Profit Versus Non Profit: A Third Way? The Case of the Italian Mutual Cooperative Banks
AbstractThe traditional distinction between profit and non profit firms does not necessarily apply to some types of cooperative firms, such as the Italian mutual cooperative banks (MCBs). These MCBs present a peculiar governance structure, a combination between a public company governance model and a non-profit one. Similarly to a "not for profit organization", the ownership of the MCBs is widely diffused among borrowerowners, but dividends are not typically redistributed. Like in "public company bank", MCBs have a spread ownership and a board of directors. MCBs work in order to maximise social utility rather than profits, as a social entrepreneurship. MCBs represent a kind of third way governance model in the financial sector. The board of directors of a MCB acts as a public-good administrator in deciding on how to invest, with a deep impact on the local community. However, the governance of these banks is affected by structural problems. The mutual and co-operative nature of these banks is challenged by the increase in the number of members-owners and in the heterogeneity of the member-owners group. This study aims at investigating the democratic voting mechanism of the board (one-head one-vote) and its appropriateness given enlargement of the member's community. The research would tackle the issue of governance structure and incentive to efficient behavior.
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Bibliographic InfoPaper provided by Department of Computer and Management Sciences, University of Trento, Italy in its series DISA Working Papers with number 1003.
Length: 44 pages
Date of creation: Jul 2010
Date of revision: 23 Jul 2010
Postal: DISA Università degli Studi di Trento via Inama, 5 I-38122 Trento TN Italy
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms
- L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
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