Sunday, January 31, 2016

Putting a Lid On It

It is time for me to get off my duff. I have been sitting safely a bit too long, ensconced in my middle class security. A security a majority can't share. Time to push forward some radical possibilities. Here's one to start, some of which I've hinted around in the past.

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It's time to enact a maximum wage

More often our political forces focus on increasing the bare minimums, but the more conservative voices claim that giving the bottom a raise will cost us all more, prices will go up, yada, yada, yada. If that theory holds water, and I'm not suggesting it does, then capping the maximum income should reduce the costs to everyone, right?  There is enough for every one's needs, but not enough for every one's greed. And the data of increasing capture of wealth by the wealthiest is inscribed in the frequency of reference to the 1% and the 99%. 

We can't grow an economy based upon the consumption of more stuff on a finite planet with an increasing population and expect any outcome down the road beyond disaster. It just isn't possible, thermodynamics and the other laws of nature are against it.

I'm not suggesting that we shouldn't raise the floor too, either with a sizable minimum/living income adjustment or perhaps even as Finland is beginning to try - a basic guaranteed minimum income for everyone. But let me focus on a couple of strategies to set a maximum income. The foundation of my argument is that  Gandhian bumper sticker, "There's enough for every one's need, but not for any one's greed."

 So what might this look like. These figures are based on US economy.

The current median household annual income is approximately $50,000 (keeping these numbers rounded makes it a bit easier to calculate). One can surely also develop much more complex systems than the ones I am proposing The median is the point from which half the households make more, and half make less. I can't imagine that anyone currently at that midpoint $50,000 would find it a struggle to get by on 10 times that amount in a year. Just think of being lucky enough to make that much year after year!! So let's start the bidding at a maximum $500,000 annual income.

Another way to look at this is that the typical working life is about 50 years. So someone making $500,000 in one year would be about the same as a current minimum wage worker would make in 33 years.

$500,000 is about what the president makes in a year ($400,000 salary, + $50,000 living expenses, + $19,000 living expenses + travel + housing). So why not cap income there. Roosevelt and Congress increased the progressive rate on income over $200,000 (1945) to 94% against the cries of the conservatives of the time. Note that as a country we enjoyed our greatest sustained growth and simultaneous contraction of income inequality in the years between 1945 and the end of the Eisenhower administration when that top tax rate was reduced.

While number crunch-ers might make arguments for capping incomes at a different level or adjusting the top tax bracket a bit differently, perhaps the main impact would be how we as a society reconsider what wealth, prosperity and sharing mean.  The no-holds-barred approach to stuffing as much as one can in one's pocket, everyone else be damned, isn't a mores that has a happy ending for an increasing population on a finite planet. The average incomes of the 1 percent, let alone of the 0.1 percent, are significantly more than this threshold. A recent Economic Policy Institute report finds the average income of the 1 per-centers is $1.3 million and the minimum is $385,000.

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See the detailed state by state list here.

Now I can foretell some criticism from those who think it unfair to those who could make more. Heck, some of our celebrities make that much from one performance or one speaking engagement. How will they manage to get by if we cap their income? A further canard is the one about how the top performers, be they athletes, CEO's, actors, lawyers, physicians, non-profit directors, university administrators and football and basketball coaches will stop working or performing. Surely no one does any work in our time for any reason other than money, right? But this is one place where the market harms us by essentially creating an arms race. Just look at the salaries of collegiate football and basketball coaches over the past decade or two.

Well, another approach could be to tie-bar the maximum wage to the minimum wage. They could  be set as some magic ratio. For example the average Fortune 500 CEO is taking in about 204 times their median employee. Of those 500, 150 of those firms ratio is higher than that. That seems a little high to me. Take a look at the list of companies, some of which you no doubt use to see how they stack up here.

But we could decide to make it 10:1 or 50:1 for example. Or we could set a specific minimum wage and a specific maximum income. Robley George presents a variety of possible approaches including a annual citizen vote on setting maximum and minimum in his thoughtful book Socio-Economic Democracy.

Seriously, we need a discussion of what's enough, what is sufficient, and what's too much?

Even steadfast believers in the power of markets recognize that for markets to function well there needs to be access to relevant information so consumers can make judgments based upon the values they hold dear, e.g. quality, durability, integrity, fairness. While markets should surely not be making all the decisions we need to make in a human society, to be useful they need transparency. So we need full disclosure. The public good demands access to the information that impacts us and the natural world that sustains us.

New rules adopted by the Securities and Exchange Commission (SEC) last summer require public companies, beginning in 2017 to disclose the ratio of CEO pay to median worker pay.

