Governance of Large Co-ops

Big in co-operative news right now is the troubled leadership of the Co-operative Group. Controversy has consumed the group’s management and led to the resignation of its leader, Euan Sutherland. One of my favorite reporters on the topic, Anthony Murray, has been following the developments closely for Co-operative News. He reports that fault lies with the directors, described in an analysis report. But doubt has been cast on the governance of large co-ops in general, and some have questioned their sustainability.

How does governance of large co-ops work successfully? Without knowing how widespread the co-op model is, one does wonder. But there are a variety of successful solutions. Murray has some answers in an article showing that co-operative governance works at scale. The article links to a very interesting report by Professor Johnston Birchall called The Governance of Large Co-operative Businesses. Birchall points out in the introduction that 1,465 co-operatives worldwide create over $100 million in annual revenue (or turnover).

The answers to governing large co-ops, Birchall explains, are diverse and difficult to define in discrete categories. To begin with, worldwide co-operatives have many different ownership structures. In general terms, the sponsor of the report Co-operatives UK, has developed some general quality standards in a “Corporate Governance Wheel,” the hub of which is: A. Focus on the purpose of the co-operative. Then in a continuous circle around this purpose is: B. Carry on the work of governance in an effective way; C. Perform effectively in clearly defined roles; D. Ensure appropriate and effective member participation; and E. Develop the capability of the governing body to be effective.

As for the Co-operative Group, Murray reports on how the future board may look. The new management structure being considered could consist of a Vorstand model. This is a structure that includes a supervisory board that oversees the management board. Supervisory boards can be found in successful large co-operatives that Birchall analyzes including the Zen-Noh co-op in Japan, the Fonterra co-op in New Zealand, and the SOK co-operative group in Finland.

Co-operatives — large and small — are ubiquitous and governed successfully worldwide, as Birchall’s report makes clear. More research like this will build a broader understanding of co-operative models, as diverse as they may be, and build their reputation as practical business solutions.

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