What is Co-operative Governance?

Last Updated on Sunday, 02 May 2010 06:03 Written by David Griffiths Thursday, 29 April 2010 01:59

Public policy debate has in recent years increasingly focussed on the governance of business enterprises. Large co-operatives incorporated under Corporations Law are equally impacted by this debate.

Unfortunately, the values underpinning this debate assume that enterprises are investor owned and controlled. ?It is critical. therefore, to consider the specifics of governance for co-operatives.

Co-operative governance is the set of relationships between the co-operative’s members, the board as representatives of members that advise management for the members and the management that has the care and control of the co-operatives for the members and how a business can be best governed in the interests of its owners.

Co-operative governance provides the structure through which the objectives of the co-operative are set and the means of attaining those objectives and the monitoring of performance.

Co-operative governance is different from the governance of investor-owned and public enterprises. Good co-operative governance should provide proper incentives for the board and management to pursue objectives that are in the interests of the co-operative and members and should facilitate effective monitoring, thereby encouraging the co-operative to use resources more effectively. Co-operatives differ from investor-owned companies in their:

character
purpose
goal-setting
methods of financing
profit distribution?

Governance in an investor-owned company is aligned with profit maximization. Co-operative governance, however, is broader and more complex than profit generation and is based on co-operative values and principles. A commitment to co-operative governance improvement is particularly important for co-operatives because they are not exposed to the "disciplines" of the stock exchange.

Understanding and embracing co-operative governance is essential for the strategic re-positioning of co-operatives to survive globalization and the challenge of investor-owned companies and, in particular, multinationals. Fundamental to this, however, is acknowledgement of the strategic and operational relevance of co-operative values and principles.

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