Highlights of the New Rule

Pay Ratio Disclosure Requirement
As required by the Dodd-Frank Act, the rule would amend existing executive compensation disclosure rules to require companies to disclose:
  • The median of the annual total compensation of all its employees, except the CEO;
  • The annual total compensation of its CEO; and
  • The ratio of those two amounts. 
I suggest that this rule be applied to any enterprise, public or private, profit or not for profit, or governmental agencies that receive any contracts, tax credits, or other federal government assistance. 

While the rule would force this obligation on any sanctioned enterprise, it isn't necessary for any enterprise to wait to do this on their own. Organizations which operate in good faith should be proud to post this level of information on their website. This refreshing transparency would allow citizens to judge for themselves whether to purchase from, invest in, or donate to the enterprise. Transparency also has the extra advantage of tempering corruption. As the saying goes, sunshine is the best disinfectant. 

Let the sun shine!!

Tuesday, January 12, 2016

Another World Is Possible - An Unlikely Vehicle for Change

I was reminded earlier this morning before the light of day opened the curtains to a windy, snowy day that the paths we take are not all preordained. I was reading a Christmas gift, Lin Jensen's Bad Dog!: A Memoir of Love, Beauty, and Redemption in Dark Places.

 Bad Dog!: A Memoir of Love, Beauty, and Redemption in Dark Places

 One of the short pieces is entitled 'Paths'. An excerpt might help you give a hint of his intent.

      The paths I have in mind are nothing like sidewalks. Nor are they like the curved walkways  one finds in public gardens. They are not even like the Forest Service trails that twist their way into the high mountains. The paths I mean are not designed. They just happen.
     In towns, such paths originate at the point where the walker abandons the sidewalk and strikes out on her own. You find them as shortcuts etched into lawns and tracked through the weeds of empty lots. No one intends to make these paths; it's just that one day someone cuts across. The others follow. Paths like these are common in the country where they lead you from house to the trashcan or compost bin or woodpile. They are worn into the sod between the back door and the garden plot. They connect the laundry room to the clothesline. They thread their way down through the woods to the creek. They often end at the family burial plot. (p.131)

I have recently found myself on a path without initially realizing it. Strange as it may seem, at least it does to me, its destination seems to involve credit unions. It arose from a few symptomatic frustrations with my own credit unions. They were adding buildings -- some quite elaborate, leaving lights on at night, making questionable donations. I didn't formally react. I just sat in a silent puzzlement about them. Then one day I thought, "I wonder what their minimum wage is?" 

This time I moved beyond my puzzled silence and decided to ask them. I incorrectly figured that as a member/owner of the credit unions in question, I could retrieve that information. Wrong-o, dumb-dumb! Where my request wasn't formally ignored I learned that such information was not shared to "protect employee privacy". Of course I was asking for the minimum and median wages, not any individual's wage. These lackluster responses frustrated me as a member of a cooperative. Shouldn't co-ops offer a different means of governing than a private bank? Wasn't the organizational form one of the major reasons for choosing to bank at a credit union?

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Then as serendipity is wont to do, into my email comes a posting that mentions a new website that rates local banking institutions. Voila, I type my city into and up pops a listing of local financial institutions ranked by their performance. This site allows you to type in your city and see a rating of local financial institutions and how they rank. They use seven criteria pulled from publicly available data: 

    1) Small Business Lending,
    2) HQ Location,
    3) Bank Branch Concentration,
    4) Ownership Type,
    5) Bank Size,
    6) Small Farm and Agricultural Lending, and
    7) Speculative Trading. 

They then aggregate scores and rank banks/credit unions according to their impact on the locale. The scoring system is spelled out, so one can decide if the scoring reflects one’s own values. Sorry to report that my two credit unions got a mediocre score. 

These are the questions that initially nudged me out of my complacency and set me on the path to learn about what I thought I had understood about credit unions. Four columns later I have a more nuanced understanding of credit unions, but also a renewed sense of what they have been and can be with the right leadership. Leadership, like much of what we value, must come from the bottom-up.

The Early Idea

Credit unions were a human invention to provide access to affordable credit to those either ignored by commercial banks or too poor to afford the banks higher fees. The idea of basing the lending upon relationships of a shared group was thought to ensure that loans would be more secure. Thus the original organizing principle was to build a credit union among those with a 'community bond', i.e., the same workplace, church, school, etc..  Each member is an equal owner with one vote regardless of the number of shares one owns. It is not dissimilar from a guiding principle behind the successes of micro-credit efforts like Mohammed Yunus' Nobel winning Grameen Bank.

