Governance is the means by which an organisation’s purpose is translated into action.
The different motivations of company shareholders and co-operative members demands a governance structure for a co-operative that not only achieves financial sustainability but also maintains a focus on its purpose and ongoing member value.
In co-operatives, good governance fosters three sets of relationships between:
- Members and the board
- The board and the managers
- The managers and the employees
If the governance system is designed properly, the co-operative is constantly improving its capacity to serve its members.
The BCCM offers courses and provides advisory services to help new and existing co-operatives improve their governance. With our education partner Australian Institute of Company Directors the BCCM offers the three-day Foundations of Directorship for CMEs course – the only one of its kind in Australia. Discover more on our education.
Board of directors
All co-operatives must have a board of directors. The majority of the board must also be members of the co-operative. This requirement brings the members’ interests directly into board deliberations. ‘Non-member’ directors are chosen for their specialist skills or experiences that are relevant to the co-operative.
Having the majority of directors coming from the membership means that, not only do members elect their directors, they can also participate in governance by being elected to the board.
Management and staff
Co-operatives can employ people to carry out management and staff roles. Very small co-operatives or new, start-up co-operatives may not have the funds to employ managers or staff. Quite often in these co-operatives, directors are responsible for the day-to-day management of the co-operative and volunteer time to work in the co-operative. As a co-operative grows and is able to employ staff, the board steps back from the day-to-day work to monitor activities and performance and make strategic decisions.
The decision to employ managerial staff is made by the board under terms specified by the board. Managers are accountable to the board and are the prime source of information about the operations of the co-operative’s business. The actions and decisions of managerial staff must be monitored and supervised by the board as it is responsible for the decisions and actions of management.
All co-operatives must appoint a secretary. The secretary is a statutory officer, who is the primary point of contact between the regulators and the co-operative. Apart from managing the meetings, minutes and agendas for the board, the secretary is responsible for ensuring that the co-operative meets its legal compliance obligations. For this reason, a secretary should have a good knowledge of the relevant law.
For co-operatives, good governance centres on a clear statement of the co-operative’s purpose and making decisions consistent with that purpose. That said, there are other elements to good governance, including:
- An effective engaged and skilled board of directors
- Well-drafted policies and processes to aid planning and decision making
- Clearly defined roles and accountabilities for board and management
- Strong connection and communication with members
The Wheel of Good Governance is a very helpful representation of the elements of a robust governance model for a co-operative. The idea of the wheel is that each element equally contributes to achieving the co-operative’s purpose.
You can read more about the governance of Australian co-operatives in Enlightened Co-operative Governance.
Co-operatives UK offers a comprehensive set of resources for boards of directors of co-operative.
Co-operatives adhere to the International Co-operative Alliance’s (ICA) Statement of Identity, Values and Principles.
The co-operative principles in the ICA’s Statement define the nature of a co-operative organisation. These principles describe a co-operative as an autonomous, member owned and democratically run organisation that is established to pursue the common economic, social and cultural needs and aspirations of its members. They are part of a global movement of enterprises with a social responsibility and a commitment to helping each other.
Co-operative values include ethical values of openness, honesty and social responsibility that are values the board should aspire to inculcate across the organisation creating a culture of co-operation. The board of directors of a co-operative must chart a course to ensure their decisions are consistent with the co-operative principles, and their behaviour as managers of the co-operative evinces the co-operative values.
Australia has incorporated the co-operative principles into the legislation governing co-operatives.
Research shows that co-operatives whose boards appreciate and are committed to the co-operative principles are equipped to perform well because they understand the organisation and its people. Boards that commit to the co-operative principles demonstrate this in their decision-making and tend to instil a culture throughout the co-operative of the importance of the co-operative values and principles.
In 2018, the Business Council of Co-operatives and Mutuals (BCCM) released the Governance Principles for Co-operative and Mutual Enterprises (CMEs).
The Governance Principles for CMEs provide guidance and practical advice to help directors incorporate the co-operative values and principles into their decision-making, planning, policies and processes.
Compliance with these principles provides a sound basis for good governance in all co-operatives.
The BCCM has prepared a prototype survey tool to help co-operatives evaluate and improve their governance practices. The survey is designed to help co-operatives and mutuals consider their maturity in relation to the recommendations of the CME Governance Principles.
With sector feedback on the prototype BCCM will continue to improve this tool.