Cooperative governance must often be performed in conjunction with other types of governance. The size of the cooperative makes a big difference to how cooperative governance is practised. In small cooperatives with very little funding and few liquid assets, informal arrangements can work well. Micro to small and medium cooperatives (that is, where income is over VT 10,000,000) need to formalise their practices more if they are to survive and be successful. The trend towards growth in the size coops means that the process of formalising corporate governance practices as cooperatives grow is important and a key to improving governance in the near future. At the same time, small cooperatives should not be over-burdened with unnecessary red tape. The COSO Act allows for this by streaming cooperative for reporting purposes.
For Micro, Small and medium cooperatives, more formal arrangements need to be in place if the management are doing their job well. The focus of the directors should be on clarifying with members the direction (aims) of the cooperative, then deciding on the best roads to get there (goals) and driving to achieve these aims and goals. The challenge of mapping clearly the direction and the roads that a cooperative society will take is a big job and should not be underestimated. The management also needs to focus on overseeing the implementation of the goals through committee, including having a say in the employment and keeping a constant eye on risks and whether they are being managed well. Management for micro small and medium cooperative businesses need to avoid micromanaging (a common mistake); instead, they should steer.
Most cooperatives under the COSO Act have limited liability, which means that members do not usually have to contribute to the debts of the cooperative if it fails. However, directors can be held liable if they have not fulfilled their duties. Other issues, which are increasingly being recognised as important to cooperative businesses, are:
- Respect for members' rights
- Agreement about and use of effective internal dispute resolution mechanisms for coops
- Availability of timely and accurate reporting to committee
- Self monitoring
- An agreement about to whom accountability is owed, which is put into practice
- Agreed decision-making principles
- The need for the directors to be equally representative of various interest groups, balanced with other requirements for skills and independence
- Transparency in structure and decision making
- Active and persistent conflict-of-interest management, particularly by the directors as a whole and individually
- Up to date and relevant goals and strategies for the coops.
- Members actively participate.
- The committee communicate with members regularly, in a way that members understand.
- Democracy is at work in the board and the wider cooperation.
- The management are keen to learn about and apply good corporate governance, and share their knowledge.
- The management must audits their own performance to pinpoint areas for improvement.
- Good relationships thrive and good conflict resolution policies and procedures exist and are acted upon.
- Plans, policies and decisions are transparent.
- Planning is inclusive, goals fit with the purpose of the cooperative, and plans are implemented, monitored and reviewed regularly. Planning is seen as an opportunity to work as a team to produce a plan that reflects the aspirations of the cooperative. The plan is a vehicle for 'one voice' in the cooperative.
- Budgets are developed against the plan, projects and activities.
- Younger people, women and marginalised groups are actively brought along into the cooperative concept.
INFOsheet: Top ten practical tips for good cooperative governance
1. Keep register of members up-to-date
Make sure the registers has the following information for every person who is or has been a member:
• the person's name and address
• the date that person became a member
• the date that person ceased to be a member (if applicable)
(Note: the register of members is a continuing record and if kept correctly, it will help to resolve any disputes about who is a member.)
2. Know your role and responsibilities
Make sure the committee and management fully understand their role and responsibilities
3. Know your by-laws
Know your rule book (by-laws). Encourage your members to learn about it.
4. Know your money position
Make sure you know about the money position, or use your auditor more often (say every three months) to check that your staff are managing the money properly (a good auditor will do this for the management).
Make sure that tax matters are handled correctly, in particular the VAT Regulations), Pay As You Go (PAYG) and Fringe Benefits Tax (FBT). Make sure the severance payments are paid for all your staff.
Make sure a board members is at every meeting when the ORBDS come to visit.
7. Insurance (currently optional)
Make sure the cooperative property is insured. Check that insurance policies are renewed on (or before) the due date.
Be careful to only use the cooperative assets in line with conditions (most will say that personal use is not allowed). Better still, make a policy about this for everyone to see and use.
9. Minutes of meetings
Make sure you keep minutes of every meeting of the cooperative. Minutes should say what type of meeting you had (AGM, general meeting or board member's meeting, what day it was held, who came, and what decisions were made).
10. Hold an annual general meeting (AGM)
Make sure you have an AGM every year (usually before 30 November).