Ownership and Banking: The Cooperative Difference

The BSA reports conclude that building society employees put “the interests of their customers, who are also their members, first”, and that, as a result, “member-ownership and the organisational culture it drives can lead to significant differences in consumer outcomes”, often including “higher standards of service and conduct” (BSA, 2017: 12). The survey results reported in this paper suggests that something similar is going on in cooperative banks in Denmark. In this concluding section, we will point to some of the findings that lend support to this.
Before presenting these findings, a couple of important caveats deserve mentioning. First, it is not possible to claim causality between ownership type and outcomes based on the data presented here. In this regard, the possibility of employee sorting may be the most important to mention, i.e., the possibility unobserved reasons related to a bank’s ownership status may have caused employees to deliberately seek employment there. Second, the data presented here are employee perceptions and thus not necessarily the same as other respondents would have answered. It is, in this way, one side of the story, though, arguably, an important one.
First, according to the employees, cooperative banks have less focus on profit maximisation. This is not to say that profit is not considered important in cooperative banks. Indeed, more than half of all cooperative employees perceive it as the main purpose. It is, however, a relatively small majority in the cooperative banks compared to other banks.
Second, and related to the first point, cooperative banks distribute benefits (the value creation) differently. In these banks, owners receive less than in other banks, customers receive more and so do the local communities. Employees, wider society, and the natural environment receive the same despite marked differences in the higher purposes of the different ownership types.
Third, the relationship between bank and customer is better in cooperative banks. Employees in cooperative banks are more likely to think that their bank is ethical, conscientious, and trustworthy. Generally, banks are perceived to put their customers first, but cooperative banks more so than other banks. These factors may well be part of the reason for why cooperative employees are more proud of their employer, which is also a finding in this survey.
Fourth, cooperative employees do not have more influence on their job content, but they do have more influence on how they go about doing their job once the content of it is decided. This also is reflected in the fact that cooperative employees are more able to make decisions that are based on assessments of non-economic factors and the relationship to the customer.
Fifth, culture seems to differ between cooperative banks and other banks; employees perceive it to be more trusting, transparent, and inclusive in cooperative banks. More concretely, cooperative employees find that management is more informative about the reasons for the decisions being made. Cooperative employees are also more like to trust that managements’ business decisions are well informed and socially responsible. Lastly, management also includes cooperative employees more in significant decisions.
Finally, when comparing UK and DK, the first observation is difference in the profit motive, which is stronger in DK. Next, looking at the benefits received by different stakeholders, the biggest differences are with the owners and the customers. In DK, more benefits go to owners, and less to customers, relative to the UK. However, seeing that there is an overlap between owners and customers in cooperatives, the material differences may not be equally large. This may also indicate a difference in how cooperative banks serve their members/customers, i.e., the extent to which they are served, respectively, as members/owners or customers.