A long-standing member has begun taking a share of their business to a private competitor. They are still a member, still attend the annual meeting, and have not said anything.
The board’s instinct is to treat this as a loyalty problem. It is usually a price and service problem, and the distinction determines whether the cooperative responds usefully or spends the goodwill it has left.
The structural position
A cooperative is unusual in competing for the custom of its own owners, and the arrangement contains a genuine tension nobody designed away.
As a customer, a member should take the best available terms. As an owner, the same person needs the cooperative to remain viable, which requires volume.
A member taking part of their business elsewhere is behaving rationally in the first capacity and undermining themselves in the second, and they may not have thought about it in those terms at all.
Loyalty is the wrong instrument
An appeal to loyalty is available and it costs more than it returns.
It asks a member to accept worse terms for reasons of sentiment, which a member operating on thin margins cannot do indefinitely. It implies the cooperative cannot compete on merit. And it converts a commercial matter into a question of whether somebody is a good member of the community, which is a considerable escalation over a fertiliser price.
It also tends to be deployed by boards that have stopped examining whether their terms are competitive, and members can generally tell.
What can legitimately be explained is the arithmetic — what volume does to the cooperative’s costs and therefore to what it can offer everybody. That is information rather than an appeal, and it lets a member weigh their two capacities knowingly.
Find out why
The step that generally gets skipped, and members will usually say if asked directly by somebody who is not defending the answer.
Frequently it is not price. It is availability at the moment it was needed, a service the cooperative discontinued, somebody they dealt with who left, a credit arrangement, or a single incident three years ago that nobody addressed.
Each of those has a response. A price gap has a different response. And an answer of we simply cannot match them on this line is worth having explicitly, because it tells the board what business it is actually in.
What forecloses the conversation is asking in a way that implies the member owes an explanation.
The competitive question the board owes itself
Members leaving in one direction over several years is information about the institution rather than about the members.
The uncomfortable version, and it is the stewardship question: on the lines where members are going elsewhere, is the cooperative still the right vehicle? Some services a cooperative was formed to provide are now supplied competitively by others, and holding a line out of history rather than viability is the drift described in the purpose entry.
Narrowing to what the cooperative does well, and doing it properly, is frequently a stronger position than defending every line it has ever offered.
That is a board decision requiring information members will only supply if asked without reproach.
The director who deals elsewhere
A sharper case and one that damages an institution quickly.
A board member taking substantial business to a competitor is visible to everybody, and it is read — reasonably — as the person with the most information concluding that the cooperative is not the better option.
What obligations attach to directors, and whether any arise here, is a matter for the cooperative’s counsel and its own governance documents rather than for general principle.
What is a matter of judgment is that a director in this position should raise it themselves, in the boardroom, before somebody else does. The reason they are going elsewhere is exactly the information the board most needs, and delivered voluntarily it is useful rather than damaging.
What actually holds members
Not sentiment, and not the annual meeting.
Being competitive on the things that matter to them. Being available when a private competitor would not be, which is generally in a bad season and is the strongest argument a cooperative has. And being visibly governed in the interest of the whole membership rather than of the largest operators, which is the composition question from the earlier entry.
A cooperative that has those does not need to ask for loyalty. One that does not will find that asking accelerates what it was meant to prevent.
Edited by Patrick J. Wolf, PhD