|
 A co-operative is both a Business Enterprise and an Association of People, so it is essential to build strong foundations for both aspects of the co-operative. A winning business strategy alone can create a successful business, but not necessarily a successful co-operative. It is essential to have a strong democratic association, which ensures that the co-op members truly own and govern their enterprise. For this reason, a co-op has two inter-related structures:
- The business enterprise structure may be simple or complex, depending on the nature and scale of the co-op's activities, but in most respects it will be similar to other private enterprises.
- The democratic structure allows all members to participate in the governance and direction of the enterprise. The democratic principle of one-member, one-vote is what distinguishes a co-op from other forms of business. Each co-op must establish the means to practice this principle successfully. Otherwise, it will be a co-op in name only.
This section provides an overview of what is involved in creating the democratic structure for co-operatives. It is not a detailed how-to manual, but more a road map that shows the lay of the land and what needs to be considered. The Links section will direct you to further information.
1. Tools to build the democratic structure
Here is an overview of the types of organizational structures and procedures used by co-ops at their various stages of development - all of which help build the foundation for democratic ownership and control. If you are familiar with organizational development you will find many similarities here between co-ops and other types of democratic enterprise, especially non-profit organizations. However, the application of these structures must fit the unique purpose that each co-op is designed to serve.
 • Steering committee
• Interim board of directors
• Articles of incorporation and by-laws
• General membership meetings and AGM
• Elected board of directors
• Committees of the board
• Co-op advisors
• Use of delegates and other voting structures
Steering committee
When the idea for a new co-op is first being explored, a Steering Committee is usually formed at a meeting of interested and potential members. The committee's role is to lead the way in pursuing the co-op idea and goal. This includes establishing the feasibility of the co-op idea and setting in place the various business and democratic procedures required to establish the co-op on a solid footing.
Since the Steering Committee becomes the first public face and voice of the co-op in the community, it is important to select members carefully. For example, in order to establish that the business idea will work and will meet the needs of the intended members, it is necessary to include people with sound business judgement and skill, who represent the intended member users. All committee members should be well respected in their community.
As a group, the Steering Committee will require a range of skills to get the job done - from research and communications to financial management and proposal-writing skills. The committee will also need to consult experts at various stages of the process. These can include engineers or financial experts at the feasibility study or business planning stage, and lawyers or co-op development specialists at the incorporation and set-up stages. As the co-op moves closer to reality and the workload increases, it may also be necessary to set up sub-committees by drawing from the larger pool of interested members.
Interim board of directors
An Interim Board is put in place in order to incorporate the co-op. This usually occurs after a feasibility study and business plan has determined that the co-op idea is viable and is likely to succeed as a business. The Interim Board only serves until the general membership elects a board of directors at the first annual general meeting. Members of the Steering Committee will often sit on the Interim Board, but other people may be added at this point.
The Interim Board's overall role is to plan the co-op and represent the needs of members. At the early stage, this will include recruiting sufficient members to ensure the co-op's success, finding funding to hire experts, and incorporating the co-op.
Articles of incorporation and by-laws
These documents are the legal foundation for the democratic structure of your co-operative. There are variations by province, but the Articles of Incorporation generally include details such as the co-op's name and address, its directors, the type and value of its shares. The Articles must always comply with the legislation under which the co-op is governed.
The By-laws are a more detailed set of rules that spell out procedures for internal governance and democratic process. They are not an inflexible set of policies on how to deal with every possible scenario, but they offer solid rules and guidance on issues like how organizational decisions are to be made, the rights and responsibilities of the board and members, how long directors can hold office, and under what conditions members' capital will be refunded by the co-op.
The Articles of Incorporation are filed with the appropriate government regulator, but the by-laws reside with the co-op and they serve as the day-to-day reference document that the co-op will rely on. So it is essential that the by-laws are well structured and concise, that they do not conflict with the articles of incorporation in any way, and that all members can understand the rules governing their co-op. Every co-op is advised to have a co-op lawyer assist with or review these documents since it a key to the success of your organization, and to minimizing potential legal difficulties for your co-op.
LINK here for more information on incorporating your co-op.
General membership meetings and AGM
Throughout the life of a co-op, meetings of the general membership are a prime indicator of the democratic health of the organization. High attendance at general meetings is a clear sign that the members are active owners and decision-makers in the enterprise. Low attendance can suggest a form of disconnect between the co-op leaders and the members they are intended to serve. When members exercise their right to vote and have a say, they direct the co-op leaders and staff to act on their behalf. In this way, the co-op serves its intended purpose of meeting the needs of its member-owners.
Each co-op is required by law to conduct an Annual General Meeting (AGM), and this is the minimum in terms of general membership meetings. The agenda for the AGM includes a report on the year's activities, a financial statement for the co-op, naming of auditors, election of the board of directors, and adoption of resolutions related to co-op policies and by-laws. All members have a vote in decisions at the AGM.
