A cooperative is governed by the people it serves. That single structural fact produces most of what distinguishes leading one from leading a company, and it is routinely underestimated by directors who arrive from private business.
Governance structures, patronage, equity retirement, and the obligations of directors vary by cooperative and are matters for the organization’s counsel. What follows concerns the leadership demands rather than the legal ones.
Three roles, one person
Every member is simultaneously a customer, an owner, and a voter, and those roles want incompatible things.
As a customer, a member wants the best available price and terms this season.
As an owner, the same member wants the cooperative to retain enough to remain solvent, maintain its assets, and still exist in twenty years.
As a voter, they want a board that is responsive to them personally.
A board that treats members purely as customers will price and distribute the institution into fragility. One that treats them purely as owners will be turned out by people who feel the cooperative has stopped serving them. The job is holding all three, and saying out loud which one is governing a particular decision.
The retention argument
Every cooperative faces a recurring version of the stewardship problem, and it arrives annually.
Money retained for maintenance, reserves, and capital strengthens the institution for members who will be here in fifteen years. Money returned strengthens the position of members who are here now, some of whom will not be farming in ten.
The present is better represented. Current members attend the annual meeting, vote, and can name what a return would mean to them this season. The members of 2041 are in the room only if the board deliberately represents them.
Which means the long-term case has to be made explicitly and concretely at every such decision, in the terms described in the stewardship entry: named consequences, dates, and the specific choice being transferred to a future board.
Members with different interests
The membership is not uniform, and the divergence is usually along one of a few lines.
Large members and small ones. Members who are expanding and members who are winding down toward retirement. Members whose operation depends on one service and members who use several. Long-standing families and recent arrivals.
Each group has a genuine and different interest, and a board drawn disproportionately from one of them will make decisions that are read — accurately — as favouring it.
The protection is composition and disclosure rather than good intentions. A board that has never asked whether its membership reflects its members is likely to discover the answer in a contested election, at the point where the divergence has become a grievance.
The manager relationship
Cooperatives fail at governance in the same two directions as school districts, and for the same reasons.
A board that begins managing — directing operational decisions, taking member complaints directly, involving itself in personnel — produces two centres of authority and a manager who cannot be held accountable for outcomes they did not control.
A board that defers entirely has stopped governing. The manager sets the agenda, supplies all the information, and the board ratifies. This is the more common failure in cooperatives with a long-serving and competent manager, and it is invisible while things go well.
The test from the board packet entry applies: does the board receive anything the manager would rather it did not? A standing section for what is not going well, never empty, is the mechanism.
The member who is also a competitor for the board’s attention
A situation with no clean resolution and worth naming.
A director is a member whose own operation is affected by every decision the board makes about pricing, terms, capacity, and service. Unlike a corporate director, they cannot hold the institution’s interest at arm’s length from their own, because the structure does not permit it.
What is available is the same discipline as in a water district. Disclose specific interests that go beyond the general one. Recuse where a matter concerns your own contract or dispute. And be conspicuously careful where a decision would benefit your operation differently from others.
Directors who apply that standard visibly protect the institution’s legitimacy, which is the asset that lets it make unpopular decisions at all.
The annual meeting is the accountability
For most members it is the only direct contact with governance they have all year, and it is frequently run as a formality.
A meeting consisting of reports read aloud, an uncontested election, and a meal has discharged a requirement and communicated nothing. Members leave with no better understanding of the institution’s position than they arrived with.
What makes it worth the evening is the same as anywhere else in this Library: state the position honestly including the unfavourable parts, explain the reasoning behind the year’s significant decisions, and answer the hard question first rather than waiting for somebody to ask it.
A cooperative whose members understand its position will support a difficult decision. One that has been told only good news for a decade will treat the first difficult year as evidence of failure, and will be reasonable to do so.
Edited by Patrick J. Wolf, PhD