Directors share major role as part of cooperative management team – Commentary – industry management theory and information

Directors share major role as part of cooperative management team – Commentary – industry management theory and information – Brief Article

Randall Torgerson

Responsibility for seeing that cooperatives are properly managed ultimately falls squarely on the shoulders of the cooperative’s board of directors. Key to this role is selection of a chief executive officer or manager in whom the board has confidence to run the day-to-day operations of the cooperative business. The manager also has responsibility, with the board, to see that operations are run on a cooperative basis.

As user-owned, user-controlled and user-benefitted businesses, cooperatives implicitly have a dual character as an association of people and as a common business undertaking. Both aspects of the organization must be nourished to achieve organizational strength and ultimate business success. This makes management of cooperatives unique among other forms of businesses. It is one source of their distinctiveness and strength.

As cooperatives become more complex organizations, both in size and scope of business activity, management must be sensitive to operating the cooperative for members’ benefit and continuing to meet their needs. Sensitivity to those needs is a continuous challenge given the increasing diversity among cooperative members and the broader geography represented in many operations.

Members must also be properly educated to understand their responsibilities to the organization. This includes proper capitalization as user owned businesses so that the stream of benefits continues to flow to them. Capital-starved organizations can seldom perform at optimum levels under any circumstances. Control follows capital. If members want to control their organizations, they have to capitalize them.

Several recent changes in state cooperative laws attempt to allow for greater amounts of non-member business than is customary in cooperatives, or to allow co-op equity to be owned by non-members. These are onerous signs of deterioration in the legal foundations for cooperative enterprise in the country.

The North American cooperative community was shocked recently when Agricore, a Canadian regional cooperative that resulted from the 1998 merger of the Alberta Wheat Pool and the Manitoba Pool Elevators, decided to relinquish its status as a cooperative by combining with United Grain Growers, Ltd., a public company in which a large investor-owned firm has an interest. The action effectively displaces the remaining large grain marketing cooperative presence in the region, and follows the Saskatchewan Wheat Pool’s conversion in 1996 to a publicly-traded company.

Managing business operations in a difficult climate for farmers during the past several years has not been an easy task for cooperative management teams (directors and managers). Nevertheless, cooperative business volume in the United States increased slightly in 2000.

A strong cooperative business sector is important to maintaining market access for farm operators and their place in a rapidly restructuring food and fiber system. Board members need to remain vigilant that their organizations are kept member oriented and providing the marketing, farm supply and other services needed by them. They also need to ensure that the legal foundations and capital requirements are met, consistent with operating on a cooperative basis.

Farmers can give away control of their cooperative businesses, but it cannot be taken away from them.

Randall Torgerson, deputy administrator Rural Business-Cooperative Service

COPYRIGHT 2001 U.S. Department of Agriculture, Rural Business – Cooperative Service

COPYRIGHT 2004 Gale Group