Credit unions began to flourish in the Depression and have continued to grow. 2015 showed a 4 percent growth to now more than 100 million members in the U.S. But somewhere in the more recent past many, if not most, credit unions have become what we might term, 'bank-lets', credit unions in name only.

Cover: How the Other Half Banks in HARDCOVER
As noted in a new book from Harvard University Press (2015), How the Other Half Banks: Exclusion,Exploitation and the Threat to Democracy,

     Credit unions were an ideological rejection of mainstream banking – a purposeful system of credit that favored the common good above profits, communities over institutions, and mutual control over hierarchy. (p.68)… Today, credit unions are much like mainstream banks. The American Bankers Association argues that credit unions are not fulfilling their mission to serve the underserved. Of course, the banks are biased, but the assertion is not unfair. (p.75)

Another signal of this blurring of banks and credit unions is the increase in mergers. Here in Michigan we saw DTE and NuUnion credit unions merge a couple years back creating Lake Trust Credit Union now with 168,000 members (2014 Annual Report). More recently Lake Michigan Credit Union and Union Federal Credit Union announced a merger that was touted as the largest merger in credit union history, the combined credit union would have been the nation's 19th largest credit union. It would have served about 500,000 members with total assets of more than $6 billion and 1,400 employees at 78 locations in seven states. Just days ago the merger was cancelled.

Federation Credit Unions United to Serve the Underserved
There does remain a small segment of the credit union industry that aligns with the original purpose of credit unions begun in the early years of the 20th century.  Community Development Credit Unions (CDCUs) "with a mission of serving low- and moderate-income people and communities. CDCUs specialize in serving populations with limited access to safe financial services, including low-income wage earners, recent immigrants, and people with disabilities." ( A majority of the CDCUs are certified Community Development Financial Institutions (CDFIs) which are required to devote a minimum of 60 percent of their lending to disadvantaged communities. There are only 231 members of the National Federation of Community Development Credit Unions out of more than 6,400 credit unions nationally. That's less than 4 percent.

A November 2015 Filene Research Institute report, "CDFI Credit Unions: Foundations for Success" finds:

      Community development is a growing field and business model in the credit union system. Over 2013–2014 the number of community development financial institution (CDFI) credit unions grew by 28%, to 241. While this trend points to community development becoming a credit union business model of the future, it also recalls the credit union system’s genesis.  

In an evolving era of climate change, increasing inequality, spiraling refugees numbers and numerous other challenges facing us as a human family, we need to look at triple-bottom-line (TBL) or sustainable enterprise performance from all our institutions. Globally, unbeknownst to most, the finance industry has sizable constituencies addressing TBL performance. 

UNEP Finance Initiative - Changing finance, financing changeve
The UN Environment Programme Finance Initiative developed the “Principles for Responsible Investment” in 2005 (see for more details). The six core principles are:
1: We will incorporate ESG [Environmental, Social and Governance] issues into investment analysis and decision-making processes. 
2: We will be active owners and incorporate ESG issues into our ownership policies and practices. 
3: We will seek appropriate disclosure on ESG issues by the entities in which we invest. 
4: We will promote acceptance and implementation of the Principles within the investment industry. 
5: We will work together to enhance our effectiveness in implementing the Principles. 
6: We will each report on our activities and progress towards implementing the Principles.

The principles, aimed at institutional investors (i.e., foundations, pension funds, investment banks, university endowments, etc.), now have more than 1,400 signatories committed to those principles. Assets under management by these signatories now exceed $59 trillion. When the old guard tells you sustainable investing is a loser, tell that to these players.

The Global Alliance for Banking on Values is another emergent group of banks and credit unions committed to higher standards of sustainability and community wealth building. But there are currently only eight U.S. financial institutions which have joined this group representing banks and credit unions from Africa, Asia, Europe, Latina America and Australia. What is it they share, and could we coax our local credit unions and banks to adopt the principles and practices they support? The GABV Principles of Sustainable Banking are intended to describe fundamental pillars of values-based banking:
1. Triple bottom line approach at the heart of the business model 
2. Grounded in communities, serving the real economy and enabling new business models to meet the needs of both 
3. Long-term relationships with clients and a direct understanding of their economic activities and the risks involved 
4. Long-term, self-sustaining and resilient to outside disruptions 
5. Transparent and inclusive governance 
6. All of these principles embedded in the culture of the bank.


Through my own connections in the TBL/Sustainable enterprise world I reached out to find examples of credit unions that are going deeper than just a great economic engine of community development. While there are a number of good examples, I found none better than Vancity, the largest credit union in Vancouver. 