Many co-ops and co-op federations also use the annual meeting as an educational opportunity for members, since it is a rare chance for members to gather in one place. The larger co-ops tend to host conferences, while smaller co-ops will focus on specific education or training needs of their members.
The main rules and procedures for co-op meetings are spelled out in the co-op's by-laws, and the minutes of meetings provide a record of all decisions made. It is the role of the board of directors to ensure that these procedures are followed. For example, the board must give proper notice of a meeting, and provide an agenda in advance to ensure that a general meeting is well attended and members come properly prepared to engage in fruitful discussion.
Elected board of directors
Members of the Board of Directors are co-op members who are elected by and represent the general membership. They oversee the co-op's activities, represent the members' needs and interests, and lead the way in achieving the co-op's mission and goals.
Board members assume a great deal of responsibility, so they must possess the right mix of skills and personal characteristics in order to fulfill their role on behalf of members. While the type and level of responsibility of board members will evolve as the co-op matures, here is a general overview of the board's responsibilities:
• Ensure that co-op business is conducted according to the co-op's articles of incorporation and by-laws.
• Comply with all legal requirements - of the law governing the co-op's incorporation; of all contracts the co-op enters into; and the general legal responsibilities of the board.
• Hire competent management and staff, and adopt measures to oversee their performance.
• Develop and adopt long-term business strategies, along with policies to guide co-op operations and management.
• Implement systems to oversee and monitor the co-op's activities - including annual budgets, monthly financial and operations reports, annual audit, and board minutes to record all key decisions.
• Ensure proper orientation and training for all members, and develop a succession plan for ongoing board renewal.
• Act as an intermediary between members and management / staff, and ensure adequate flow of information from one to the other.
The Board of Directors is elected from the general membership, and all co-op members have the right to put their names forward for nomination. As seen in the job description above, it is essential that members elect those among them who are best qualified and able to uphold the commitment required of a position on the board. At the same time, the co-op must create a training and support program that helps board members do their job and ensures that less experienced members have opportunities to grow into the leadership role.
Committees of the board
Committees are considered the working arms of the board and are accountable to the board of directors. Each committee is assigned to specific areas of responsibility and is typically chaired by a member of the board. When a co-op uses committees it also allows more members to get involved in the work and leadership of the co-operative.
Co-ops use two key types of committees. Standing Committees conduct ongoing work of the board such as Finance & Audit, Member Relations, and Board Development and Training. Ad-hoc Committees are set up for special needs or projects. In the early stage of development this can include committees for business planning, member recruitment and promotions, and drafting the co-op's by-laws and policies. Committee needs will change as the co-op matures.
In all cases, the committee acts on behalf of the board and members. Terms of reference are usually set forth to direct the committee in its tasks - providing objectives, timelines, job descriptions, and reporting requirements to the board and membership.
Co-op advisors
At virtually all stages of a co-op's development, there will be a need to consult outside advisors and experts on a range of subjects. This may begin with hiring a co-op development consultant and a legal advisor to assist in the set-up stage. It can include setting up a pool of advisors to provide ongoing advice to the board when needed. Or it can sometimes include non-voting advisors who sit on the board of directors.
The key to democratic ownership and control of the co-op is the ability of members to make decisions about their own enterprise. Since they cannot make good decisions without adequate knowledge, this is why they use advisors who specialize in the expertise they require. Rarely is the expert's knowledge taken as gospel, but instead it is weighed with all other relevant facts and considerations to formulate the best decision.
As industries become more specialized and issues more complex, the use of outside experts can help co-op boards stay current and at the leading edge. In many large and established co-operatives, it is considered essential to use outside advisors for the board in order to balance the influence of professional management teams with the interests of co-op members. The result is a balance between a successful business and a successful member association.
Use of delegates and other voting structures
The concept of one-member, one-vote is not always a simple one to apply, especially in very large co-operatives where the membership is widely dispersed. In these cases, co-ops often use a system of representation where local members of a district elect a representative to the larger co-op decision-making body. In some cases they elect their own director to the board who represents their district, while in other cases they elect a delegate who, along with other delegates, will elect the board of directors. In all cases, local members choose the delegate they believe will best represent their collective interests.
The delegate voting system is most often used in large agricultural co-operatives, as well as in federated co-operatives that cover large territories and levels of membership - e.g. from local to provincial to national.
In recent years, many large co-operatives have begun to offer the option of online voting, which can easily bridge the distance between widely dispersed members. While this method is unlikely to replace standard elections any time soon, it allows more members to cast their votes in key decisions such as electing the board of directors or, for example, deciding whether to merge with another co-operative.
