Cooperative and Mutual Enterprise (CME) Governance Principles explained

26 October 2018

By Alison Gaines FAICD IDPC global Chief Executive Officer Gerard Daniels Perth 

In July 2018 the BCCM launched the first edition of the Principles – a collector’s item edition that should be cherished for its success in marrying the interests of good corporate governance with the unique member focused interests of CME’s.

The endeavour, to create governance principles for the sector, was initiated by the CME 100 Chairs Forum in 2017 and was followed by 18 months of consultation within the sector and with governance experts.

The Governance Principles are not a unique idea and they make best use of the work that has gone before it. The Australian Stock Exchange Corporate Governance Council published the first governance principles for the listed sector in 2003 and recently drafted its fourth edition. There are currently eight principles. The Australian Charities and Not For Profit Commission has created five governance standards for its sector. 

The nine CME Governance Principles apply contemporary concepts of good governance, drawing from the principles that apply to many Australian corporations. As well it captures the unique member dimension of CME’s, building on the International Cooperative Statement of Identity, Values and Principles, in

Principle 1 Create, protect and return member value – A CME should act on behalf of its members to achieve its agreed purpose by pursuing the sustainable creation, protection and return of value to current and future members.

The other Principles are well known to board directors and overwhelmingly practiced in CME boardrooms:

Principle 2 Lay solid foundations for management and oversight – which relates to clarity of roles for board and management and performance monitoring

Principle 3 Structure the board to add member value – which creates the board of member directors and others and of the right size, skills and diversity and commitment to govern

Principle 4 Act ethically and responsibly – in relation to all members and stakeholders

Principle 5 Safeguard integrity on CME reporting – which ensures there are the right formal controls, assets safeguards, audit and financial integrity

Principle 6 Make timely and balanced disclosure – which ensures that the CME provides timely and balanced disclosure on material matters

Principle 7 Respect the rights of members and other stakeholders – which respects the rights of members and stakeholders to information and may provide education and training to assist them exercise the rights effectively

Principle 8 Recognise and manage risk – have in place a sound risk management framework and ensure its effectiveness to create, protect and return member value

Principle 9 Remunerate fairly and responsibly – if the CME decides to pay directors to attract talent to the board then the fees should be sufficient to attract and retain talent; and similarly executive pay should be sufficient to attract and retain talent align effort with members’ and stakeholders’ interests.

The principles cumulatively recommend the creation of committees of the Board – the Nominations Committee, Audit Committee, Risk Committee and Remuneration Committee. They provide clarity for key roles – Chair, Company Secretary, Member Representation, Independent and Non-Member Directors, and internal audit. They capture concepts of strategic objectives; board accountability; board composition, diversity and performance; values, culture and code of conduct and whistle-blower protection; the quality of financial statement, audits and AGM’s; member and stakeholder communications; and sustainability reporting using cooperative principles.

The BCCM’s first edition of the Principles contains very useful recommendation, guidance commentary to assist boards implement the principles. In addition the BCCM was very fortunate to have Hon Robert French AC, former Chief Justice of the High Court of Australia, provide a foundation paper “Governance and Culture in the Real World’ which gives the context for the Principles.

The sector should be very proud of the work done by its leaders to build a framework that gives confidence to directors in its boardrooms and to its member and stakeholders.

Alison leads the board consulting practice of Gerard Daniels, is a certified international director and Fellow of the Australian Institute of Company Directors and recent Deputy President of its WA Division. She provided assistance to the BCCM in the development of the principles.