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Democratic Governance Mechanisms in Cooperative Banks: A Reassessment

Author

Listed:
  • Mitja Stefancic

    (University of Lijubiana)

  • Silvio Goglio

    (Università degli Studi di Trento; Euricse)

  • Ivana Catturani

    (Università degli Studi di Trento; Euricse)

Abstract

The governance of cooperative banks is arguably so distinctive that it cannot be properly captured by standard economic models. One of the problems that arises in the assessment of the assumed democratic governance in such banks refers to the members’ commitment to the banks. This paper considers the fact that it is not always clear whether cooperative banks’ members have the proper incentives to actively participate in making decisions that relate to bank strategies and policies. To shed light on this problem, this paper provides an improved framework of governance based on some seminal concepts by Albert O. Hirschman (1970), such as voice, exit and loyalty. Given the challenges that cooperative banks are currently facing, the arguments discussed in this paper should help illuminate the kind of reforms that such banks are expected to pursue in the coming years. Their governance model needs to be updated in practice to retain its specific features; otherwise, it may end up mirroring that of standard for-profit banks.

Suggested Citation

  • Mitja Stefancic & Silvio Goglio & Ivana Catturani, 2019. "Democratic Governance Mechanisms in Cooperative Banks: A Reassessment," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 8(1), pages 22-41.
    • Handle: RePEc:trn:csnjrn:v:8:i:1:p:22-41
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    References listed on IDEAS

    as
    1. Timothy Besley & Stephen Coate, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(1), pages 85-114.
    2. Derek C. JONES & Iiro JUSSILA & Panu KALMI, 2016. "The Determinants Of Membership In Cooperative Banks: Common Bond Versus Private Gain," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 87(3), pages 411-432, December.
    3. Malleson, Tom, 2014. "After Occupy: Economic Democracy for the 21st Century," OUP Catalogue, Oxford University Press, number 9780199330102.
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    6. Derek Jones & Panu Kalmi, 2015. "Membership and Performance in Finnish Financial Cooperatives: A New View of Cooperatives?," Review of Social Economy, Taylor & Francis Journals, vol. 73(3), pages 283-309, September.
    7. Timothy Besley & Stephen Coate, 2001. "Lobbying and Welfare in a Representative Democracy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(1), pages 67-82.
    8. Mitja Stefancic & Silvio Goglio & Ivana Catturani, 2017. "Democratic Governance Mechanisms in Cooperative Banks: A Reassessment," Euricse Working Papers 1799, Euricse (European Research Institute on Cooperative and Social Enterprises).
    9. Giovanni Ferri & Panu Kalmi & Eeva Kerola, 2015. "Organizational Structure and Performance in European Banks: A Reassessment," Advances in the Economic Analysis of Participatory & Labor-Managed Firms, in: Advances in the Economic Analysis of Participatory & Labor-Managed Firms, volume 16, pages 109-141, Emerald Group Publishing Limited.
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    More about this item

    Keywords

    Cooperative banks; Democratic governance; Commitment of members; Albert O. Hirschman;
    All these keywords.

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G3 - Financial Economics - - Corporate Finance and Governance

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