common bond is the link that exists between its member11s. It may be a place of residence, a
place of work, a common profession.
These members invest a small amount or a "share" to join the CU and are the shareholders as
well as the owners of the CU.
As a co-operative, it is a democratic and non-profit organisation. It entitles them to elect from
among themselves a board of directors, which sets policy and may appoint a manager. It is vital
developing the mutual confidence which members must have if the credit union is to be a
success.
10 Thomsen, S., 2016. The Nordic corporate governance model. Management and
Organization Review, 12(1), pp.189-204.
11 Zuva, J. and Zuva, T., 2018. Corporate governance and organizational
performance. International Journal of Business and Management Studies, 10(1), pp.16-
29.
14

FINANCIAL INCLUSION
Access to affordable, reliable and self-sustainable financial services improves lives on many
different levels. Credit unions work to expand services to people of all income levels.
GLOBAL BENEFITS
85,000 credit unions in 118 countries improve the lives and communities of 274 million
members.
The Credit Union Difference
How do we differ from banks and other financial institutions?
CLIENTELE
Members share a common community, occupation or place of work. Service to the working
poor is blended with service to a broader spectrum of the population, which allows a credit union
to offer competitive rates and fees.
GOVERNANCE
Credit union members elect a board of directors from their membership. Members each have one
vote in board elections, regardless of their amount of savings or shares in the credit union.
EARNINGS
Net income is applied first to adequacy requirements. Member owned capital structure,
compared to stockholder capital, allows the credit union to manage surplus to lower interest rates
on loans, higher interest on savings or new product and service development.
OUR GLOBAL NETWORK
World Council represents more than 85,000 credit unions serving over 274 million members in
118 countries.
Importance of credit Union and reason why it matters
A credit union is a kind of financial organization which is owned and governed by its
members. Credit union helps in providing members with a variety of financial services that
includes checking and saving accounts and loans. They are a kind of non- profitable
15

organizations that are intended to provide high quality of service to all of its members but they
do not provide services for maximizing profit. They are actively involved with the community
and focus upon providing service to them. They majorly provide traditional banking services to
different kinds of entities of different sizes from small, volunteer operations or large entities that
have thousands of participants spanning the country. Credit union can be formed by various
kinds of large organizations and by their employees or members. They are a kind of financial
organization that are majorly structured in a cooperative model. Members of credit union
purchase shares in the organization and the money collected from its members is pooled together
so that it can be used for provision of different kinds of financial services to all of its members.
Credit union follows basic business model in which members pool their money together
so that they can provide loan, financial products, demand deposit accounts and provide various
other kind of financial services. Any kind of income which is generated through this is used to
fund products, products and services that can further benefits interests and community of their
members. Fenwick, McCahery and Vermeulen, (2019)12 says that credit union is a bit different
from traditional banks and their services. But as compared to banks they offer much better rates
and more ATM locations. Credit union is not traded publicly and they only make sufficient
amount of money that can be used by them for continuing their daily operations. As compared to
normal traditional banks they have fewer brick and motor locations. It is a kind of drawback for
them especially for some of their clients who like to get products and services in person. Credit
union is exempted from corporate income tax on their earning. Initially members of credit union
were only those people who shared a common bond, worked in same industry, or were from
same community but now these restrictions have been removed and restrictions upon
membership have loosened up because of which even general public is allowed to join credit
union.
Credit union has a board of directors that are appointed by its members. It majorly
operates for well- bring of all of its members13. If this organization make any kind of profit then
12Fenwick, M., McCahery, J.A. and Vermeulen, E.P., 2019. The end of ‘corporate’governance:
hello ‘platform’governance. European Business Organization Law Review, 20(1), pp.171-199.
13 McCahery, J.A., Sautner, Z. and Starks, L.T., 2016. Behind the scenes: The corporate
governance preferences of institutional investors. The Journal of Finance, 71(6),
16

that profit is returned back to its members in form of reduced fees, lower loan rates and higher
saving rates. In order to become a member of credit union, people need to qualify on the basis of
their involvement in the community, how much they can cooperate in terms of saving as one
members saving is another member’s loan, their connection to other communities or
organizations. Other than this if a person is family member of an existing member, is an
employer and are ready to sponge their own credit union, and they serve people of a specific
geographical location.
There are approximately 85,000 credit union in 118 countries. It has two main helping
hands: first is self- help and another is mutual help. When a person applies for becoming a
member of credit union, they should be self-sufficient to help themselves and provide loan to
other for other’s welfare. Symbol of credit union globally is same that represents two helping
hands helping family members of community. Each member of credit union has can give one
vote
3.3 CU Operation Principles
Credit union differs from other financial organizations. They accept funds from this
member and provide loan to other members at much lower rate. Whereas other financial
institutes provide loan and other financial services at much higher rates. CU has various kinds of
operating principles that helps them in differing from other financial institutes. There are some
WOCCU International Operating Principles that helps in differentiating CU from other financial
institutes. There are three main categories of principles under this: cooperative structure, service
to members and social responsibility (WOCCU)14. All the three categories and sub- operating
principles within it has been explained below.
Cooperative Structure
 Member Owned
pp.2905-2932.
14 WOCCU international operating principles, 2020. [Online]. Available though: <
https://www.woccu.org/documents/2017_WOCCU_International_Operating_Principles#:~:text=
and%20their%20communities.-,Community%20Responsibility,which%20they%20work%20and
%20reside. >
17

Credit unions and other cooperative financial institutions are owned by the consumers who use
their services. All members are owners of the cooperative financial institution. The credit union
is an autonomous private enterprise, within the framework of law and regulation, recognizing the
credit union as a cooperative, serving and controlled by its members.
 Member Controlled
Credit unions and other financial cooperatives are democratic organizations which are controlled
by their members who actively participate in electing their board representatives and
participating in the governance of the institutions. Men and women serving as elected
representatives are accountable to the membership.
 Democratic Control
Credit union members enjoy equal rights to vote (one member, one vote) and participate in
decisions affecting the credit union, without regard to the amount of savings or deposits or the
volume of business. The one member one vote principle is designed to ensure that the
cooperative institution responds to the demands of its wider membership. Voting in credit union
support organizations or associations may be proportional or representational, in keeping with
democratic principles.
Service to Members
 Financial Inclusion
Membership in a credit union is voluntary and open to all within the accepted common bond of
association and are willing to accept the corresponding responsibilities. Credit unions and other
cooperative financial institutions are non-discriminatory, on all grounds, including but not
limited to race, nationality, sex, religion, and politics. Credit union services provide access to
affordable financial services to all including the underserved.
 Financial Sustainability
A prime concern of the credit union is to build the financial strength, including adequate reserves
and internal controls that will ensure continued service to membership. The surplus arising out of
the operations of the credit union after paying all operating and provision costs, providing a fair
18

