University of Wisconsin Center for Cooperatives

Criteria for Separating Cooperative Board and Executive Decision Areas1

There is no fine line of distinction between the executive's and the board's authority for specific action. The following ten criteria may be helpful in distinguishing board and executive decision areas.

Criterion 1

Ultimate accountability to stockholders or members is vested in the board of directors, who may subsequently grant certain authority to officers, agents, and employees as permitted under the corporate charter, bylaws, and applicable laws. The executive or general manager, in turn, is accountable to the board and initiates action within the boundaries of authority granted by the board.

Criterion 2

The board of directors is primarily concerned with idea decisions; executives are primarily concerned with action decisions.

Criterion 3

Decisions on overall objectives, policies, and goals of the company are the responsibility of the board.

Criterion 4

Decisions related to attaining objectives and goals are the responsibility of executives.

Criterion 5

Decisions involving long range and consequential commitment of resources, which include facilities, finances, or manpower, are the board's responsibility.

Criterion 6

Decisions involving long range and consequential commitment of resources, which include facilities, finances, or manpower, are the board's responsibility.

Criterion 7

Decisions related to the assurance of capable executive succession by providing for executive depth and training are the board's responsibility.

Criterion 8

Decisions specifying the ideal pattern or model of board behavior and performance, and the review of and perpetuation of this ideal through indoctrination and training of directors, are the board's responsibility.

Criterion 9

Control over the executive and of board performance, decisions involving long range and substantial financial commitments and financial structure, objectives and policies, and public and member relations are the board's responsibility.

Criterion 10

Control over operations and over subordinate managers and employees, decisions involving budgets, procurement, production, and marketing plans, and industrial and employee relations programs are the responsibility of executives.

The following are some decision areas that are often performed by the board, management or shared.

Board Decisions Solely

  1. Defining corporate objectives, policies, and goals (but with opportunity for management participation and recommendations for setting goals).
  2. Long range financial commitments, including sources and type of financing.
  3. Selection of chief executive (manager) and his salary.
  4. Defining duties of chief executive.
  5. Pilling board vacancies.
  6. Employing corporate auditing firm (unless bylaws provide for membership approval).
  7. Retaining board legal counsel.
  8. Basic changes in financial structure.
  9. Approval of major plans and commitments.
  10. Matters where stockholder or member decisions are due.
  11. Selection of banking, insurance, and related entities.
  12. Approval of employee retirement and benefit programs.
  13. Basic affiliations with suppliers.

Management Decisions Primarily

  1. Defining operating or management level objectives, goals, and policies within constraints of corporation-wide decisions.
  2. Short run commitments of resources.
  3. Preparation of budgets, production plans, and market plans for approval by board.
  4. Defining duties of division and department heads.
  5. Administration of employee benefits program and salary determination (consistent with salary scales approved by board for key management people).
  6. Selection of employees.
  7. Short run decisions on sources of supply that do not modify basic board decisions.
  8. Selection of management's legal counsel.
  9. Employee working conditions.
  10. Measurements of employee performance.

Shared Decision Areas

The following were identified by respondents in a survey by the Agricultural Cooperative Service. There is some difference from the above list.

  1. Relations with government, industry, and general public.
  2. Insurance requirements (but not the source selection).
  3. Amounts and sources of working capital.
  4. Engaging professional services.
  5. Employee benefits plans.
  6. Selections of depositories.
  7. Appraisal of cooperative's performance.
  8. Distribution of earnings.
  9. Financial relationships with affiliates.
  10. Employee bonding.
  11. Changes in basic organizational structure.
  12. Issuing capital instruments.
  13. Authorizing facility construction, expansion, etc.

Criteria for Separating Board/Management Responsibility Areas

Accountability To Members To Board
Areas of Concern
  • Idea Decision, Judge
  • Ends/Purpose
  • Action Decisions, Manage
  • Means/Activities
Commitment of Resources
  • Determine Values
  • Long Range, Consequential
  • Set Limits, Monitor
  • Intermediate and Short Range
  • Organize and Control Resources
Information Request, Review Develop, Analyze, Provide
Goals, Policies Determine Implement
Management Evaluation
  • Set Policies Regarding Results to be Achieved and Limitations on Activities
  • Monitor Progress Toward Results
  • Monitor Compliance with Limits
Provide Information for Monitoring
  • Determine Values and Goals
  • Set Limits
  • Monitor
Perpetuation Assurance of Capable Management and Board Succession Support, Participate
Board Process Determine Structure, Behavior, Performance Evaluation, Calendar and Agenda None

1Adapted from Leon Garoyan and Paul O. Mohn, "The Board of Directors of Cooperatives, "University of California, Davis, 1976.

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