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 into a literature review, exploring the history of credit unions and the importance of corporate governance. Following this, it examines the credit union structure, including the CU entity, operation principles, and structure. The theoretical framework of corporate governance, including its theories, principles, and models, is then discussed. The report proceeds to analyze regulatory frameworks and actions, focusing on global credit union regulatory bodies and operations. Finally, it analyzes corporate governance in credit unions, discussing findings, issues of poor governance, and the effectiveness of application. The report aims to add value to the main subject area of Corporate Governance within a sector of the financial industry – the Credit Union.

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
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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
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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)
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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.
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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
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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].
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 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.
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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.
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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.
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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.
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