rate of interest on savings and deposits and after payment of fair dividends on members shares or
equity capital, should ensure appropriate reserve levels.
 Maximizing Member Economic Benefit
To encourage thrift through savings and thus to fund loans and other services, a fair rate of
interest is paid on savings and deposits. While meeting the conditions of financial sustainability
of the credit union, the provision and pricing of services seek to improve the economic and social
well-being of all members.
Social Responsibility
 Financial Literacy
Credit unions provide relevant education to their members, officers, and employees for their
economic, social, democratic and professional development. Training and education in financial
literacy supports members’ informed choices in thrift, debt, wise use of credit and financial
planning and budgeting. Providing skill sets and knowledge that allow members to make
informed and effective decisions with all of their financial resources are essential in serving
member needs. Credit unions also provide education to their members in rights and
responsibilities of members.
 Network Cooperation
In keeping with their cooperative philosophy and to benefit from the economic and efficiency
advantages of pooling resources and expertise, credit unions and other cooperative financial
institutions cooperate with other credit unions, cooperatives and their associations at local,
national, and international levels to best serve the interests of their members and their
communities.
 Community Responsibility
The cooperative ethos supports the ideals of self-help, mutual assistance and economic
empowerment. The vision of economic empowerment extends both to the individual members
and to the larger community in which they work and reside. Credit unions support the growth of
19

a broader just, healthy and prosperous community within which the credit union and its members
reside.
 Global Vision
The vision embodies building, championing, defending and growing a global community that
improves lives through cooperative financial institutions.
3.4 CU Structure
Overall structure of credit union is almost same for all the credit union present globally. Only
difference is in number of members15. Structure of credit union internal and external structure of
credit union. Internal credit union structure involves general meeting members, board of
directors and supervisory committee. General meeting members of credit union are the highest
decision- making body which is composed by all of its members. This general meeting of
members is held at least one in a year. Board of directors’ services as a nerves system of a credit
union under their general meeting of their members (Abdallah and Ismail, 2017)16. Board
members of credit union consist of 7 to 21 members who are elected by all of its members and
serves a term or time period of 3 years. If any of the board members are re-elected, then they can
serve unlimited time period. When all the members of board of directors are elected, they are
required to call a board meeting within a week of general meeting so that 4 most important
members of board of directors can be appointed and represent credit union’s president, vice-
president, secretary as well as treasurer among existing members of board of directors. Board
meeting is required to be called at least once in a month for business management and for
establishment of business strategy. internal structure of credit union also includes supervisory
committee. Though general meeting of credit union members helps in forming 5 to 15
supervisory members who are elected by all the members and they also serve a time period of 3
15 Detthamrong, U., Chancharat, N. and Vithessonthi, C., 2017. Corporate governance,
capital structure and firm performance: Evidence from Thailand. Research in
International Business and Finance, 42, pp.689-709.
16 Abdallah, A.A.N. and Ismail, A.K., 2017. Corporate governance practices, ownership
structure, and corporate performance in the GCC countries. Journal of International
Financial Markets, Institutions and Money, 46, pp.98-115.
20

years. Another rule is same for supervisory members i.e. if they are re-elected then they can
serve unlimited terms. Supervisory members are also required to call a meeting within a week
just after general meeting so that 1 supervisory member can be elected as chairmen of this
committee. Supervisory meeting is also required to be held at least once in a month to supervise
financial reports as well as business implementation so that proper and appropriate manner with
the help of suggestions of board of directors. Other than this, internal credit union members also
includes credit committee and education committee (Dignam and Galanis, 2016)17. Credit
committee focuses upon reviewing and approving loans applications. Education committee also
includes few members. Most of the times members of this committee are selected by general
members but rarely they are elected by board of directors.
All the committee members and general members have their own roles and responsibilities that
are required to be fulfilled by them. Roles and responsibilities of all the members of credit union
have been explained below:
Board of directors: they are responsible for setting polices and procedure according to the
current law and legislation can be carried out so that all the main activities of credit union can be
carried out.
President: All the members of board of directors conduct a meeting so that president can be
elected. Present is responsible for presenting annual report of all the members of board of
directors. Present is one of the most important members of board of directors who plays a vital
role in decision making.
Vide precedent: In case president is absent or is disabled then in such case vice present comes
into picture. Their major role is to act in absence of precedent. Vide present is also elected by
board of directors.
Treasurer: they are majorly responsible for maintaining financial records of credit union for all
the employees and other operations of credit union. Treasurer is also appointed from board of
directors.
17 Dignam, A. and Galanis, M., 2016. The globalization of corporate governance.
Routledge.
21

Secretary: Secretary is mainly responsible for maintaining minutes of all the meetings
conducted by members of credit union whether it is a general meeting or weekly meeting or
monthly meeting.
Credit Committee: they are responsible for reviewing all kinds of loan applications and approve
them. They are generally elected by general members of credit union only in special case they
are elected by board of directors.
Supervisory committee: they are responsible for inspecting all kinds of operating procedures
and records of credit union in a detailed manner. members of this committee should be bondable,
familiar with auditing and accounting principles, willing to commit and who is willing to attend
required and applicable training. This committee consist of a chairperson, secretary and other
supervisory committee members. But chairperson and secretary can be same person.
Education committee: they are responsible for informing all the members and non- members of
credit union about all kinds of services and ideas. They are responsible to provide updated and
new information related to credit union services to board members.
22

Figure Structure of credit union18
Above structure clearly explains overall internal structure of credit union. It is the internal
structure of Credit Union. External structure of credit union only consists of chapter and league.
Chapter is a local union which is majorly formed or composed by primary credit unions that are
located in the same area which works as a bridge between league and primary credit union
(Paniagua, Rivelles and Sapena, 2018). There are approximately 15 chapters present in 15
countries. These chapters help credit union in assisting or conducting various kinds of social
activities, conducting training programs for their leaders as well as for members for promoting
new credit union for establishment and business which is run by league. Next is league which is
national union. It is a kind of legal juridical association which is majorly organized by all the
main primary credit unions. League is majorly responsible for management, establishment,
assistance, and guidance of primary credit units. All the registered primary unions focus upon
joining league as its member. League has its own board of directors who are responsible for
management of primary credit unions (Lau, Lu and Liang, 2016). It is important for regulatory
bodies of credit union to update polices, rules and regulations and define in a proper and
appropriate manner so that members who will be elected, members who can be hired by board of
directors or members who are appointed by board members. this further helps in pre-defining
rules and regulations of all the members of credit unit.
18Structure of credit union. 2020. [Online]. Available though:
<https://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_ent/---coop/documents/
instructionalmaterial/wcms_628563.pdf>
23

