Governance in Cooperatives and Social Enterprises

1. Governance in Cooperatives and Social Enterprises

2. Cooperative principles Established by the International Cooperative Alliance

3. 1st Principle: Voluntary and Open Membership • Co-operatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.

4. 2nd Principle: Democratic Member Control • Co-operatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. • Men and women serving as elected representatives are accountable to the membership, e.g. Tower Colliery • In primary co-operatives, members have equal voting rights (one member, one vote) and co-operatives at other levels are organized in a democratic manner.

5. 3rd Principle: Member Economic Participation • Members contribute equitably to, and democratically control, the capital of their co-operatives. At least part of that capital is usually the common property of the co-operatives: avoids free-riding problem. • Members allocate surpluses for any or all of the following purposes: developing the co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operatives; and supporting other activities approved by the membership.

6. 4th Principle: Autonomy and Independence • Co-operatives are autonomous, self-help organizations controlled by their members e.g. CRS is not like a loyalty card • If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operatives autonomy.

7. 5th Principle: Education, Training and Information • Co-operatives provide education and training for their members, elected representatives, managers and employees so they can contribute effectively to the development of their co-operatives, e.g. farmers cooperative training • They inform the general public – particularly young people and opinion leaders – about the nature and benefits of co-operation.

8. 6th Principle: Co-operation among Co-operatives • Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures. • A recent example is linking of cooperatives through fair trade.

9. 7th Principle: Concern for Community • While focusing on member needs, co-operatives work for the sustainable development of their communities through policies accepted by their members. • This is a basic commitment, not to ensure PR, contrast with shareholder value

10. Governance in social enterprises

11. Characteristics of new governance form? (Borzaga and Solari) • Greater autonomy • Participatory decision-making • Respect for people and their expectations • Balance between efficiency and social mission • Closer attention to customers and society • Ownership—economic and psychological • Emotional and technical leadership • Fulfilment of array of personal needs and desires

12. HRM in social enterprises • SEs are usually labour-intensive • Importance of ‘intrinsic rewards’ • Psychological contract between employees and organisations is different in nature • Balance between extrinsic incentives (pay, flexibility of work hours) with intrinsic (participation, autonomy, moral values) • Distributive justice: balance between effort and incentives • Flatter hierarchy

13. What are multi-stakeholder processes? • Term grew out of the Rio Earth Summit in 1992 • Intrinsically linked to sustainability • Kofi Annan (2000): need for ‘more active cooperative management’ • ‘Stakeholders are those who have an interest in a particular decision, either as individuals or representatives of a group’

14. Key values and ideologies of MSPs • Sustainable development • Good governance • Democracy • Participation • Equity and justice • Unity in diversity • Leadership

15. Case-study of Suma Wholefood Co-operative

16. Governance at Suma • Separate the board from the executive: the Management Committee (elected, non-executive directors) run the Function Area Coordinators, who are the executive managers (executive directors) • Dynamic dialogue between the two; neither can operate without the other • Ongoing relationship between the MC and the general meeting of member shareholders: Suma has six GMs a year • MC can only operate with impunity for a maximum period of three months at most, • Executive managers at Suma are answerable to MC on a weekly basis

17. Consequences • Separation between the democratic governance of the cooperative and the executive management of the business • Authority of members clearly defined: operational when they are as GM • Otherwise they are employees subject to management culture they have chosen democratically • In collectives member-employees can refuse instructions from colleagues: ‘stop – go – stop’ style of management • Most collectives suffer from the problems of most small partnerships of equals – the tyranny of the individual veto

18. Shann Turnbull’s concept of Network Governance

19. Network governance • Response to lack of accountability and inefficiency in private sector and unresponsiveness and bureaucracy in public sector • Size of global businesses and power of CEOs reduces accountability • Importance of human scale • Public disillusion with business

20. Rationale for network governance • Network organisations introduce internal interdependence as a rational basis for developing trust, cooperation and greater operating efficiency • Internal competition for job satisfaction and other self-interests • Unlike command and control hierarchies, network organisations allow individuals to utilise their contrary nature to be competitive/cooperative, suspicious/ trusting, self-interested/altruistic • Introduces the checks and balance required for efficiently sustaining the self-regulation of social creatures

21. Advantages . . . • Self-interest of executives harnessed to further the public good by introducing contestability for senior positions • Internal competition for control provides a much better informed, sensitive and efficient mechanism to improve the operations of a business than competition for control through the stock market • A compelling basis for replacing corporatisation, privatisation or public-private partnerships as a means for increasing economy, efficiency, and effectiveness of social enterprises