My Views on Co-operative Corporate Governance (1996)

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    This document has been made available in electronic format
         by the International Co-operative Alliance ICA 
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                         December, 1996

          (Source: Review of International Co-operation
                    Vol.89, No.4/1996, pp.20-24)


          My Views on Co-operative Corporate Governance

                         by Raija Itkonen*
          **********************************************


Preface
-------
What do we mean by corporate governance? Does co-operative
corporate governance differ from that of other forms of
enterprise? Those were the questions I asked myself when I was
invited to make this contribution. 

In my opinion the purpose and objectives of co-operatives provide
the framework for co-operative corporate governance.
Co-operatives are organised groups of people and jointly
managed and democratically controlled enterprises. They exist to
serve their members and to produce benefits for them.Therefore,
co-operative corporate governance is about ensuring co-operative
relevance and performance by connecting members, their elected
representatives, management and employees to the policy, strategy
and decision-making processes. Good co-operative corporate
governance is greater owner involvement in direction and control.

What Has Gone Wrong?
--------------------
Power and decision-making in co-operatives are all too often
concentrated at the top in too few hands. Co-operative
performance has for a long time been characterized by lack of
participation and sense of involvement. Statutory governing
bodies exist to review past performance and to endorse
management's decisions rather than to challenge policies and
strategies. Speaking up on issues and offering constructive
opposition to chair and top management are no spontaneous
elements in either international or national co-operative
culture.

Furthermore, personal relationships and deeply rooted old-boysÕ
networks weaken or prevent objective decision-making. However,
active members who feel that they are part of an organisation
that has goals in harmony with their own and clear roles for
constructively engaged, competent  governing bodies and
management would be a powerful force to build co-operative
identity and excellence. The task of governing bodies should be
to bring different perspectives and expertise to the direction
of co-operatives whereas management must have the authority and
responsibility for the day-to-day operations. 

Forgetting about the prime objectives of co-operatives and
focusing on various theoretical management systems that have come
into fashion one after another rather than on their
possible impact  on the performance of the organisation have
resulted in contemptuous indifference and frustration among
employees. Suppressive hierarchical structures have at the
same time created insularity. Power, status symbols and
privileges have become more important than co-operative goals and
success.

How to Improve the Situation? 
------------------------------
A prerequisite for improved performance is that co-operatives
start to put their house in order by substituting rhetoric with
action, eliminating hypocrisy and standing up for their unique
qualities and thus distinguishing themselves from other business
enterprises. Co-operative participatory democracy should be
restored and the synergy inherent in the co-operative structure
should be reactivated. 

A change is needed which is built on confidence in human capital
- the most important of all resources -, in commitment,
creativity and innovation brought about by proactive membership,
governing bodies, and employees. Key elements for viable
co-operatives wishing to attract and retain the best possible
human resources for building success and sustainable future are
in my opinion trust, empowerment and appreciation of diversity.
The ability to capture knowledge and wisdom gives co-operatives
their competitive advantage. A prerequisite is that participants
from all parts of the organisation know and understand its
purpose, core values and visions.  

Co-operative members and employees  -  women and men - with their
experiences, knowledge and energy are an inexhaustible resource
of development provided that they are encouraged to participate
and contribute to co-operative performance. Human resources
represent in my opinion a deeper and more important source of
energy than financial resources. Success of economic decisions
depends on human resources at the disposal of the organisation.
Therefore, relying on networking with stakeholders rather than
having  them as distant referees can re-energize co-operatives.
Strong corporate governance which takes its obligations seriously
is a source of strength to management.

Furthermore, broader participation especially by women and young
people -  currently minority groups in co-operative
decision-making - is a way to make policies, strategies and
business of various co-operatives more people-centered and
user-oriented and consequently more productive. 

Eliminating the unequal power relationship and gender
segregation, and at the same time creating new partnerships
between women and men with shared power and shared
responsibilities would bring about a new and successful era for
co-operatives and attract new active and committed people into
membership. A combination of the strengths and talents of women
and men could also change stagnant structures and routines, help
co-operatives to meet the changing challenges of working life and
instil much desired entrepreneurship into them. Implementing
equality in corporate governance and management structures is to
think about relevance and excellence of co-operatives. 

A better gender balance can offer new perspectives to
co-operative governance and management due to the fact that women
and men have different values and priorities. According to
research, male leaders prefer traditional command-and-control
systems with clear goals and ways of working. They concentrate
their energy on one issue at a time. They promise privileges and
rewards but keep power and information for themselves. Female
leaders, on the other hand, prefer to distribute information and
power. Results are produced together in networks and teams.
Therefore, women with their interpersonal skills, preference
for collaborative working environment and consensus decisions are
well suited to contribute to building participatory, transparent
organisations in our era which is searching for an approach that
supports diversity of views and empowers people. Top-down
development models no longer respond to present day needs and
aspirations.