24

Most of the marginal work within credit union is done by internal members of credit
union. Roles and responsibilities of all the members of credit union helps in smooth running of
all the operations of credit union. From time to time all the members of credit union are also
provided with training so that they can fulfil their roes and responsibilities in a proper and
appropriate manner. embers are also provided with orientation so that they can get to know about
rules and regulations of credit union (Fenwick, McCahery and Vermeulen, 2019). For example if
any trainee is asked about ultimate power of any credit union member then they will simply
respond that some discussions are not allowed to be done.
Mostly structure of credit union is always same but there can be slight variation within
credit union of different parts of the world. Well- defined structure of credit union also helps in
reducing possibilities of misunderstandings, issues or problems within current members of the
credit union. Clear structure and roles and responsibilities of members helps the trainees to
understand services of CU and ways in which it will be fulfilled in a proper and appropriate
manner. When any kind of meetings are held then complete details of meetings are provided to
all the members who will be attending the meeting a night before so that they can understand
main agenda of the meeting and prepare for the meeting in advance (Fenwick, McCahery and
Vermeulen, 2019). In order to explain overall structure of credit union to new joiners or trainee’s
a set of steps is required to be followed: they should be provided with operating principles, rights
of all the members, decision making authorities and structure in a proper manner.
25

4 – Corporate Governance Theoretical Framework
4.0 Introduction
Corporate governance can be defined as set of or combination of processes, rules and
legislation that helps in operating business, regulate and control it as well. Corporate governance
is a kind of internal and external factor that directly impacts interest of shareholders of the
company. There are various kinds of principles, ttheories and models of corporate governance
that are required to be followed by organizations. These theories, principles and models will be
explained below in detailed manner.
4.2 Theories of corporate governance
In the view of Clarke, 201619, there are various theories and models of corporate governance
which is followed by organisation. The use of theory depends on needs of organisation. So, it
provides a framework on how to apply corporate governance and what method can be followed
in it. besides that, each theory focuses on different concept and enable in effective corporate
governance. Moreover, it is necessary to take proper decision in this as well so that structure and
process are followed. Apart from it, the theories play a vital role in CG. It helps in understanding
relationship between stakeholder and ethics. With that their interest can be identified and on
basis of that decision is taken. So, basically there are 4 theories in it which are agency,
stakeholder, stewardship and socio logical. They all are defined below:
Agency theory- the theory state that managers are agent of organisation as they perform daily
activities. so, theory argue that agent goal is different from principals. It means they are
conflicting. Hence it defines relationship between shareholder and director of company. the
agents are hired by principals. They assign work to them who are agent of shareholder.
Therefore, shareholder expect from them to take decision in interest of principal. But it may
happen a situation that agent does not follow self-interest, from this theory it is clearly observed
difference of ownership and control. Employee are accountable to their role whereas agent
priority is reward and punishment. Besides, rewards can be used to increase profit of owners.
The agent should be monitored and controlled in order to protect interest of principals. So, it is
19Clarke, T., 2016. The continuing diversity of corporate governance: Theories of convergence and
variety. Ephemera: Theory and Politics in Organization.
26

the responsibility of board. Hence, board is responsible for takin decision and is accountable to
stakeholders.
Procedures and processes according to which an organization is directed and controlled. The
corporate governance structure specifies the distribution of rights and responsibilities among the
different participants in the organization – such as the board, managers, shareholders and other
stakeholders – and lays down the rules and procedures for decision-making.
As stated by Klepczarek, 201720, this theory plays significant role in CG. It provides protocols to
manager on basis of which they take strategic decision. Basically, decisions are taken for long
term benefit to organisation and stakeholder. It also shows that buying single share of company
does not give right to vote. Also, people having power to make decision benefit from it. the best
interest of company is short term profit that is to give dividends to shareholder. The purpose of
this theory is that it shareholder need to informed about inner working of company. unless they
are not informed, they do not invest in it. so, shareholder only buy shares as they do not want to
take risk. whereas managers are involved in daily operations they are aware about risks
associated with short term strategies.
Stakeholder theory- as there are various stakeholder of company such as suppliers, creditor,
customers, government, etc. so, in this theory it is stated that manages must take decision in
interest of all stakeholder of company. It is because all of them is having some intrinsic values
and interest. thus, company follows input output model which is considered in it. However, many
time, interest of stakeholder conflicts. Hence, it is important for manager to take effective
decision. Besides that, theory assume that stakeholder can easily negotiate with each other. it will
lead to gaining long term interest. here, many stakeholder roles are reduced in organisation but
they need to work and get compatible to work with others. Hence, here manager play vital role in
it. they should ensure that there is fair return of stake in company. society and other stakeholder
affect on indirect way to organization. so, success or failure of firm can be affected easily.
Stakeholder theories advocate for some form of corporate social responsibility, which is a duty to
20 Klepczarek, E., 2017. Corporate governance theories in the new institutional economics
perspective. the classification of theoretical concepts. Studia Prawno-Ekonomiczne,
(105), pp.243-258.
27

