There is no one right way to create a governance structure. The design of governance is entirely dependent on the desires of the members. Good governance practices will be extremely important in maintaining accountability and the general success of the cooperative.
Collective Governance
Good cooperative governance will:
- Ensure that the board and management pursue objectives that are in the interests of co-operatives and members;
- lead to effective monitoring of activities;
- ensure efficient and effective use of available resources;
reduce conflicts; and - increase accountability and transparency in cooperatives.
Basic Components of Governance
In most cases, conversion to a cooperative should involve learning and training about new ways to operate. Future cooperative members may wish to form a working group to examine questions of and possibilities for governance. When designing governance structures for a newly converted cooperative, here are some of the key considerations:
- What are the governing bodies, and what realms does each control? Board of Directors? Advisory Board? Bicameral governance? Role of committees? Only the members (in the case of an LLC entity)?
- How are governing bodies elected or appointed? Member-elected board? Board-appointed advisory council? Specific appointments by outside organizations (such as a nonprofit that has a right to appoint one board seat)? How long do people serve? If there are elections, what is the nomination process for candidates?
- Who are the members? If applicable, what are the criteria for membership? Who can become a member and participate in governance? Are there different classes of members with different powers?
- What is the division of power between the board and members? What are the rights and responsibilities of directors? Of members? When can members invalidate board action?
- What are avenues for member and stakeholder participation and influence? How can members and stakeholders take part in suggesting or dictating new directions for the organization?
- Can the functions of the organization be delegated into semi-autonomous committees?
- How are meetings held? Who can participate in meetings? How often are meetings and how do people receive notice of them? Are meetings in person or virtual? How is the agenda set? How is the meeting facilitated? Are there rules of order?
- How are proposals brought, considered, and adopted? Who can bring a proposal, when, and about what? Is there a clear process for exploring the proposal? Is it adopted by a majority? Supermajority? Consensus? By Holacratic procedures?
- Transparency and Communication? How can the organization efficiently and clearly communicate governance structure, rights, responsibilities, and activities to members and stakeholders?
- Central organizations and outside governance: What could be the role of a centralized trust or federation of organizations that dictates some activities and decisions of the member organizations?
How to practice governance docs with care
Beyond the basic governance rules applicable to cooperatives, regardless of chosen entity, there remains a good amount of flexibility in the details of the Bylaws and Operating Agreements. It is critically important that cooperatives adhere to the rules they choose to adopt. Otherwise, actions can later be challenged and invalidated on the basis that they were taken without adherence to adopted procedures. It is very common for cooperatives to fall into habits of operating informally, without regard to the procedures they have adopted. Later, especially when there are disagreements, chaos can ensue as members seek to invalidate prior decisions.
Members should become familiar with and practice their governance procedures with care. Ways to make adhering to governance docs easier:
- Ensure that governance documents avoid legalese and are written in plain-English (and/or another primary language of workers).
- In-person trainings and simulations for workers can greatly facilitate adherence to governance documents.
- It helps to designate one member or a committee of members responsible for regularly reviewing procedures to ensure that the cooperative is following its chosen roles. In some cooperatives, we have referred to this role as a “Cooperative Trustee,” meaning someone with a duty to ensure that the democratic principles of the cooperative are being faithfully upheld.
Internal Governance Controls
What mechanism does the cooperative have for members to exercise control over decisions affecting their workplace?
Regular Board elections can help make directors accountable, but there often needs to be more than that. Managers need to be directly accountable to the worker-owners, inviting participation from workers prior to making a decision, explaining their decisions, and providing means for review and evaluation by workers. If there are loose structures or no structures of command and control, leaders will arise spontaneously. Most cooperatives want to encourage this process. However, without formal structures, these leaders may operate without accountability and in a way that impairs democracy in the workplace.
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