BigBank Stock Options: Hear No Evil, See No Evil, Tell No Evil

Years ago I recall walking into a new hire class and being told that as a new employee I was now the owner of a stock option for 400 shares of bank stock. Stock Option… the word just sounds cool. My mind danced around with endless possibilities. I was going to be wealthy beyond my imagination. I just had to help the stock get to the first trigger then it was all mine.

Two long years later the stock hit the trigger. I like everyone else was checking the stock price by the hour. People in the next cube over had just cashed in and were putting money down on a house. I called my wife told her to stop cooking we were going out for supper! Then the news hit. The “Oh Momma” of all words in this type of environment… Merger. I was so excited I pulled up another spreadsheet and redid all the math. Numbers and dollars signs danced before my eyes. There was talk of a stock split. The stock was close to 100 dollars up from 60 dollars the prior day. People cashed in left and right. Cars, vacations, homes, motorcycles, people were getting it all.

After running through the math I set my target I would cash out at 105 per share. I waited and watched all day. Work was ignored…each up or down movement brought cheers or groans. The stock got to 104. I held strong. Then it slid to 102…100…97. I wanted to panic but I knew it would bounce back. Others told me to cash out but I had latched onto my mental anchor it would bounce back.

So how does this end? Well, the next day the news broke that the other company had hid billion in losses in a bond deal with Russian bond traders. The stock plummeted. I watched with horror as the stock went below the 1st trigger. Two years later I sold my shares and took all the money I made and bought a two hundred dollar grill at Lowes.

Why do I mention that today? I remember everyone being so excited and so very distracted during that period. Everyone was going to make a ton of money and everyone was watching the stock. During that time no one was focused on the company mission, vision, or customers. It was all about everyone getting their share of the pie. This tunnel vision continues today in large banks.

In a world of stock options it is hard to not concentrate on the stock. Not only do you have a duty to make sure you provide a good return for stockholders you are also motivated because you potentially get to make out better than the stockholders. You have three groups of people who have a stake in the type of service, pricing, and products the company offers – stockholders, customers, employees. The problem is that two of the group members (employees and stockholders) profit if the 3rd group pays more and gets less.

The way to fix this is to allow everyone to own the company. How do you do that? Simple give ownership to anyone who wants to join. Sounds crazy. Sounds like the way credit unions have been doing business for the last 75 years. A better model that rewards everyone.

Practical Application:

The topic of ownership is something every credit union should be jumping up and down to articulate to its membership. In order to do that the membership has to understand the contrast between a member owned cooperative and a stock owned bank. 

Questions to Consider:

How have you educated your staff and your membership on the value they receive by not having to compete with a separate group of stockholders?