operate in ethical ways, even if that means a reduction of long-term profit for a company. So,
management has a responsibility to protect interests of all stakeholders by ensuring that
corporate or organizational practices are taken into it along with principles of sustainability.
As elucidated by Li, Terjesen, and Umans, 202021, the purpose of this theory is
organisation needs to create value for stakeholders as well apart from shareholder. It is essential
to do so that business can sustain for long term. Generally, there are two types of stakeholder that
are internal an external. In internal it consists of employee, manager, director, etc. whereas in
external they are supplier, government, etc. to apply this theory first of all organisation need to
identify who are their stakeholder. This is done through stakeholder analysis. then, their needs
are identified. through that, their interest is protected.
Stewardship theory- here, steward means a person who manage other party. Thus, theory state
steward in organisation needs to protect and increase shareholder wealth apart from company
performance. The stewards can be executives, managers etc who work for shareholder and
protect their interest. so basically, they are caretaker of shareholder as well as of organisation.
they must not utilise property for their own benefit. Here, managers are stewards and are
motivated by principal objective. Furthermore, stewards are highly motivated. They stress on
position of employee to force them to act independently. This is done to increase shareholder
returns. So, in this way staff taken responsibility of their job and work in diligent way. Here,
theory also suggest that board must play crucial role in this. They need to control actions and
motivate staff. But the theory argues that relationship between board and executive involve
training, decision making, etc.
Madhani, 201722, said that there are some consequences of this theory. It is evaluated
that it revolves around individual agency. The trust is justified between manager and board. For
instance- in board CEO is not chairman of it then it can be ensured by board that long term CEO
will be good manager. so, the theory reflects that manager want to awarded for efforts but no one
wants this at cost of firm.
21Li, H., Terjesen, S. and Umans, T., 2020. Corporate governance in entrepreneurial firms: A
systematic review and research agenda. Small Business Economics, 54(1), pp.43-74.
22 Madhani, P.M., 2017. Diverse roles of corporate board: Review of various corporate
governance theories. The IUP Journal of Corporate Governance, 16(2), pp.7-28.
28

Sociological theory- the theory state that decision making is function of social interaction and
not function of rational of individua strategies. It means that decision taken must be in that
context that it is appreciated by others. Thus, it helps in understanding behaviour of director in
decision making. Therefore, by analysing social behaviour of director or manager it
Resource dependency theory – As name depicts the theory is related to access of resources
required by firm. So, here BOD play vital role in providing resources to firm. It is done by
getting access from external environment. The procurement of resources enables in increasing
organisation performance. With that they are able to perform operations and function properly.
Along with it, director of company brings in various resources within business. they are info,
manpower, material, etc. Thus, it results in fulfilling needs of organisation. Also, directors are
categorized into 4 types that are insider, business expert, support specialist and community
influential. So, they all play vital role and bring in different resources in business. the theory
state that usually most decision taken by executives are after approval from board. Hence,
resources needed by firm needs to be approved from board (Outa, and Waweru, 2016)23.
Transaction cost theory- The theory state that organisation is having various contract with
themselves. This leads to create value for firm. However, with each contract there is cost
associated with it. This is known as transaction cost. So, it is stated that if transaction cost is high
than the market then organisation itself undertake that cost.
Political theory – the theory of focused of developing support from shareholder rather than by
buying their voting power. It this it shows how power, profits, etc. are defined in the favor of
government. Here, shareholders are supported in giving their vote. The power of voting is not
decided on basis of share given to them.
In the opinion of Thomsen, 201624, these are the theories of corporate governance which
is usually applied by organisations. Henceforth, each theory focuses of different aspect.
23 Outa, E.R. and Waweru, N.M., 2016. Corporate governance guidelines compliance and
firm financial performance. Managerial Auditing Journal.
24 Thomsen, S., 2016. The Nordic corporate governance model. Management and
Organization Review, 12(1), pp.189-204.
29

Generally, it describes role of managers and directors in it. They both significant role as it they
take decision. So, it becomes their responsibility to protect interest of stakeholder and take
decision. As any decision take outside interest of it leads to unethical or non following of
compliance or regulation of corporate governance. The emphasis is on maximizing shareholder
profit. However, it is analysed that there is difference between business ethics and corporate
governance. The ethics are formed to ensure that business practices are followed in proper way.
furthermore, there are different models of CG which is implied along with theory. The models
differ in countries and is formed by government. Moreover, most of credit unions apply
stakeholder theory of corporate governance. This is because it enables them to take decision
within interest of stakeholders. Through that, they are able to determine who stakeholder are and
what role they play in firm. Furthermore, manager and director become accountable for their
role. they do not take any decision which is not in favour of interest of stakeholder. So, in this
way organisation protects their rights as well. similarly, resource dependency theory is also
applied by organisation. they acquire useful resources from outside and use it. In this some
business gain competitive advantage on basis of resource. They are able to effectively use them
in such a way that it enhances their performance.
According to Zuva, andZuva, 201825, with help of this theory company is able to
identify interest of stakeholder in firm. Hence, if there is any change in needs of stakeholder
there is shift and impact on their interest. so, on basis of that manager have to take decision to
make sure their interest is protected. So, as credit union principle is to help people and they are
controlled by its members. Therefore, manager of credit union has to take decision in regard of
people benefit. the government regulate and monitor overall functioning of unions. There is
relationship between CG and theory. the entire concept of CG is based on theories developed.
But main purpose is to follow set of rules, process, methods, etc. and regulate. This is done to
protect interest of stakeholder. Furthermore, it is determined that CG is influenced by BOD.
With help of it organisation is able to attain its goals and objectives in effective way. the firm is
able to build relationship with outsiders. By developing strong and effective relation firm is able
25 Zuva, J. and Zuva, T., 2018. Corporate governance and organizational
performance. International Journal of Business and Management Studies, 10(1), pp.16-
29.
30

to attract large number of investors. Then, several stakeholder theories are applied in it to set
process and methods. The BOD is responsible for ensuring that CG theory is properly followed
in it. furthermore, selection of theory depends on BOD. They also regulate and monitor that
whether theory is followed or not. The BOD must ensure that the company's corporate
governance policies incorporate the corporate strategy, risk management, accountability,
transparency, and ethical business practices. Moreover, it is necessary to for management to set
or develop a specific structure or process. this will allow in ensuring transparency, accountability
etc of operation within company.
4.3Corporate governance principles
Some of the main principles of corporate governance are:
 Fairness: Fairness means equal treatment i.e. all the stakeholders are treated equally and
shareholders should be fair to all the stakeholders.
 Accountability: corporate accountability means responsibility and obligations so that
proper reason for actions of company can be provided.
 Responsibility: All the board of directors of the company are given with some authorities
and responsibilities so that they can act on behalf of the company.
 Transparency: it is important to maintain transparency i.e. all the stakeholders of the
company are informed about main activities of the company so that future strategies to
tackle risk associated with business can be developed.
4.4 Corporate Governance Models
The Anglo-US Model
The Anglo-US model, also known as the Anglo-Saxon model, was crafted by the more
individualistic business societies in Great Britain and the United States. This model presents
the board of directors and shareholders as the controlling parties. The managers and chief
officers ultimately have secondary authority.
Managers derive their authority from the board, which is (theoretically) beholden to voting
shareholders' approval; however, most companies with Anglo-US corporate governance systems
31