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Vancity isn’t shy in sharing its vision for what community banking should be. You can read it on their website. (excerpts here)

"At Vancity, our vision is to redefine wealth in a way that furthers the financial, social and environmental well-being of our members and their communities.

"As of December 31, 2007, Vancity is officially a carbon-neutral organization. … Our data was audited by Interpraxis (our social auditor).

"Currently, the minimum wage in BC is $10.25/hour, but the living wage in metro Vancouver is $20.68/hour[$15.14US]. This means that families who work for low wages often have to face impossible choices: buy food or heat the house, feed the children or pay the rent. Paying a living wage allows individuals and families to meet their basic needs and contribute to their communities. A Living wage means strong local economies, sustainable cities and healthy communities."
On top of their living wage commitment and carbon neutrality achievement, their 56 page 2014 annual report notes plenty of successes across the triple bottom line. They even note where they have failed to reach their goals. This commitment to transparency is evident throughout the report as it was in conversations I had with management. For instance, they show the compensation package for their CEO and note that the ratio between it and the median salary was 16:1, which they compare to a study showing CEO pay at large Canadian banks at 135:1. They also noted a failure to meet their goal for new members. More recently their website proclaims new initiatives to assist Syrian refugees based on their own study of the economic boost refugee arrival will add to the community.

A review of their website, their mission, and their incredibly detailed annual report will cause any who bother to read about their enterprise to marvel at what they aim to do and accomplish. Who wouldn't want to bank there? But there is no equivalent Vancity in most communities.

Re-energizing Credit Unions as Engines of Community Wealth 

It seems, from this vantage point, that the nature of leadership brought in to manage credit unions isn’t attuned or has yet to be exposed to sustainable or triple-bottom-line performance possibilities. If we want to see our institutions move in those directions, we will need to point, nudge, cajole or otherwise push them to see the advantages of such practices. How might we do that?

The boards of our credit unions are elected representatives of the membership. All credit unions must have a one member/one vote process. When was the last time any of us remember voting for board members? And what level of information about them did we have when making the decision? Did we have any say on who might be candidates? My investigation into board election processes of credit unions has found that the norm appears to be driven by a subcommittee of the board, often called the election or nominating committee. They come up with members to stand for election. In essence the candidates are hand-picked, sometimes with great influence of the current CEO. Having served on and worked with many boards in the nonprofit world, I’ve seen this become a who-knows-whom exercise. A real danger is that the board can quickly become a private club; at worst, if the CEO is making board nominations, it could become a board submissive to the CEO, the opposite of the intended relationship.

Two approaches to check this type of board packing are:

1) to reserve seats for certain types of constituents – either by occupation, class, gender, race, or stakeholder status--who are nominated by those groups; and/or 

2) to allow members to nominate other members as candidates.

In an email exchange with one of my local credit unions I learned that any member wanting to be considered for election to the board would need 500 member signatures. From another I received a small insert in my last statement indicating nominees would need 1,500 member signatures, to be collected within 6 weeks.  That’s near as many as are needed to get on the ballot for U.S. House of Representatives as an independent. Vancity, the Vancouver credit union I showcased before which has a much larger membership base, only requires FIVE letters of nomination. They highlight board election information on their home page, something rarely if ever done on the websites of local credit unions I have looked at

My research indicates our local credit unions seem to reflect the national trend, acting like private businesses as opposed to the co-ops we may have thought they are.  In another recent report for the Filene Research Institute, “Credit Unions and Cooperatives: How Charter Choice Drives Social Enterprise,” the author notes:
“Member owned institutions operated in accordance with cooperative principles were one of the earliest forms of business organization that integrated the pursuit of broader social goals within a for-profit vehicle.”

What’s happened to those principles? Citing a 2014 report on cooperative financial services, the author of the Filene report notes an opportunity being missed.
“A new generation of members awaits, one which is more civic-minded, socially conscious and motivated by causes such as ‘green growth’, ‘local food’ and ‘gender opportunity’. The obligation remains with credit unions to put the greatest emphasis on nurturing values, as well as generating value for their members.” 

One thing studying sustainability has taught me is that any system needs feedback to change. If we want our credit unions or private banks to grow and make money at any cost, our silence is all that is needed to keep that trajectory going. If, however, we want our institutions to be triple-bottom-line performers, we have to let them know that’s what we want. Every credit union has an annual membership meeting. How well they advertise it and how pro forma it is varies. Members should be able to raise questions or make suggestions at that forum. Otherwise, communicating with the board requires some digging on the websites to get names and, rarely, email addresses.