Back to top of page
2. Co-op education and training - essential to success
 One of the greatest strengths of the co-operative movement has been its contribution to the education and development of people. Co-ops have often been called Schools of Entrepreneurship - where everyday people get the opportunity to learn how to run their own enterprise. There are thousands of co-op examples worldwide that show how ordinary people have achieved quite extraordinary things, but one of the key tools to their success is always Education and Training provided by their co-operative.
It is the tool that empowers the members of a co-operative to fully engage and participate in the democratic process - and it is why Education and Training is one of the 7 co-operative principles.
The suggestions outlined below can help shape a training program that will help your co-operative meet its full potential. Additional information on this site, combined with input from your provincial co-op association, can create a program that is available whenever a new member or staff person enters your co-op.
Co-op orientation for all stakeholders in the co-operative
Since the co-op model is based on a different set of values and principles than other enterprises, it is essential that all members, directors, managers and staff share a common understanding of what it means to be part of a co-operative.
A co-op is not a place where the classic top-down models of power and decision-making will work, nor will attitudes of disrespect or intolerance for different points of view. It is a place where all players must prepare to expand their view of what is possible - both in human relationships and in what can be achieved through co-operation.
A Co-op Orientation Program should focus on the following types of topics:
• A view of the larger co-operative movement that your co-op is part of - including the co-op sector on a global scale, in Canada, and in your province or region. This includes the types of co-operatives that exist - consumer, worker, producer, multi-stakeholder; the social and economic sectors in which they operate; the structures they create in order to succeed in a global economy, such as co-op federations; and the support systems for co-operatives, such as provincial and national co-op associations.
• Understanding your own co-operative within this larger context - its specific purpose, type and industry sector, and its potential to connect with and learn from other co-operatives.
• The seven international co-operative principles and what they mean. This is best studied in the context of your own co-operative. Through a group exercise, you can flesh out exactly how these principles will be applied in your co-op.
• A clear understanding of what makes your co-op different from most private enterprises in your industry, including all the practical implications of these differences. A co-op has a different purpose (to meet the needs of members); a different ownership and control structure (one-member, one-vote); and a different allocation of profit, where applicable (generally based on how much a member uses the co-op, not on how many shares held). Look for and make the most of any competitive advantage related to being a co-op and doing things differently.
When all members and staff in the co-op share this common understanding, they will each require specific training in order to fulfill their particular role in the co-op.
Member training
All members must understand their role and responsibility in being a co-op owner - both in terms of the business and the democratic association. First of all, members must learn the rules of being loyal and effective user-owners of the co-op's services, because without this, the business is unlikely to succeed. Depending on the capital needs of your co-op, members may also have to make a significant financial investment in the co-operative.
Members must learn to exercise their right to vote and have a say in the enterprise - attending meetings, being informed, offering suggestions for improvement, and getting involved in committee work. Like any owner, they should keep an eye on the overall health and direction of the enterprise and be attuned to changes in their industry.
In the early stages of development, practical training in co-op procedures can include anything from invoicing and market research to meeting and voting procedures. These needs will change as the co-op evolves, but the co-op should adopt a clear policy that members will receive the training they require to be effective owners of the co-op.
Board training
The role of the board of directors is a challenging one, and new board members must be equipped for the job. They should come to the board with a co-operative attitude, personal integrity, and commitment to the task at hand. But they will likely have a variety of education and training needs, including:
• The exact role and responsibilities of the board, specifically as it relates to your co-op
• The legal responsibilities of the board
• The realities of the co-op's business and the industry in which you are operating
• Financial management procedures - assessing budgets, financial statements, etc.
• Human resource policies and procedures, especially when the co-op hires staff
A board training program will include many dimensions that change over time, but it is essential to the democratic health of the co-op that a core training program be developed and maintained. As new members are elected and the board is renewed, this training program is essential.
As part of the overall board training program, the co-op should consider ways to introduce younger and less experienced members to leadership roles - such as co-chairing a committee, and mentoring by senior board members. In this way, the co-op helps build the leadership base of the co-operative and grooms potential new directors.
Management and staff training
The staff team of any co-operative will bring needed skills and expertise to the organization, but rarely will they bring much knowledge of co-operatives and how they work. For this reason, all management and staff must participate in the co-op orientation program. They must also understand the role of management vs. the board, and the rights and responsibilities of members. The staff of a co-operative must become totally allied with the co-op's purpose and recognize that when serving the members, they are serving the owners of the enterprise.
Back to top of page
3. Creating an active and engaged co-op membership
 Every co-op has a unique purpose and a unique set of needs in terms of level of commitment required from its members. Nonetheless, an active membership is always a sign of a healthy co-op - whether that means the members are simply loyal consumers of the co-op's products or services, or they are dedicated volunteers involved in the operation and development of the co-op. Here are some things to consider in building commitment and fostering an active and engaged membership:
Focus first on the reason to engage
The central focus for any co-op must be its core purpose, which is to provide a product or service that meets the needs of its members - whether that is housing or social services, or marketing for agricultural products. All other co-op activity revolves around this center. In order to recruit and retain committed co-op members, there must be a clear link between the success of the co-op and the success of the individual member's life or livelihood. If members don't see a personal benefit they are unlikely to commit to the co-op idea, or to maintain commitment over the long term.