have legislative controls over shareholders' ability to assert practical, day-to-day control over the
company. The capital and shareholder structure are highly dispersed in the Anglo-US markets.
Moreover, regulatory authorities, such as the U.S. Securities and Exchange Commission (SEC),
explicitly support shareholders over boards or managers.1
The German Model
The German model, sometimes referred to as the continental model or European model, is
carried out by two groups. The supervisory council and the executive board.
The executive board is in charge of corporate management; the supervisory council controls the
executive board. The supervisory council is chosen by employees and shareholders. Government
and national interest are strong influences in the continental model, and much attention is paid to
the corporation's responsibility to submit to government objectives and the betterment of society.
Banks also often play a large role financially and in decision making for firms.
The Japanese Model
The Japanese model is the outlier of the three. Governance patterns take shape in light of two
dominant legal relationships: one between shareholders, customers, suppliers, creditors,
and employee unions; the other between administrators, managers, and shareholders.
There is a sense of joint responsibility and balance to the Japanese model. The Japanese word for
this balance is "keiretsu," which roughly translates to loyalty between suppliers and customers.
In practice, this balance takes the form of defensive posturing and distrust of new business
relationships in favor of the old.
Japanese regulators play a large role in corporate policies, often because corporations' major
stakeholders include Japanese officials. The central banks and the Japanese Ministry of Finance
review relationships between different groups and have implicit control over negotiations.
Given the interrelationship and concentration of power among the many Japanese corporations
and banks, it is also not surprising that corporate transparency is lacking in the Japanese model.
Individual investors are seen as less important than business entities, the government, and union
groups.
32

33

Chapter 5 – Regulatory Frameworks & Action
5.1 Global Credit Union Regulatory Bodies
As per the view of Lydra, (2019) Federal chartered credit unions are majorly regulated by
national credit Union administration (NCUA)26. Whereas, state- chartered credit Union are
regulated at state level. All the federal chartered banks are only supervised and regulated at
federal level, but state- chartered bank are supervised and regulated at both state and federal
Credit union structure state level state-chartered banks are regulated by their own state
banking regulatory bodies and at federal level state-chartered banks are regulated by either FDIC
or by federal reserve system. Lydra, (2019) further says that, main mission of national credit
Union administration (NCUA) is to ensure that nation’s system of corporative credit is safe and
is run smoothly27. For achieving this mission, an examination program has been developed that
majorly focuses upon risk to broader system and to credit union share insurance fund. As NCUA
is the main regulatory body, so they make rules and regulations so that a modern regulatory
framework can be developed that not only focuses upon regulating credit union but also helps in
allowing innovation and flexibility as it helps in ensuing safety of complete credit union system.
5.1.1 Government
US – federal CU and other types
In Us union is not for profits financial establishment which is similar to banks who are
accepting the deposits, issues deposits, issue loans and offer a variety of other financial services.
But unlike a bank, a credit union is a not-for-profit organization that is not federally taxed, and is
26 Aguilera, R.V., Judge, W.Q. and Terjesen, S.A., 2018. Corporate governance deviance.
Academy of Management Review, 43(1), pp.87-109.
Aguilera, R.V., Judge, W.Q. and Terjesen, S.A., 2018. Corporate governance deviance.
Academy of Management Review, 43(1), pp.87-109.
27
34

funded and managed by its members28. Credit unions offer a cooperative structure designed to
mutually assist members in their financial goals. As per the NCUA have the division of the credit
union types into the two categories such as the federal union and freely insured state credit union
as it is important to note that’s all the credit unions has to be regulated by their NCUA and being
insured by the National Credit Union Share Insurance Fund. The NCUSIF also covers federally
insured state credit unions.
Hence, it is important to note as there to keep the proper level of tracking the different types of
the credit unions are to held as the confusing factor. hence the to keep it simple, you can think of
credit unions as falling into four general types:
 Employer credit unions
This is often having the sponsoring credit unions for the employees which can properly
represent the worker form the diverse range of the fields. Hence the people who are
following this profession such as the police men’s, fireman, teachers, postal employers,
transit workers and government work will be involved.
 Group credit unions
This have the inclusion of the fraternal organizations in order to have the specific account
This is being specified to have here inclusion of associational credit unions and military
credit unions29.
 Local credit unions
Organizations, activities and job titles aren’t the only specified this which will have the
defining definition for credit unions. Credit unions exist for residents of certain cities, as
well.
28 Thomsen, S., 2016. The Nordic corporate governance model. Management and
Organization Review, 12(1), pp.189-204.
29 Bhatt, P.R. and Bhatt, R.R., 2017. Corporate governance and firm performance in
Malaysia. Corporate Governance: The international journal of business in society
35

 Federal credit unions
This law has been designed to make the viability of credit widely available to the
Americans via on profits credits unions.
UK – CU Act
The Credit Unions Act 1979 for the first-time regulated credit unions in the UK. This all credit
unions in Scotland, Wales and England register with the Registrar of Friendly Societies. this is
been identified as responsible for ensuring that credit unions had a satisfactory common bond
and adhered to common set of rules30. The register have the tasked to taken er proper monitoring
a aphorise e credit unions to have the submission of quarterly and annual return to the register.
Other – mention other authorities in other countries
In the Ontario the credit union sector is actually governed by the Credit Unions and Caisses
Populaires Act, 1994 (the Act), Ontario Regulation 237/09 and Ontario Regulation 238/09. On
the other hand, the ministry of finance is responsible for developing an proposing law of credits.
5.1.2 WOCCU
WOCCU Governance Principles
 Voluntary and Open Membership
 Democratic Member Control
 Member Economic Participation
 Autonomy and Independence
 . Education, Training and Information
 Cooperation among Cooperatives
 Concern for Community
In 2005, WOCCU produced a white paper on Credit Union Governance
30
36

 External Governance
 Government and stakeholders
 The government and stakeholder are the important part which are considered as
important aspect as in the credit union as members have ownership31 .These
determinations mostly include agency decisions that can directly impact credit union
capital, earning, operation flexibility, that impacts nature and level of its oversight.
 Transparency
To have the honest communications with member and regulators,
To have proper representation of the financials statement which are generally accepted
accounting principles and local regulatory standards, should be made available to
members and the public32
 Compliance
To comply with term letter and spirit of regulation along with national laws in perfect
manner. There is the need to have extended audit within 90 days at the end of each fiscal
year.
To have the remaining of the frequently consideration in eery 5 years in competitive
building position
 Public Accountability
The board of directors and management must be constantly cognizant of responsibilities
to governmental structures
 Internal Governance
 Audit and supervisory committees
This have the inclusion of task reviewing the company internal controls along with
addressing the separate bonds composed with independent directors along with handling
the risk management system.
31 Malikov, E., Restrepo-Tobón, D.A. and Kumbhakar, S.C., 2018. Heterogeneous credit
union production technologies with endogenous switching and correlated
effects. Econometric Reviews. 37(10). pp.1095-1119.
32 McCahery, J.A., Sautner, Z. and Starks, L.T., 2016. Behind the scenes: The corporate
governance preferences of institutional investors. The Journal of Finance, 71(6),
pp.2905-2932.
37

