Robb on Cooperation

Corporate governance

Posted by Alan Robb on 29 September 2009 | 0 Comments

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A well functioning board can contribute greatly to the success of a cooperative in many ways.

● It can set the strategic direction for development so that members’ needs are always uppermost. To do this it must be in close contact with members.

● It can set standards and monitor progress on the part of management, challenging and testing proposals which management produces.

● It can bring a breadth of experience to issues so that decisions are better informed than those of any one individual member.

A board, however, is unlikely to serve its members well if:

● it loses touch with members and proposes changes, as Fonterra has recently done, which are likely to be rejected by members;

● it lacks a balance of skills and starts making bad decisions;

● it fails to reject proposals designed to benefit corporate raiders and managers, rather than members;

● its members are not wholly committed to cooperative principles and values. It will inevitably start functioning like the board of an investor-owned company.

NON-MEMBER DIRECTORS
Conventional wisdom suggests that corporate governance can be aided by the presence of one or more independent, or non-member directors.

If independent directors are to benefit a cooperative then it is essential that the they are drawn from other successful cooperatives or that they are professionals with a sound knowledge of cooperative principles and values.

Independent directors are not some kind of super human. They are fallible, they are subject to the same pressures as other directors. They should therefore be subject to the same limitations on tenure of office as any member directors.

Equally important, they should be accountable to members in exactly the same way as any member director. If appointed to fill a casual vacancy, they should stand for election at the next annual meeting. They should be part of the normal rotation of directors.

All directors are responsible to the members of a cooperative. All must be accountable to members.

In the February/March 2008 Cooperatives News the suggestion was made that cooperatives should amend their constitutions to prevent members voting some directors, such as the chairman, off the board.

This is a wholly repugnant suggestion. It strikes at the principle of democratic member control and is contrary to good governance in cooperatives.

– from the April/May 2008 Cooperatives News