International Co-operative Alliance Co-operative Governance Fit to Build Resilience in the Face of Complexity Photo courtesy of The Co-operators Statement on the Co-operative Identity DEFINITION OF A CO-OPERATIVE A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise. CO-OPERATIVE VALUES: Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and soli- darity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, open- ness, social responsibility and caring for others. CO-OPERATIVE PRINCIPLES: The co-operative principles are guidelines by which co-operatives put their values into practice. 1. VOLUNTARY AND OPEN MEMBERSHIP Co-operatives are voluntary organisations, 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. 2. DEMOCRATIC MEMBER CONTROL Co-operatives are democratic organisations 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. In primary co-operatives members have equal voting rights (one member, one vote) and co-operatives at other levels are also organised in a democratic manner. 3. MEMBER ECONOMIC PARTICIPATION Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensa- tion, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their 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-operative; and sup- porting other activities approved by the membership. 4. AUTONOMY AND INDEPENDENCE Co-operatives are autonomous, self-help organisations controlled by their members. If they enter into agree- ments with other organisations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy. 5. 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. They inform the gen- eral public - particularly young people and opinion leaders - about the nature and benefits of co-operation. 6. 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. 7. CONCERN FOR COMMUNITY Co-operatives work for the sustainable development of their communities through policies approved by their members. Copyright © International Co-operative Alliance 2015 Reuse is authorised, provided the source is acknowledged. Co-operative Governance Fit to Build Resilience in the Face of Complexity 1 INTRODUCTION: Co-operative Governance Fit to Build Resilience in the Face of Complexity SONJA NOVKOVIC AND KAREN MINER 9 Co-operative Governance Fit to Build Resilience in the Face of Complexity 1. INTRODUCTION: Co-operative Governance Fit to Build Resilience in the Face of Complexity SONJA NOVKOVIC AND KAREN MINER A think piece, such as this one on governance in co-operatives, is designed to be thought- provoking and invite debates and discussions, agreements and disagreements, new ideas and reassurances. Our intent is to initiate rich conversations and motivate co-operative members and leadership to re-examine the wide-ranging systems of governance they are a part of. Are these systems conducive to multi-layered participatory frameworks? Are channels of communication open throughout the organization and into the community? Starting from the Blueprint’s vision for elevated participation within the co-operative move- ment (see p. 135), we also look at the economic trends that call for networked governance. Global society is facing new trends in which co-operatives are seen to be the enterprises of the future. How can co-operative governance match those trends and expectations? Our introduction is built on those premises: looking to increased complexity in the socio- economic milieu that demands structures which build resilience, coupled with vibrancy of new networked social movements and co-produced technology, we highlight the charac- teristics of co-operative governance fit for the demands of the emerging socio-economic systems. Our introductory remarks present the building blocks of such co-operative gov- ernance systems, followed by a group of contributors who present a select sample of experiences in co-operatives, allowing us just a glimpse into the diverse world of co-oper- atives today. This document is opening the space for what we hope will be rich ongoing conversations and evolution into the next decade and beyond. Co-operative governance The word governance has its root in the Latin verb “Goubernare” which derives from the Greek “Kybernan”, meaning “to lead, to steer, to be the head of, to set rules, to be in charge of the power”. Governance is related to vision, decision-making processes, power dynamics and accountability practices. The ultimate goal of governance is to effectively fulfill an organization’s goals in a way consistent with the organization’s purpose. Co-operatives are member owned and democratically controlled organizations. Their governance has to meet co-operative’s objectives, protect member interests and main- tain member control. Co-operatives are also values based businesses whose governance and management principles and practices need to reflect and safeguard their values. Governance of co-operatives is very diverse as it reflects an evolutionary path determined by a co-operative movement dating back hundreds of years, combined with different legal environments, industry standards in sectors in which co-operatives operate, the size and type of membership, life cycle and maturity. In terms of co-operative governance effec- tiveness, small co-operatives seem to be doing better than large; worker and producer co-operatives better than the consumer-owned1. 1 Birchall (2014a) The Governance of Large Co-operative Businesses Manchester: Co-operatives UK (also republished by New Zealand Co-operatives Association) 10 Co-operative Governance Fit to Build Resilience in the Face of Complexity What can they learn from each other, and can we find some common ground for co- operative governance? Governance practice, particularly in large co-operatives, is often marked by the ‘state of the art’ in hierarchical corporate governance. The corporate governance model pro- tects owners’ personal interests (focused on financial return), and is typically designed as a top-down control mechanism. There seems to be a great deal of pressure for co- operatives to adopt hierarchical command and control systems and adhere to corporate governance ‘best practices’, against the inherent ability of co-operatives to tap into tools and structures fitting of democratic, member-owned and controlled organizations. In light of numerous governance failures in large corporations, co-operatives included, “Large Turnbull argues that hierarchical2 command and control systems fail because of “the ten- organizations dency of centralised power to corrupt; the difficulty in managing complexity; and the sup- need to break pression of ‘natural’ – human – checks and balances.”3 He goes on to argue that large complexity down organizations need to break complexity down into manageable units and decompose into manageable decision-making into a network of independent control centres – in other words, units and polycentric, or network governance. decompose decision-making Where are co-operatives on this, and how can they deliver on a decomposed govern- into a network ance structure fit for democratic organizations? of independent There are three fundamental properties inherent in co-operatives as peoples’ organi- control centres zations: humanism (people-centred approach); joint (distributed) ownership and con- – in other words, trol, and democracy (self-governance). polycentric, or network Regardless of the expected diversity in the world of co-operatives, we suggest there are governance. three fundamental properties inherent in co-operatives as peoples’ organisations --demo- cratic and values based-- that give them an edge over the competing models in the ability ” to devise complex governance systems for resilient enterprises. 1. Humanism (people-centred approach). Humanistic understanding4 of management and the firm assumes people are intrinsically motivated social beings, balancing their personal and group interests in accordance with general moral principles. Organizations, in this view, embrace a balance of objectives, including financial, and tend to involve key stakeholders (see Box 1.1) in their decision-making process. 2. Joint (distributed) ownership and control. Joint ownership is a hallmark of co-oper- ative organizations, and it is coupled with member control5. Although typically operating under private