To achieve buy-in from members, the co-op leaders must begin with a sound business idea and plan, and over time maintain a progressive business focus that is always committed to meeting members' needs and expanding services where possible. This will require a skilled and dedicated leadership team that demonstrates both business acumen and an undisputed commitment to the co-op way of doing business.
Create two-way communication channels
In order to engage successfully with the co-op, members must be informed of developments and upcoming meetings and have opportunities to offer input and suggestions. Here are some things to consider:
• Survey members to determine the best methods of communication. If 90% of members use e-mail and the internet, communication efforts can be largely focused there. However, the remaining 10% must be accommodated. Consider a system where designated members help relay information, keeping in mind things like the co-op's by-laws regarding notice of meetings.
• Consider setting up an online forum or meeting place for your co-op where news and information can be posted and feedback mechanisms are included. Provide training so that everyone can use it effectively, and find ways to accommodate those members who are not online.
• Establish clear policies and procedures for how suggestions and input from members are handled. Members should feel that their input is valued. Depending on the size and complexity of your co-op, this may require systems to create a manageable flow of communication and follow-up action.
Create opportunities to engage
Every co-op will have its unique challenges in achieving an active and committed membership - depending on the co-op's activities or its geographic range - and it will inevitably find its own creative solutions. Here are a few ideas to consider:
Regular meetings and other communication channels: Create policies and procedures that ensure members have regular opportunities to meet, be informed and have input into the co-op's business and decision-making. This will allow everyone to feel connected to the co-operative and its success.
Opportunities to invest: Members who invest financially in their co-operative tend to take a stronger interest and are more engaged in the co-op's success. Where necessary, co-ops use a variety of ways to help members make the required investment such as an equity instalment plan, or setting up a member investment loan program with a local credit union.
Committee positions and other volunteer opportunities: As a rule, people respond more readily to specific requests for help than they do to a general call for volunteers. Create and circulate a list of all volunteer opportunities in the co-op, including everything from committee positions to working on the newsletter, or painting the co-op office.
Knowledge and skill sharing among members: Consider all opportunities in your co-op for members to share special knowledge or skills for the benefit of other members - through workshops, newsletter submissions, etc. Any opportunity to build the overall knowledge base of members and to value the contribution of individual members can help boost engagement.
Ensure equity and fairness for all members
At all times, co-op members need to see the co-op values and principles in action, including a sense of justice and fairness for all. This issue can sometimes arise when the co-op's founding members compare their contribution to those members who joined when the hard work of set-up was complete. Your co-op will have to find ways to address this potential inequity.
Some co-ops compensate their founding members with investment shares in the co-operative, or a reduced price per share. Others pay a one-time bonus when the co-op is in a position to do so. Still others operate on the premise that ‘virtue is its own reward.' Despite the hard work of setting up a co-operative, many founding members will tell you that it was a rich learning experience, and a great opportunity for self development.
Back to top of page
4. Links to additional information and advice
Tools and Guides for Co-op Boards of Directors
USDA tools for Co-op Boards and Managers
This site offers practical tools on topics such as roles and responsibilities, employee compensation, inventory management, director liability, sample policies, and a strategic planning handbook.
CCA site for Co-operative Governance
For over ten years, the Canadian Co-operative Association (CCA) has been supporting excellence in co-op leadership. This site provides reports and surveys, case studies, tools for diagnosing co-op leadership needs, and access to the Governance Matters newsletter.
Co-op Grocer - List of Articles on Board of Directors and Governance
Scroll this page for a list of excellent articles on a full range of co-op governance topics - from asking powerful questions to evaluating the general manager, and much more.
Free Toolkit for Boards
This site is not designed specifically for co-ops, but it does contain a lot of useful information for boards, especially in the not-for-profit sector.
By-laws: How Strong is your Co-op Foundation?
This article provides a good understanding of by-laws and articles of incorporation and their significance in good leadership. However, since this was written in the US, specific legal details will not be relevant to Canada.
Guide to Finding, Selecting and Using Consultants
This very useful guide was developed in the UK, but it is equally relevant for Canadian co-ops.
Tools for Co-op Committees
Guidelines for Co-op Committees
This set of guidelines was written for housing co-ops but the general rules can apply to most co-ops.
CCA Governance - Executive Committees
This particular issue of the Governance Matters newsletter addresses questions related to executive committees - including why you would have one, trends in their use, and the pros and cons.
Committee Terms of Reference - Template
This is a useful tool if you've never set up a committee. It notes all the elements to be considered in setting the committee on the right track.
|
