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Governance

A cooperatives has a unique governance structure that reflects its ownership and control by its user members. The structure supports its orientation toward providing benefits to its members who use the cooperative, as opposed to returns on capital investments.

Board of Directors

Members elect the board of directors, who are also members. Directors, as visionaries of the cooperative, develop the long-range business strategies that both ensure the economic health of the cooperative and meet the needs of the membership.

As trustees for the members' equity, the directors review and evaluate all financial reports, assess the capital needs of the cooperative, and determine patronage refund allocations. They establish operating policies and are responsible for hiring and evaluating the general manager.

Directors must stay clear of conflicts of interest, so that their decisions serve the needs of the entire cooperative, rather than specific groups within the business.

Board-Management Relations

The management of a cooperative is hired to carry out the objectives and policies adopted by the board. The general manager oversees the detailed operations of the cooperative, and manages the people, capital and physical resources within the guidelines set by board policy.

The manager furnishes the board with information and recommendations for long-range planning, develops the budget for board approval, and provides ongoing financial and operations reports. Management is responsible for hiring and supervising staff, and carrying out board policies.

Members

Members control the cooperative by democratically electing member representatives to a board of directors. Members directly vote on changes to articles of incorporation and bylaws, and on cooperative mergers or dissolution.

Members need to understand the rights and responsibilities that come with being part of the cooperative. They also have a responsibility to patronize the cooperative, and to provide the capital necessary to finance the business. This member support keeps the co-op economically healthy, and allows it to adapt to changing member needs.

Cooperatives emphasize a high-quality member communication and education program as a sound investment in the co-op's future. An informed and educated membership is essential. Members can make better voting decisions and contribute to the co-op's development when they understand the business and financial issues that the co-op is facing. Member understanding and participation in the democratic processes contributes to a more sustainable, better functioning cooperative.

Resources

USDA Rural Development Library of Publications

The U.S. Department of Agriculture (USDA) Rural Development -- Business and Cooperative Programs has an extensive library of useful publications, especially those related to agricultural producer cooperatives. Publications on governance topics include:

The Circle of Responsibilities for Co-op Boards
Cooperative Information Report 61

Annual Audits Board Responsibilities
Cooperative Information Report 41

Assessing Performance and Needs of Cooperative Boards of Directors
Cooperative Information Report 58

Appraising Manager Performance
Research Report 136

Sample Policies for Cooperatives
Cooperative Information Report 39

Decision-Making in Cooperatives With Diverse Member Interests
Research Report 155

Organizing and Conducting Cooperatives' Annual Meetings
Cooperative Information Report 21

Director Liability in Agricultural Cooperatives
Cooperative Information Report 34

Voting and Representation Systems in Agricultural Co-ops
Research Report 156

Sample Policies for Cooperatives Cooperative Information Report 39

What Co-op Directors Do
Cooperative Information Report 14

Cooperative Member Responsibilities and Control
Cooperative Information Report 1 Section 7