In Credit Unions, employees represent the credit union and the board
of directors is supposed to represent the membership. “Agency
theory describes the problems that occur when one party represents
another in business but holds different views on key business issues
or different interests from the principal.” (The Investopedia Team)
Some Credit Unions are formed when a company decides to form a
financial institution exclusively for their employees, others are
formed when a group of community people come to together to form
a financial institution exclusively for those that live, work or worship
in a particular area (these are thereafter called SEGs – Select
Employee Groups). The credit union I worked for was formed by a
company for its employees. The board of directors are supposed to
represent the average membership base and direct/guide and hold
accountable the employees of the credit union. The board of
directors at the credit union was mostly consisted of older male
retired employees who had held higher up positions at the SEG. The
average credit union member was an employee who worked in a
warehouse and lived paycheck to paycheck. At times it was difficult
to get the board to understand why the management team would
propose certain programs to help the membership because in their
world, they would never use the proposed program.
“Stakeholder theory describes the composition of organizations as a
collection of various individual groups with different interest.” (The
Investopedia Team) Within the credit union, like other companies,
you have different departments and each one must work together to
make it successful. My credit union was made up of 4 departments,
loans, member services, collections, and accounting. Loans wants to
lend out money, member services wants to help members with all
transactions, collections want to get back the money that was lent
out, and accounting wants everything to balance. Those were the
official departments but there were two “unofficial” departments,
compliance and management. Compliance involved everyone at the
credit union, we had regulations that we all had to adhere to and
management was made up of employees from each department.
“An essential part of creating an ethical organization environment is
to put in place effective corporate governance systems that establish
control mechanisms to ensure that organizational values guide
decision making and that ethical standards are being followed.”
(Mintz, 2020 p. 135) A credit union has to adhere to regulations set
forth by NCUA (National Credit Union Association), the federal
government, and policy’s set forth by their board of directors. These
are managed by using internal controls along with policies and
procedures to monitor the credit unions activities. Credit Unions are
examined/audited by not only CPAs but also by regulators, NCUA.
My credit union was audited by outside CPA examiners once a year,
monthly by a supervisory committee who would audit different
aspects of the credit union each month, and every 12 to 18 months
NCUA would do an extensive audit of the credit union to make sure
we were following regulations and internal policies.
In credit unions corporate governance is very important. As an
employee you have access to very sensitive/private financial
information that you are supposed to protect at all times. We had in
place policies to help prevent unethical behavior, for example, all
employees had to take 5 business days in a row of vacation at least
once a year. The theory was in those 5 days, someone else had to do
you job and it would be possible to detect any wrongdoing by the
employee on vacation. Sometimes in other credit unions this policy
has been effective and has caught employees committing fraud.
References
Mintz, S. and Morris, R. 2020 Ethical Obligations and Decision Making
in Accounting Fifth Edition
The Investopedia Team. 2021. Agency Theory vs. Stakeholder Theory:
What’s the Difference? Agency Theory vs. Stakeholder Theory: What's
the Difference? (investopedia.com)
