Cooperative board responsibilities: Focus on governance

The role of a cooperative board is to protect and make the most of the assets of the cooperative.

A cooperative board accomplishes its goals by communicating with the cooperative membership, establishing policy, ensuring compliance with policy and by guiding the future of the organization.

The bylaws are the organizing document of a cooperative and define the intended purpose of the cooperative. Understanding the purpose of the cooperative’s mission statement guides the board in setting policies and establishing goals. Simply put, aligning strategies that maintain the cooperative’s mission and purpose in accordance with the bylaws are the duties of the board. The board needs to be cognizant and respectful of the organizing past, dutiful to maintain the usefulness and purpose of the present and be aware and flexible for the future.

Staying connected with customers and members through good communication practices will allow the board to evaluate how present conditions relate to the cooperative’s purpose and asset utilization. Has the customer/member base changed or moved in a different direction than the original purpose or just slightly self-corrected as time passed? How is the impact on the members of the organization being measured? Reduced patronage and attendance at annual meetings can be useful indicators.

With purpose and mission in mind, the hiring of the executive director is of paramount importance for any cooperative board. Thoughtful and deliberative effort should go into choosing someone to run the organization on a day-to-day basis. Handing over the duties of fulfilling the mission to one person requires both support of the board and a system of timely and useful evaluation of the executive director. Constant challenging of authority or rubber-stamping every decision can lead to disaster. The collective wisdom of the board helps to alleviate this dichotomy, but can be a constant challenge.

The board should be engaged in planning for both the long-term as well as year to year. Understanding good reporting and monitoring the environment makes for good decision making and ensures adequate resources meet the mission of the organization. Continual monitoring should be conducted in both management reports and through meaningful questions and answers with staff at board meetings.

The board needs to be aware that they are responsible for financial oversight. Setting policies to allow for good communication of the true financial position is necessary to avoid both financial embarrassment and implied improprieties. At the core of financial integrity is an audit committee. The committee should review both practices and policy compliance. Additionally, the audit committee should have the records and practices audited annually by an outside firm separate from the accounting firm contracted by the organization.

In addition to being the voice of the organization in the community and within the cooperative, the board has the responsibility to continually improve itself. Engaging in trainings on board leadership, self-evaluation and recruitment of new members with desired skill sets are activities successful boards engage in to be effective in meeting their responsibilities.

Serving as a member of the board of any cooperative should be seen as a duty and not a reward. Being aware, conscientious, respectful and passionate are traits any board would welcome. Finding the right blend can sometimes be a challenge. A nominating committee to fill vacant or expiring terms should scan the community to seek out potential members that would add value to the board.

Michigan State University Extension educators working with the MSU Product Center’s cooperative development services are available to assist boards in determining due diligence.