Inside the cooperative board room: Seeking procedural excellence

Cooperative boards of directors are ultimately responsible for their own financial health. Success can be achieved by understanding the co-op’s mission and respectful discussion at the board level within an agreed upon framework.

Cooperative (co-op) boards have responsibilities beyond linking with their members, reviewing policies annually, assuring compliance with stated policies and goals, and dreaming of how the future of the co-op will be formalized and realized. See previous Michigan State University Extension article on cooperative governance for more on how the board conducts its own business inside and outside of the board room to ensure business harmony and creditability.

The board chair provides leadership, sets the agenda and facilitates meetings. Additional managerial duties include managing board member interactions, and being in contact with the general manager between board meetings. Generally, an executive committee assists the board chair with making decisions between board meetings.

It is incumbent on board members to act in good faith and show loyalty to the co-op. Self-dealings should be tempered with reasonable diligence to adhere to the business judgement rule: How would a reasonably prudent person act? This would include fiduciary duties of care to protect and utilize assets of the co-op.

Members must disclose conflicts of interest in matters before the board, before discussion begins. Questions to be asked should include:

  • Is it fair to the cooperative and its board members?
  • Is there any appearance of impropriety?

A director with a presumed conflict of interest should state the conflict and not take part in any discussion. Some would recommend leaving the board room rather than stay and abstain in a vote.

Due diligence requires that on any matter before the board, a motion be made followed by open discussion and any necessary legal counsel following a formal vote. Some boards have outside directors, which may be lawyers. It should be remembered that they are lawyers on the board, not the board’s lawyer. Additional oversight policies should be in place to assure the action is within the law and that outside audit recommendations are followed.

Once a vote is taken, some degree of confidentiality is required. Agreement should determine what materials are non-public information. An example could include what might be construed as contentious and vigorous debate. This can be accomplished by agreeing on what the talking points will be and that the board speaks with one voice. This can be as formal as a written policy or declining to comment.

Co-op board service is not an earned right by tenure or patronage, but rather arduous duty requiring ever increasing knowledge and skills. MSU Extension educators working with the MSU Product Center provide training for co-ops as part of the USDA Rural Cooperative Program.

Additional articles in this series:

Cooperative board responsibilities: Focus on governance

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