Getting 500 or 1,500 signatures presents a significant challenge to changing the board’s direction through elections. Obviously one could begin by advocating for a much lower threshold for nomination. But one doesn’t need to wait for that day to come to have the board address issues of sustainability. Every single member has a voice, which can of course be amplified by getting others to join you. Here are a list of possible actions credit union members can take to redirect their credit unions to more sustainable performance.

1)     Check out the rating of your credit union at . Type in your             city and then look to see if they are rated strong, moderate or weak. You can                 then click on the full detailed report.
2)     Examine the web page of your credit union. Identify who is on the board and                 key administrators. See if information you want is available. Is there an annual             report available? Are minutes of meetings available? Ask to see them if not                   posted.
3)     Write letters to the Board members and CEO to address questions or                             concerns you have.
4)     Attend annual meeting and ask questions and request actions.
5)     Forward examples of credit unions which are performing in more progressive               ways to the board and CEO.
6)     Use social media to share information with other members.
7)     Write letters to local newspapers raising issues.
8)     Encourage credit union board and administration to sign on to Global                           Alliance for Banking on Values
9)     Urge credit union leaders to sign and implement Principles of Responsible                    Investment 
10)   Urge credit union to seek certification as a CDFI and join the Federation of                    Community Development Credit Unions

It’s your credit union and these are the Days of Decision.


Monday, January 4, 2016

A New Year, A New Economy?

I did not begin the day with any intention to write about anything in particular. Several ideas popped in and out of my consciousness during the day, but no one thing grabbed me.

But then I skimmed the new January 2016 issue of Too Much, diligently compiled by Sam Pizzigati, and saw a familiar name I hadn't encountered in awhile.

Pizzigati excerpts a quote from a recent (December 29, 2015) article by sociology Prof. Michael Schwalbe. "A Brief for Equality" published in CounterPunch was as poignant and erudite as I remember Schwalbe from two books of his I relished, Rigging the Game: How Inequality is Reproduced in Everyday Life  and A Sociologically Examined Life. Each of these books is worth your time if you enjoy clear writing and seek to understand what it means to live in a human society.

CoverThe Sociologically Examined Life: Pieces of the Conversation

In this recent article, Schwalbe pushes back on the liberal defense of equity as a meek response to those who suggest equality is neither possible nor desirable. Instead he gives a full throttle argument for a commitment to deeper equality. To lift the same quote that Pizzigati inserted in his newsletter from Schwalbe's piece gives a sense of both the argument he develops and his penchant for writing.

    "Many people steeped in the culture of capitalism have been taught to believe that an            equal sharing of the world's resources would result in a drab sameness -- a gray,
     sackcloth-and-ashes existence. But the opposite is true: equality would produce a                  flourishing of creativity and constructive diversity. The cultivation of talent that is
     possible no for only the privileged few would be possible for all."

Schwalbe offers numerous arguments to support moving towards true equality and away from the hideous inequality that surrounds us now in this short piece.

If you need to be convinced of the inequality problem, then simply flash back to Pizzigati's newest Too Much issue, or the many earlier issues he has compiled over the years documenting the growing gaps between us. I suspect if you've read this far, that won't be necessary, but you might well still be astonished at the figures and examples of the disparities both domestically and globally that he shares.

As it happens I've been inching through the recent distillation 101 Reasons for a Citizen's Income (2015) of Malcom Torry's earlier work.This is one policy approach that could address the inequality that Pizzigati and Schwalbe illuminate and discuss. I wrote about this idea a couple years back and have continued reading bits about it here and there (mostly there). It's an idea that has more interest in Europe than here. 

In fact recently Finland has committed to phasing in a basic income starting in 2017. Each individual will then receive the same basic monthly payment. The initial payments will not be enough for someone to live on and escape poverty, but the belief is that the income will increase after the initial phase in period. Some of the major advantages include the reduction if not elimination of bureaucracy that is involved in means testing and administration for other social benefits, as the basic income when fully in place will take the place of those.

Torry briefly summarize those 101 reasons in just 116 pages. If you want the deeper analysis behind each of these reasons you can peruse his 300 page treatment Money for Everyone: Why We Need a Citizen's Income Policy (2013). 

     “Citizen’s Income is a big idea whose time might at last have come. Malcolm Torry’s              book could play a part in making that happen. Everyone should read it.
     Professor Hartley Dean, London School of Economics.

 We certainly need to be exploring options to end the extreme inequality that is creating so many problems here and there. These writers help us begin to rethink our economic system. I just hope we're not too late.