Why so Few Women?
-----------------
The 1994 World Survey on the Role of Women in Development
identifies three factors leading to poor representation of women
at the decision-making level: 

-    a predominantly male culture of management, 

-    the continuing current effect of past discrimination

-    lack of recognition of the actual and potential
     contribution of women to economic management 

"What also works against women's advancement is the so-called
glass-ceiling, an invisible but impassable barrier formed out of
biased work conditions and the male corporate culture", notes the
World Survey. Recruitment policies, employment rules, and
performance evaluation systems are predominantly male-made and
male-based. Since corporate structures are largely built around
male norms they do not favour or support the involvement, skills
and competence of women.

Changing Environment
--------------------
In Europe there are 105 women for every 100 men. The average life
expectancy of women is 79,6 years for women and 73,1 years for
men. Thirty years ago women made up less than 30% of the European
work force whereas their share today is 41%. According to the
European Commission women will make up 75 % of Europe«s new
workers and 50% of the graduates in Europe's business schools by
the year 2000. If co-operatives wish to have the best and the
brightest forces involved in their activities, they must review
their  structures and recruitment policies and become more gender
responsive.

The growing gender-responsive attitude within the European Union
is reflected in the increasing number of women in decision
making. In 1994 the number of female members in the European
Parliament grew from 100 to 146 out of 626, thus 25.7%.  At the
same time the number of female commissioners was increased to
five, to correspond to the share of female MPs. When Austria,
Finland and Sweden joined the Union in 1995 the number of
female members of the European Parliament reached 27.6%, which
is very close to the target of the critical mass of 30% when real
influence becomes possible. 

The European Union Fourth Medium-Term Community Action Programme
on Equal Opportunities for Women and Men points out that - the
"principle of equality between the sexes is one of the basic
principles of the European model of democracy. The increased
presence of women in decision-making institutions and bodies
would provide for a renewal of values, ideas and styles of
behaviour beneficial to society as a whole and contribute to
achieving the goal of parity on representation".

"In view of the changing environment some companies have also
started to review their policies", reports an article published
in Business Week. "In Britain, for instance, a programme called
Opportunity 2000 was launched five years ago. This programme has
convinced companies to set voluntary numerical goals for 
promoting women. Among its 300 member organisations, 32% of all
management positions are now filled by women. Some of the
organisations are government authorities, which have been more
disposed toward female managers than the private sector.
Opportunity 2000 helps companies get over their fear of
goal-setting by stressing the importance of equal opportunities
in financial terms. The result is encouraging compared with the
10.7% of overall female management positions in Britain", writes
Business Week.

However, frustrated by the slow progress of equal opportunities
in practice and by increasing unemployment many women have also
started to set up their own businesses. In Germany one third of
all new businesses are owned by women, an increase of 20% since
1975. In Britain women now start one new business in four.
According to a leader in the Economist women-owned companies also
have more staying power than the average.

A Step Forward
---------------
The resolution on Gender Equality in Co-operatives proposed by
the European Regional Assembly in 1995 was unanimously endorsed
by the ICA Centennial Congress. A step forward in view of
improved corporate governance reflecting the member-oriented,
participatory and value-driven true nature of co-operatives is
to start to create a climate of support for women by establishing
clear promotion policies and plans including targets. 

Some women and many men do not favour affirmative action as a way
forward. They consider quotas and parity to be degrading to women
and emphasize the need to abolish the obstacles to women's full
participation by making more effective use of existing
procedures. However, positive action as an intermediate stage
could change present power imbalance and role models and make
women and men accustomed to power and responsibility sharing.
As Dr. Lou Hammond Ketilson from Canada says in her article
concerning the study "Research for Action on Women in
Co-operatives" published in the Review of International
Co-operation: "To address equitable representation in democratic
and staff structures is right and proper in itself. It is also
more than that. 

When co-operatives deal with issues that cluster around equity,
they address questions that have to do with how co-operative
organizations `do democracy' and how they do business". 


References:
------------
Human Development Report 1995

Women: Looking beyond 2000

Making Membership Meaningful

Patricia Aburdene, John Naisbitt: Megatrends for Women

The 1994 World Survey on Women in Development

Tony Dunderfelt:  Naisen ja miehen maailma (The World of Women
and Men)

The UN Fourth Conference on Women: Platform for Action

EU: Fourth Medium-Term Community Action Programme on Equal
Opportunities for Women and Men (1996-2000)

Lennart Koskinen: Usko tulevaisuuteen (Faith in future)

Edgar Parnell: Reinventing the Co-operative

Review of International Co-operation No. 2/1996

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*    Ms. Itkonen is responsible for international co-operative
     relations of the Finnish Consumer Co-operative Association
     (FCCA). She is also Chairperson of the ICA European Council
     and member of the ICA Board and the Global Women's
     Committee.