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    This document has been made available in electronic format
         by the International Co-operative Alliance ICA 
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                        November 1995


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     Corporate Governance and Management Control Systems

  Summary of the Seminar in St. Petersburg on 11th July 1995
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In order to evaluate further some important aspects of the
Corporate  Governance report a seminar was held on the 11th
July, 1995 in St.  Petersburg, following the meeting of the
ICA European Council.  Under the  chair of its President,
Graham Melmoth, around 40 leading co-operative from  13
European countries participated.  The lectures and discussions
focused  on:

Governing Bodies

Balance of power between elected lay persons and management 
Strengthening ties with members
It was unanimously agreed by the forum that the composition,
qualification,  commitment and working procedures of the
Governing Bodies, especially of  Board of
Directors/Supervisory Board, were of great importance in 
guaranteeing the influence on, and the control of, the affairs
of the  co-operative society by members.  In this context it
seems to be of less  importance if the co-operative is using
the monist system (Shareholders  Meeting plus Board of
Directors) or the dualist system (Shareholders  Meeting plus
Supervisory Board plus Executive Board).  Both systems have 
their advantages and disadvantages and these were explained in
detail by  Dr. Thomas Walter from the University in Marburg,
Germany.

In both systems the elected lay persons should come from
within the  membership.  The election of professional outside
directors did not find  support at the seminar being in
contravention of long standing co-operative  principles.  On
the other hand it was acceptable if the existing Board of 
Directors and/or an Election Committee chaired by the
President gave  assistance to finding suitable candidates for
Board elections, but without  limiting the right of grassroot
members to nominate their own candidates.  The payment of a
realistic financial compensation for the responsible and 
time-consuming work in the Boardrooms could be a way of
attracting the  interest of qualified members to be nominated
but it was agreed that the  level of fees should be carefully
balanced.  The general introduction of  age limits was seen as
an appropriate instrument to improve rotation of  Directors
giving interested members the possibility to participate
within  Governing Bodies, although it was recognised that this
was a controversial  area which needed to be kept under
review.

The important role of the President/chairperson was
highlighted.  The  election of a suitable person with power,
ability and commitment had to be  considered very carefully as
he or she has to guide and organize the work  of the Board,
agree the agenda of Board meetings, initiate and monitor 
strategic decisions, and oversee and collaborate with the
management.

The elected lay directors are not obliged or able to examine
the affairs of  their co-operative society in great detail but
it is necessary for them to  have sufficient commercial
know-how and trading knowledge in order to make  policy, issue
guidelines, take strategic decisions and exert the necessary 
controls over the business operations.

To fulfill the demanding duties of the Boards it is not
recommended that  more meetings should be held but better
meetings with concise, clear and  relevant information being
supplied between, before and on the day.  The  use of Board
sub-committees and the consultation of independent experts can 
help in the case of special problems or activities. 
Corresponding  guidelines and instructions to the management
should be in force in each  society.

One of the most important duties of the Boards is to appoint a
qualified  management.  This duty implies that Boards must
also be prepared to issue  management with warnings, and even
their removal, if objectives are not  achieved.  In many cases
a special Board committee for senior management  has the
responsibility for the preparatory work relating to the
appointment  of the chief official and his management team,
deciding service contracts,  remuneration and terms of office.

Part of good corporate governance is to represent properly the
interests of  all members - men and women.  As underlined by
Raija ltkonen of FCCA and  the ICA Board, gender equality will
be and has to be a top priority in each  individual
co-operative society - in the Governing Bodies as well as in
the  work force on all levels.  Only by gender equality will
it be possible to  exploit fully the existing human potential,
the different abilities and  know-how of men and women for the
benefit of the co-operative movement.

The forum unanimously supported the appeal of Raija ltkonen
that words have  to be replaced by actions.  A corresponding
resolution on gender aimed at  self commitment by each
co-operative society was adopted at the meeting of  the ICA
European Council in St. Petersburg.

The role of active members was recognised as being an
important factor for  good governance and efforts to
revitalise membership was critical.  A  success story from
Norway was told by T. Solli, where five years ago NKL  and the
consumer co-operatives started to combine business efficiency
with  strict member orientation and member benefits, thus
strengthening the ties  with members.  As a beginning to this
process an electronically scanned  Co-op Membership Card was
developed and gradually introduced with several  built-in
economic benefits such as special offers and dividends.  To
date,  the results of this new approach have been remarkable,
with more and more  younger members (over 30% more members),
more benefits for members,  increased market shares and
greatly improved operational results and image.  However, it
was noted that it had not resulted, so far, in more members
becoming involved in the democratic process.

Another positive development was reported by B. Benati of
Sacmi who  referred to the producer co-operatives in Imola,
Italy.  Despite some  differences in the structure in relation
to other co- operative sectors  (members are at the same time
employees) a lot of similarities can be  found.  Some of the
main reasons given for success were effective  governance and
control systems guaranteeing the balance of power, strict 
division of duties and responsibilities, a shared identity
between society  and members and economic ties with members.

During the last two years the problems of corporate governance
and  management control systems were discussed within the
British Consumer  Co-operative Movement.  A working group was
set up by the consumer federal,  the Co-operative Union, to
investigate the matter and to formulate a Code  of Best
Practice.  As a result such a Code was approved by the British 
Co-op Congress in May 1995 which comprises 41 recommendations. 
Moira Lees  of CWS, and also the ICA Europe co-ordinator on
governance, told the  seminar the purpose of the code was to
help societies redefine the duties  and responsibilities of
Governing Bodies and Management, to make governing  and
control issues more transparent and to formulate co-operative 
strategies to achieve this.  She also referred to the steps
CWS was taking  to implement the code.

The seminar unanimously approved a recommendation to the ICA
European  Council to prepare a Code similar to the British
Consumer code on an  European level which should cover, if
possible, all co-operative sectors.