Governance in
Cooperatives and Social
Enterprises
Cooperative principles
Established by the
International Cooperative
Alliance
1st Principle: Voluntary
and Open Membership
• Co-operatives are voluntary
organizations, open to all
persons able to use their
services and willing to accept
the responsibilities of
membership, without gender,
social, racial, political or
religious discrimination.
2nd Principle: Democratic
Member Control
• Co-operatives are democratic
organizations controlled by their members,
who actively participate in setting their
policies and making decisions.
• Men and women serving as elected
representatives are accountable to the
membership, e.g. Tower Colliery
• In primary co-operatives, members have
equal voting rights (one member, one vote)
and co-operatives at other levels are
organized in a democratic manner.
3rd Principle: Member
Economic Participation
• Members contribute equitably to, and
democratically control, the capital of their
co-operatives. At least part of that capital
is usually the common property of the cooperatives: avoids free-riding problem.
• Members allocate surpluses for any or all
of the following purposes: developing the
co-operative, possibly by setting up
reserves, part of which at least would be
indivisible; benefiting members in
proportion to their transactions with the
co-operatives; and supporting other
activities approved by the membership.
4th Principle: Autonomy
and Independence
• Co-operatives are autonomous, selfhelp organizations controlled by
their members e.g. CRS is not like a
loyalty card
• If they enter into agreements with
other organizations, including
governments, or raise capital from
external sources, they do so on
terms that ensure democratic
control by their members and
maintain their co-operatives
autonomy.
5th Principle: Education,
Training and Information
• Co-operatives provide education and
training for their members, elected
representatives, managers and
employees so they can contribute
effectively to the development of
their co-operatives, e.g. farmers
cooperative training
• They inform the general public –
particularly young people and
opinion leaders – about the nature
and benefits of co-operation.
6th Principle: Co-operation
among Co-operatives
• Co-operatives serve their
members most effectively and
strengthen the co-operative
movement by working together
through local, national, regional
and international structures.
• A recent example is linking of
cooperatives through fair trade.
7th Principle: Concern
for Community
• While focusing on member needs,
co-operatives work for the
sustainable development of their
communities through policies
accepted by their members.
• This is a basic commitment, not to
ensure PR, contrast with
shareholder value
Governance in social
enterprises
Characteristics of new governance
form? (Borzaga and Solari)
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Greater autonomy
Participatory decision-making
Respect for people and their expectations
Balance between efficiency and social
mission
Closer attention to customers and society
Ownership—economic and psychological
Emotional and technical leadership
Fulfilment of array of personal needs and
desires
HRM in social enterprises
• SEs are usually labour-intensive
• Importance of ‘intrinsic rewards’
• Psychological contract between
employees and organisations is different
in nature
• Balance between extrinsic incentives
(pay, flexibility of work hours) with
intrinsic (participation, autonomy, moral
values)
• Distributive justice: balance between
effort and incentives
• Flatter hierarchy
What are multi-stakeholder
processes?
• Term grew out of the Rio Earth Summit
in 1992
• Intrinsically linked to sustainability
• Kofi Annan (2000): need for ‘more
active cooperative management’
• ‘Stakeholders are those who have an
interest in a particular decision, either
as individuals or representatives of a
group’
Key values and ideologies
of MSPs
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Sustainable development
Good governance
Democracy
Participation
Equity and justice
Unity in diversity
Leadership
Case-study of Suma
Wholefood Co-operative
Governance at Suma
• Separate the board from the executive: the
Management Committee (elected, nonexecutive directors) run the Function Area
Coordinators, who are the executive
managers (executive directors)
• Dynamic dialogue between the two;
neither can operate without the other
• Ongoing relationship between the MC and
the general meeting of member
shareholders: Suma has six GMs a year
• MC can only operate with impunity for a
maximum period of three months at most,
• Executive managers at Suma are
answerable to MC on a weekly basis
Consequences
• Separation between the democratic
governance of the cooperative and the
executive management of the business
• Authority of members clearly defined:
operational when they are as GM
• Otherwise they are employees subject
to management culture they have
chosen democratically
• In collectives member-employees can
refuse instructions from colleagues:
‘stop – go – stop’ style of management
• Most collectives suffer from the
problems of most small partnerships of
equals – the tyranny of the individual
veto
Shann Turnbull’s concept
of Network Governance
Network governance
• Response to lack of
accountability and inefficiency
in private sector and
unresponsiveness and
bureaucracy in public sector
• Size of global businesses and
power of CEOs reduces
accountability
• Importance of human scale
• Public disillusion with business
Rationale for network
governance
• Network organisations introduce internal
interdependence as a rational basis for
developing trust, cooperation and greater
operating efficiency
• Internal competition for job satisfaction
and other self-interests
• Unlike command and control hierarchies,
network organisations allow individuals to
utilise their contrary nature to be
competitive/cooperative, suspicious/
trusting, self-interested/altruistic
• Introduces the checks and balance
required for efficiently sustaining the selfregulation of social creatures
Advantages . . .
• Self-interest of executives harnessed
to further the public good by
introducing contestability for senior
positions
• Internal competition for control
provides a much better informed,
sensitive and efficient mechanism to
improve the operations of a business
than competition for control through
the stock market
• A compelling basis for replacing
corporatisation, privatisation or publicprivate partnerships as a means for
increasing economy, efficiency, and
effectiveness of social enterprises