 Structure
Interested general members who comply with the standards of individual governance can
stand for nomination. term should be encouragement of dislodge so theta the cash member is
adequately promoted to ensure e member participation.
 Continuity
To have successful succession for both directors and management that ensure the continued
existence of the credit union.
 Balance
There should be adequately reflect the demographic makeup of its members. The board
should seek balance between the diversity and experience, but all directors must meet the
standards of individual governance.
 Accountability
There is rule to be always lar with their role and responsibilities in the bylaws and other
pollicising ascriptive manner33. The board to establish strategic direction, approve policies
and monitor management’s implementation34
 Individual Governance
• The members of the institution
The member of the institution are board of directors and the stakeholders playing major
role developing individual government in the credit unions in perfect manner.
Integrity
To have the standard code of conducts regarding expatiating the behaviour. inhibition the
director and manager should not have the criminal background35. the board member
should execute themselves un-participating the disunion of vomiting maters. the board
should approve loan to the director and management.
 Competence
33Outa, E.R. and Waweru, N.M., 2016. Corporate governance guidelines compliance and firm financial
performance. Managerial Auditing Journal
34Robertson, S., 2016. An Application of Knowledge Management and Human Capital Valuation: The Case of
Credit Unions. In Quantitative Multidisciplinary Approaches in Human Capital and Asset Management (pp. 201-
233). IGI Global.
35 Paniagua, J., Rivelles, R. and Sapena, J., 2018. Corporate governance and financial
performance: The role of ownership and board structure. Journal of Business Research,
89, pp.229-234.
38

Individual members should have specialized financial or business skills and/or a member-
focused viewpoint.
5.2.3 Basel
The Basel Framework reforms are intended for Global-Systemically Important Banks (G-
SIBs) and Domestic-Systemically Important Banks (D-SIBs), but the lack of clarity for
implementation for those that are neither D-SIBs or G-SIBs continues to be an issue. This
reinforces the proportionality concept we believe the Basel Committee should go further in
providing guidance to national level supervisors on this approach.
5.2.4 Other
According to the view of Robertson, (2016) For being a sole proprietor or heading a large
organization or starting a new business it is extremely important to contact different
regulatory bodies which can become a bit difficult for them36. Credit union regulatory bodies
can help in beginning a new project. Regulatory bodies of credit union have helped them in
defining a process though which they can help new business owners in finding important
information. Credit union provide a proper procedure for new business owners though which
they can get information about getting a licence, taxes they need to become familiar with,
like federal income tax, corporate income tax and personal income tax which is required for
every business person.
 WOCCU
The World Council of Credit Unions is the leading international trade association and
development agency for credit unions and cooperative financial institutions.
 ICURN
The ICURN review provides external validation of the effectiveness and proportionality
of our regulatory and supervisory approach for credit unions
 CUNA
CUNA is the only national association that advocates for the entire credit union
movement. CUNA provides member credit unions with trade association services, such
36World Council of Credit Unions. 2020. Statistical Report | World Council Of Credit Unions. [online] Available at:
<https://www.woccu.org/our_network/statreport> [Accessed 14 August 2020].
39

as lobbying, regulatory advocacy, professional development, and professional services
management.
 Basel Committee
The Basel Committee on Banking Supervision (BCBS) is the primary global standard
setter for the prudential regulation of banks and provides a forum for regular cooperation
on banking supervisory matters37. Its 45 members comprise central banks and bank
supervisors from 28 jurisdictions.
 SEC
The SEC protects investors in the $3.8 trillion municipal securities markets that cities and
towns rely on to provide neighbourhood schools, local libraries and hospitals, public
parks, safe drinking water and so much more.
 FIU
This have the Acceptability in transferring in the credits remaining the borrowers at h
addressing here credited insinuations and nationally accredited institutions.
 Government
The governments credit unions have regular offering the excellent customer servers,
providing the owner interest , lower bank fees and higher interest on the checking and saving
accounts.
 US based compliance
Risk based compliances and audit programs have the consisting of significant enlist as per
the organized product. This can be used to have the conducting of the compliance for the
federal laws and regulations, including security, privacy, electronic banking, disclosures
5.2 Operations
AGM
37 Robertson, S., 2016. An Application of Knowledge Management and Human Capital
Valuation: The Case of Credit Unions. In Quantitative Multidisciplinary Approaches in
Human Capital and Asset Management (pp. 201-233). IGI Global.
40

As per the recent information Rafal Matsutake have the first WOCCU AGM to be held in the
virtual manners dur toe the pandemic of COVID38. There are more than 90 delegates around
the globe who have attended the AGM. This have been featured with presentations of the of
the Distinguished Service Award and Member Growth Awards, along with recognition of
new WOCCU members
Supervisory committees
This committee have principle level of objectives to be performed or to have inclusion of the
qualified individuals for performing the annuals audits. Here is the periodic internal audits of
the operational assets and areas throughout the years.
Internal control
WOOCU have Internal controls are mechanisms, policies, and procedures used to minimise
and monitor operational risks. In order to deter employees and/or members from committing
a dishonest or fraudulent act the controls must be thorough and comprehensive.
38 Clarke, T., 2016. The continuing diversity of corporate governance: Theories of
convergence and variety. Ephemera: Theory and Politics in Organization.
41

