Looking for good governance – can co-ops get it right?

Stay different, and don’t ape the corporate governance structures of the private sector. That in outline was the message to co-ops from Professor Yvan Allaire, the executive chair...

Stay different, and don’t ape the corporate governance structures of the private sector. That in outline was the message to co-ops from Professor Yvan Allaire, the executive chair of Canada’s Institute for Governance to delegates at the co-op summit taking place in Quebec this week.

Yvan Allaire talked of what he called a “deep governance crisis” in shareholder-owned companies, where he said management had been driven by investor pressure to focus simply on immediate short-term returns. “Managers are motivated, some would say bribed, to work just for the interests of shareholders,” he said. The interests of other stakeholders in these businesses were being completely disregarded. Co-ops, he said, had to do things differently.

Mr Allaire, who is a member of the Global Council on the Role of Business at the World Economic Forum (Davos), is well-known in his native Canada for his writings on governance issues, and is also co-author of the recent book A Capitalism of Owners: how financial markets destroy companies and societies and what to do about it. He reminded his audience of how executive pay had risen steeply in recent years, so that top managers now could be earning 180 times the average wages of employees in their businesses. At the same time investors were holding shares for shorter and shorter periods of time.

By contrast with these trends in the private sector, he said, co-operatives had the opportunity to look long-term and to work out for themselves what forms of corporate governance best suited their business model. He offered advice for ensuring strong boards of directors, talking of the need to develop clear approaches towards trust and integrity. And he reminded his listeners that board members had a responsibility to make sure they were getting the strategic and financial information they needed to be able to make informed decisions.

Corporate governance in co-operatives has been a major issue in recent months in the UK, where the Co-operative Group has overhauled its governance arrangements to give greater power to independent non-executive directors and to limit the role of member-elected directors.

But short presentations from senior figures from host co-operative Desjardins (Canada), France’s Groupe Crédit Mutuel and the Confederation of Popular Banks (CIBP) and Rabobank in the Netherlands suggested that co-operatives in non-Anglo-Saxon countries are choosing to follow very different routes in respect to governance.

In particular, several speakers stressed the important role which their general assembles of members played in the democratic life of their co-operatives. A speaker from Crédit Mutuel, for example, said that 56,000 of its seven million members would typically attend their regional general assembly, to debate the development of the business and take part in the elections.

Hubert Thibault, Desjardins vice president for corporate affairs, said that his co-operative had undertaken a thorough-going review two years ago of the governance arrangements in place. “It was important not to leave any stone unturned,” he said. Nevertheless the advisory committee’s eventual conclusion was that major change was not needed. In one respect, too, Desjardins chose not to follow conventional private sector wisdom of separating the roles of chair and CEO. In their case, Mr Thibault said, they were unconvinced that this would improve their management arrangements.

From France, Raymond Ouger of CIBP talked of the need to get the balance right in representative structures in co-operatives, including gender balance and balance in relation to social and economic class. He urged co-operatives not to be complacent, telling his listeners: “We have to strengthen corporate governance for co-operative organisations.”

He also insisted on the importance of safeguards to ensure that co-operative structures did not permit current members and managers to strip out the accumulated assets for their own benefit. “We must ensure the trans-generationality of our model. I believe this is fundamental,” he added.

  • For more updates from the 2014 International Summit of Cooperatives, click here


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