New Generation Cooperatives:
Managers’, Directors’, And
Owners’ Responsibilities
Gary Brester
Dept. of Agricultural Economics and Economics
Montana State University
AGBE 445
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OUTLINE
1.
Overview of New Gen Cooperatives
2.
Management Responsibilities
3.
Director Responsibilities
4.
Owner/Grower Responsibilities
5.
Questions
2
Motivation
1. $2 billion of investments
2. Lots of publicity
3. Rural development?
4. Value-added agriculture?
5. Risk management?
6. USDA Resources
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New Generation Cooperatives
1. They are different from
traditional cooperatives
2. Capitalization
3. Rights and obligations to deliver
4. Stock is tradeable
5. But, should not be considered
similar to other tradeable stocks
a. Why are IOFs ignoring
this opportunity?
b. Rationale is usually market access
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What Do The Following
New Gens Have In Common?
1. South Dakota Soybean Processors
2. Pro-Gold
3. Spring Wheat Bakers
4. North American Bison
5. Walton Bean Co-op
6. Bushel 42 Pasta
7. Century 21 Alliance
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OUTLINE
1.
Overview of New Gen Cooperatives
2.
Management Responsibilities
3.
Director Responsibilities
4.
Owner/Grower Responsibilities
5.
Questions
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Management Responsibilities
1. Fiduciary responsibility to owners
a. Protect investment and sustain
business entity
b. Maximize returnson investment
 Higher beet prices
 Patronage refunds
 Growth in price of delivery rights
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Management Responsibilities
2. Incentives must be structured to
optimize grower-to-sales issues
a. Price of delivery rights
b. Financial condition
 Strong balance sheet
 Annual net income
c. Reduce costs across the system
d. Capital investment
 At least replace depreciation
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Management Responsibilities
3. Develop/implement the strategic
management business plan
a. Monitor progress
b. Solve problems
4. Hire employees
5. Evaluate employees
6. Reward employees
7. Fire employees
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Management Responsibilities
8. Provide leadership
a. Communication
b. Understand problems
c. Listen
d. Quick action
e. Explain decisions
f.
Realize how people view decisions
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Management Responsibilities
9. Foster trust
a. Why?
b.
c.
d.
e.
Because trust is more difficult to
create than money
 And much easier to lose
Actions foster trust/distrust
No place for arrogance
 Fosters an “US” vs. “THEM”
Communication
 Listening/oral comments
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 Newsletters
Newsletter Topics
1. Quarterly/easy to create
a. Human interest
b. Regional crops/issues
c. Sugar prices/policy/branding
d. Share prices
e. Harvest/pile conditions
f. Changes in policies
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OUTLINE
1.
Overview of New Gen Cooperatives
2.
Management Responsibilities
3.
Director Responsibilities
4.
Owner/Grower Responsibilities
5.
Questions
13
Director Responsibilities
1. Manage ONE employee: CEO
a. Hire/retain/replace decisions
b. Develop written annual goals
c. Evaluate CEO performance annually
 Provide written evaluations
 Reward good performance
2. Help CEO to develop strategic direction
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Director Responsibilities
3. Educate CEO about member concerns
a. Must communicate the relative
importance of various concerns
4. Provide owners with explanations
of decisions
a. Recognize that reasons for some
decisions cannot be made public
b. Directors serve an important
education function
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Director Responsibilities
5. Seek/attend management education
6. Request outside help as needed
a. Ex-Officio members
b. Use consultants on specific matters
7. Submit themselves to evaluation
8. Must be seen as unbiased
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Board Conflict of Interests
1. As a member, you can be more
concerned about self-interest
2. As a director
a. Act for benefit of organization
b. Benefit the largest number
of members
 Could harm smaller groups
c. Communicate interests of members
d. Recognize inherent conflict of
economic interests
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Board Conflict of Interests
3. Balance conflict by
a. Requiring efficiency
and competitiveness
b. Avoiding subsidizing others
or free riders
c. Having a long-run view
d. Recognizing life-cycle and
member diversity
e. Protecting the process that
generates profits
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Board Legal Responsibilities
1. Duty of care or diligence
a. Act as a prudent person would and
in good faith
2. Duty of loyalty
a. Act in the best interest of members
and avoid conflict of interest
3. Duty of obedience
a. Comply with laws, regulations,
bylaws, contracts and Board policies
4. Duty of oversight
a. Proactive in ensuring full information
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and internal controls
Governance Focus:
Management
1. Board role
a. Passive
b. Advisory
c. Essentially “rubber stamp”
2. CEO role
a. Proactive
b. Strong
c. Dominant
d. Self serving
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Governance Focus:
Board and Organization
1. Board role
a. Proactive
b. Strong
c. “One voice”
d. Focus on purpose
e. Focus on owners
2. CEO role
a. Proactive
b. Strong
c. Focus on Purpose
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Governance Focus:
Director and Representative
1. Board role
a. Proactive
b. Strong
c. Individual directors represent subgroups of owners
2. CEO role
a. Proactive
b. Strong
c. Focus on aligning with the most
powerful coalition
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Governance Focus:
Stakeholder
1. Board role
a. Individual directors represent subgroups of owners
b. Individual directors represent others
(community, employees)
2. CEO role
a. Focus on pleasing
competing stakeholders
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OUTLINE
1.
Overview of New Gen Cooperatives
2.
Management Responsibilities
3.
Director Responsibilities
4.
Owner/Grower Responsibilities
5.
Questions
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Owner/Grower Responsibilities
1. Growers must realize that they are
no longer on an island
a. They are part of a group effort
b. Sometimes have to sacrifice as
an individual to contribute to
the whole
c. This requires strong leadership
in return
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Owner/Grower Responsibilities
2. Growers must follow the rules
a. Pre-defoliating
b. Loading trucks if hot
c. Hauling mud
d. Beginning harvest on-time
e. If the rules are bad,
get them changed
3. Ask questions
a. Demand reasonable and
logical answers
4. Must participate in education
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QUESTIONS?
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