Regulatory bodies
As per the view point of Malikov, Restrepo-Tobón and Kumbhakar, (2018) elaborates
that, NCUA provides important information and guidelines to credit union system on regulatory
and supervision matters, trends that are affecting federally insured credit Union, manage
potential risk and threats. It is important for NCUA to focus upon developing and updating rules
and regulations by accessing current version of Federal credit Union Act. NCUA are also
responsible for accessing agency’s pending, proposed and final rules so that appropriate ruling
and policy statement can be generated. Malikov, Restrepo-Tobón and Kumbhakar, (2018) further
says that, regulatory bodies of credit union set up an appropriate comprehensive resource centres
for risk- based capital, consumer and fair leading compliance, capital planning, cybersecurity and
stress testing. From time to time NCUA update manual and guidelines of rules and regulations
that are required to be followed by credit union. Main policy of national credit union
administration is to develop a policy that help them in maintaining excellent communication with
whole credit union which is supervised by them. This helps them in identifying all kinds of
issues, disagreements or problems so that they are not kept unresolved. If there is requirement of
bringing any kind of changes within process of appeal then those changes are brought so that all
kinds of issues or disputes can be resolved in a proper and appropriate manner. Appealing
process of credit union includes background, scope and procedure for filing an appeal which is
included within rules and regulations credit union.
As per the view of Lydra, (2019) Federal chartered credit unions are majorly regulated by
national credit Union administration (NCUA). Whereas, state- chartered credit Union are
regulated at state level. All the federal chartered banks are only supervised and regulated at
federal level, but state- chartered bank are supervised and regulated at both state and federal
level. It completely depends upon whether the state bank is at state level or federal level. As at
state level state-chartered banks are regulated by their own state banking regulatory bodies and at
federal level state-chartered banks are regulated by either FDIC or by federal reserve system.
Lydra, (2019) further says that, main mission of national credit Union administration (NCUA) is
to ensure that nation’s system of corporative credit is safe and is run smoothly. For achieving this
mission, an examination program has been developed that majorly focuses upon risk to broader
system and to credit union share insurance fund. As NCUA is the main regulatory body, so they
make rules and regulations so that a modern regulatory framework can be developed that not
42

only focuses upon regulating credit union but also helps in allowing innovation and flexibility as
it helps in ensuing safety of complete credit union system.
In addition to this DeYoung and et. al., (2019) says that, regulatory bodies of credit union
encourage credit union management are encouraged so that most of the disputes or issues are
resolved in a proper manner. credit union management is majorly responsible for resolving most
of the disputes or issues that occurs within credit union. Despite of this effort if there is any kind
od issue, problem or dispute that has not been resolved then for this NCUA has developed an
independent intra-agency appellate body so that they can review the issue and resolve it through
supervisory determinations. DeYoung and et. al., (2019) further explains that, These
determinations mostly include agency decisions that can directly impact credit union capital,
earning, operation flexibility, that impacts nature and level of its oversight. Credit union who
requires supervisory determination, they are required to appeal and request for reconsideration
from NCUA program office and if they consider their reconsideration then they offer or issue a
determination. But there is a specific deadline within which only credit union can request for
determination and can receive it. If independent intra-agency appellate body office finds that
request is important to be consider they issue determination and stats examination process.
8.4
43

6 – Analysing Corporate Governance in Credit Unions
6.1 Findings &Discussion
Today’s financial services in the marketplace have the requirement of more from the boards as
the roles and responsibilities tend to have continuous expansions. As per the view of (), it is very
natural to resist as the current economy is paying a major level of emphasis on good governance
along with transformation in happening. This is usually taking place in the financial sector
including banks and credit unions39. The author supported the statement stating that shareholders
were facing issues in satisfaction from the current formation of governed protects the interest of
managed shareholders. The financial market shareholders have the hint needed to create a
greater level of accountability along with improving the governance of the prime banks and
credit unions.
On the other hand, the contradicted the statement as the pressure on the financial institution have
the need to embrace the major changes along with taking individual responsibility for having
greater level accountability toward the shareholders before any change in legislative manner
occurs. According to the view of, corporate governance is considered to be wide scope which has
inclusion of both social and institutional aspects. It has the clear aims and objective to analyse
how the set target is achieved by the company along with monitoring risk assessment and
performance optimization in a perfect manner40. On the other hand, the contradicted the
statement as today's financial services in market places have requirements from the board with
roles and responsibilities. The author supported the statement that corporate governances’
structure is necessary in resolving different levels of conflicts of interest along with the desire of
differ stakeholders in the business union. In the credit unions at global level, the application of
39 Hong, B., Li, Z. and Minor, D., 2016. Corporate governance and executive
compensation for corporate social responsibility. Journal of Business Ethics, 136(1),
pp.199-213.
40 Outa, E.R. and Waweru, N.M., 2016. Corporate governance guidelines compliance and
firm financial performance. Managerial Auditing Journal.
44

corporate governance ensures clear levels of transparency and ensures a strong balance in
economic development. On the other hand, the contradicted the statement that corporate
governance has an adverse level of effect on their operation risk hence supporting the
sustainability of corporations. The quality of corporate governance will have effects which are
supporting the risk and value of the corporation.
As the role of corporate governance insisted to make the increase the level of accountability of
the credit company along with avoiding the massive disaster before they are occurring. This is
helping to put in pressure on the management to become more efficient, transparent and
accountable. They will be asking out to consumer-friendly policies by protecting all social
groups and protecting business environments in a perfect manner41. On the other hand, the
contradicted the statement that credit unions have weak levels of shareholder association as the
directors are basically using power according to their benefits. This has the various reasons
which are responsible for happening in such situations, therefore there is a need for strong
corporate governances to protect all shareholders of the company.
According to the view of Bhagat and Bolton, (2019), the credit unions are considered to be one
of the pillars in the international financial market. The financial market is basically attracting for
level foreign investors and consumers following all rules and regulations. Hence the corporate
governance will relate major levels of barriers to enter and survive and succeed in the global
market. On the other hand, there is the major role of corporate governance in the credit unions as
to have the creation of the corporate culture of maximum relating to transparency, accountability
and closure.
This is helping out in the way of improving the governance structures in different procedures for
ensuring the quality decision making along with encouraging succession planning. This is
helping out in enhancing longer term prosperity of the company and different sources of finance.
On the other hand, the Hong, Li and Minor, (2016.) support stated as an increase in easing
investors as financial performance is important for evaluating the companies form proper
investment. At the international level survey, it has been stated as the global institution investors
41 Jia, N., Huang, K.G. and Man Zhang, C., 2019. Public governance, corporate
governance, and firm innovation: An examination of state-owned enterprises. Academy
of Management Journal, 62(1), pp.220-247.
45

are ready to pay a premium of 40 % for the share of companies having superior corporate
governance in a perfect manner. The author supported the statement as well-established
corporate governance in enabling the credit unions more efficiently and preventing fraud and
different malpractices within the organization.
By implementing successful corporate governance in the credit unions will be helping out the
improved level of managing accountability and satisfy operational transparency. This will be the
resultant in terms of fulfilling the expectation of customers and confidence in management and
corporations along with increase in value. On the other hand, the have contradicted the position
as credits unions look into the proper entrust management by creating the neared value. Hence
the union are more obliged to make the timely visibility to the intergrade existence of the
company.
According to the view of credit unions are improving the governance in the people and
repositioning by looking at objectives for board compassions regarding changes which are
necessary. In addition, banks and credit unions have to create a major level focus on
comprehensive reporting and transparency. Corporate governance plays the role in identifying
the right talent and compositions being productive. On the other hand, the credits union tends to
have the complying of heavy regulations requiring the major level of financial expertise. The
author supported the statement as credit union have receive it major income for debt and the
failure in managing the better financials matters by creating the negative impacts on community
as well as shareholders
46

