Corporate Governance and Management Control Systems (1997)

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This document has been made available in electronic format
by the International Co-operative Alliance (ICA)
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May, 1997
(Source: Coop Dialogue, Vol., No. 1, Jan-April, 1997, pp.32)

Corporate Governance and Management Control Systems
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Statement of the Regional Assembly for Europe on Corporate
Governance  and Management Control Systems in European
Co-operatives
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(Corporate Governance and Management Control Systems have been
major issues confronted by Mega Co-operatives all over the world.
Co-operatives, being user owned and user managed institutions,
should ensure owner users' participation in business decision
making. Co-operatives grown into large business organisations in 
Europe have tried many strategies in this direction with limited 
results.

The newly established European Regional Assembly has given high
priority for these issues for the survival and growth of co-operatives
as an alternative enterprise for the consumers and producers.

The statement quoted here shows the complexity and also the 
importance of the issues which could be applicable to many giant
co-operatives that are emerging in Asia and the Pacific.

-Editor)

1. 	The review of Corporate Governance and Management Control
Systems in European co-operatives has been one of the top priorities
within the work of ICA Europe - all the more so as many co-operatives
had experienced grave problems which have threatened to undermine the
profile and identity of the whole co-operative movement.

References are made to the 1994 ICA Report on Corporate Governance
and Management Control Systems in European Co-operatives; to the Code
of Best Practice adopted by the British Consumer Co-operatives in 1995 
and to the papers, presented on the Regional Assembly 1996 in Budapest.
This documentation is available through ICA channels.

2.   The Regional Assembly (RA) acknowledges the vital importance of
good governance and management control systems for the future existence
and well-being of the co-operative system, enabling members actively to
participate in setting policies, making decisions and controlling results.

In this context it has to be recognised that the main objective of co-
operatives today, as in the past, is to promote the common economic,
social and cultural interests of their members - as it was underlined by the
statement on the Co-operative Identity adopted on the ICA Congress in
Manchester, October 1995. An efficient business operation is therefore an
absolute must to reach the targets for member promotion.

3.   Ready-made solutions to improve corporate governance and
management control systems are not available. The RA recommends that
the individual societies and their Boards carefully consider their own
situation related to broad guidelines and, if necessary, draw up and
implement the necessary measures. Changes can only be made locally.

4.   The RA underlines the decisive role of the elected members in the
Governing Bodies, especially in the Boards, within the democratic
structure of co-operative societies. 

*   An open and easily understandable election procedure is required and
contested elections are desirable, and should  be encouraged.

*   The elected members should be made fully aware of their  duties and
responsibilities, which require their  involvement, the need for appropriate
qualifications, and regular training programmes.

*   There should be a clear-cut division of legally binding responsibilities
between the Governing Body (the Board) and  Senior Management (the
Chief Executive) set out in the society's rules and/or standing orders where
the law does  not provide for it.

*  Details of working procedures in Boardrooms, Executive and Board
remuneration, key information and figures regularly supplied by the
management should be open in each co-operative society. 

5.   In co-operative societies, the RA recommends efforts should be made
to elect more women to the Governing Bodies thus securing a better
representation and participation of members.

6.   The reports of external and internal audits are of great help for the
control of the business operations of the individual society. These should
be thoroughly evaluated by the Board and discussed with the top
management.

7.   Only a minority of members are able to participate actively within the
Governing Bodies. The RA sees it therefore of utmost importance that the
societies develop and introduce new ways of information, consultation and
control as already adopted by consumer co-operatives and societies in
some other sectors. In addition members should receive on a regular basis
information about their society and other co-operative matters.

8.   The RA would encourage each member organisation to introduce a
Co-op Code of Best Practice - similar to the Code adopted by the British
Consumer Co-operatives, with the objective of helping societies to
redefine the duties and responsibilities of the Governing Bodies and
Management, to make governing and control issues more transparent and
to formulate strategies to achieve this.