6.2 Exploring Issues of Poor Governance
As the recent mergers and consolidation gave the increase the credit unions along with the
increase in the largest ones. This is managing the ten of billion dollars and serving the million
members across the country.
Case1 Hiding out the Cleveland
Th CEO of the Taupa Lithuanian Credit Union have been arrested for te fraud charges for
collapsing the $23.6 million. The FBI have the issue as public warning apparently tending the
good reasons as the former CEO could bearded, dangerous and socials42. As per the NCUA
auditors found 10,000 rounds of ammunition and multiple semi-automatic weapons in a storage
room at the credit union. It is unknown why the weapons and ammunition were stored in the
credit union
Case 2
CBS Credit union manager have been sentences for 14 years for $ 40million fraud. the fraud has
the done the union as insolvents he was forging the checks forest 20 years and gambled theory
and put into the failed business and venture. at last the apologized the staff, board of directors
and letter the court to credit union.
Case 3
Breaking the bad piece often action
42 Lone, E.J., Ali, A. and Khan, I., 2016. Corporate governance and corporate social
responsibility disclosure: evidence from Pakistan. Corporate Governance: The
international journal of business in society.
47

The auto loan is the main source of revenue in credit unions a the one of employee have broken
bad and antedate piece of cation. Michael Ross Franco, a former loan officer for the $274 million
My Community Federal Credit Union in Midland, Texas, was sentenced to 18 months in federal
prison in November for his role in approving nearly 500 fraudulent auto loans totalling $7
million and accepting more than $29,000 in kickbacks.
According to the view o transparency and accountability plays significant roles in transforming
the governances. There are the major level of concerns, the board of directors have to produce
the reports with doing the particularise information about the non-performing assets. This will
be helping out in improving governance seeing the dissenting view regarding the independent
reason rigidising investments, acquisitions, related transactions and clear risk profiles.
On the other hand, this is regarding the improvement of trust within the shareholders will be
accountable in key business parameters. So, this will be best practice instilling in terms of
objectivity in performance of all board directors. Hence, it is important to note that the credit
intends to face the major level of challenges as the banking sector does. This has been proven as
the major level over contributions to the respective stability of the financial services in the
industry is considered to be slightly different.
it is important to note that the governance standard has the well working for credits union as well
as banking. But it is important to note that the creditors remember ownership as they are not able
to stand up for rigorous new regulation development. The author supported the statement as the
improved governance in terms of credit unions have the need to take in account the board
nominating process along with position with the board the accountability of its members. In
order to make the proper transformation of the credit’s union, we need to make the proper
establishment. There is a need to make the proper identification on the difference in the
situational ownerships. This will be helping out the credit union from the risk of fitting into one
size fit model to take the unnecessary risk and render them as a less effective category.
According to the view of DeYoung and et. al., (2019) transforming the governance is considered
to be good for shareholders, manager, employee and board with economy43. There are various
43 Reserve Bank of Australia. 2020. The Global Financial Crisis | Explainer | Education.
[online] Available at: <https://www.rba.gov.au/education/resources/explainers/the-
global-financial-crisis.html> [Accessed 18 August 2020].
48

levels of challenges faced by the credit union and the banking sector. transformation with the
banking industry is considered to be likely much easier for the other industries to fool the differ
suit imperfect manner. The author supported that statements there is the transformation within
the fiancée industry will be regarding the prices, composition., transparency and accountability
the perfect manner.
In addition the regulatory bodies along with the legislature need to be factors following the
unique role and framework for the credit unions defining the different corporate strategy working
within institutions, their members and different communities. On the other hand, the contradicted
the statement that credit unions have weak levels of shareholder association as the directors are
basically using power according to their benefits. Hence the corporate governance will relate
major levels of barriers to enter and survive and succeed in the global market. On the other hand,
there is the major role of corporate governance in the credit unions as to have the creation of the
corporate culture of maximum relating to transparency, accountability and closure. The
statement that corporate governances’ structure is necessary in resolving different levels of
conflicts of interest along with the desire of differ stakeholders in the business union.
This has the various reasons which are responsible for happening in such situations, therefore
there is a need for strong corporate governances to protect all shareholders of the company. This
is helping out in the way of improving the governance structures in different procedures for
ensuring the quality decision making along with encouraging succession planning
6.3 Effectiveness of application
Strength
This promise is identified to have relation between the risk management and differ corporate
governance for banks, credit unions and other financial institutions are so vastly different from
those of other industries. The quality of corporate governance will have effects which are
supporting the risk and value of the corporation. On the other hand, there is the major role of
corporate governance in the credit unions as to have the creation of the corporate culture of
maximum relating to transparency, accountability and closure. as the manager and executive in
the banking industry have the need to develop the finance industries and tend to have the higher
level of qualification in expertise in governance.
49

Weakness
There was various conflict of interest along with lacks innocence. their pursuit a little
understanding over effort matter. there is a notable difference in the banking industry which is
the decision of the board of directors affecting the shareholders, creditors and banking
customers. This is especially true in the case of credit unions where the multiple members are the
owner of banks. Her case has sown as the lack of supervising heralding ore fraud and
embezzlements.
Failure of the corporate governance in credit union
According to the view of Lydra,,(2019), there is the need for the bulk of principles behind the
good corporate strategy in terms of banking in financial institutions. In addition, the author
supported the statement. On the other hand, the contradicted the statement as for credit unions,
corporate governance relates to the manner in which the business affairs of each individual
organization are directed and managed by the Board and senior management necessary time to
the credit union. Failure to attend board meetings may result in dismissal. Hence the corporate
governance will relate major levels of barriers to enter and survive and succeed in the global
market. The author supported the statement as well-established corporate governance in enabling
the credit unions more efficiently and preventing fraud and different malpractices within the
organization. The corporate governance will relate major levels of barriers to enter and survive
and succeed in the global market.
50

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