GOVERNANCE IN COOPERATIVES - Dr.G.N.Saxena

GOVERNANCE

The United Nations Development Programme (UNDP) defines governance “ as the exercise of economic, political, and administrative authority to manage a country’s affairs at all levels.

The Organisation for Economic Cooperation and Development (OECD) describes “Governance” as : “ the use of political authority and exercise of control in a society in relation to the management of its resources for social and economic development.”

Governance is understood as the structures and processes by which cooperation in organizations is directed and controlled for the purpose of producing beneficial outcomes for its stakeholders and to promote greater openness and democracy as well as longer-term thinking and commitment.

COOPERATIVE GOVERNANCE

Co-operative governance is the set of relationships between the co-operative’s members, the board as representatives of members that advise management for the members and the management that has the care and control of the co-operatives for the members and how a business can be best governed in the interests of its owners.

Co-operative governance provides the structure through which the objectives of the cooperative are set and the means of attaining those objectives and the monitoring of performance.

It requires that managers and stakeholders adopt a thinking which mediates between hierarchy and autonomy thereby effectively combining the strengths of each principle.

In a cooperative society, it is very essential that the critical balance between the needs of the members expressed through the democratically elected leadership are implemented by the professional executives to the entire satisfaction of the members of the cooperative society.

This tight rope balance can function pragmatically only when the enlightened democratic leadership assumes the role of monitoring and supervising the implementation of economic and social needs expressed by the members without interfering with the implementation process by the professional team.

The system of governance in cooperatives is relatively a complex system compared to private enterprises, because ensuring retention of control by members, to a great extent, depends on the awareness, understanding and knowledge of the elected representative about the cooperative philosophy, responsibility and their own role in the management. In order to insulate itself from the outside interference such as political and government, the prevailing legislation made for the cooperatives will also play a great role.

INSTRUMENTS OF GOVERNANCE IN COOPERATIVES

Typical organisational structure [governance frame] of a co-operative in Asia. This structure is the product of the byelaws.

PARAMETERS OF COOPERATIVE GOVERNANCE

Good governance in a cooperative society will largely depend upon the following factors:
§ Autonomy & Democratic Leadership
§ Awareness to Elected Representatives
§ Cooperative Law
§ Role of Government
§ Federal Structure
§ Value-based Professional Management; and
§ Social Audit

AUTONOMY & DEMOCRATIC LEADERSHIP

In order that the cooperatives remain member driven, the autonomy of the Board is important.

As it has been rightly said that :-

“ OBVIOUSLY NOT ALL WELL GOVERNED COMPANIES DO WELL IN THE MARKET PLACE. NOR DO THE BADLY GOVERNED ONES ALWAYS SINK. BUT EVEN THE BEST PERFORMERS RISK STUMBLING SOME DAY IF THEY LACK STRONG AND INDEPENDENT BOARDS OF DIRECTORS.”

AWARENESS TO ELECTED REPRESENTATIVES

Cooperative so far have evolved out of the weaker sections unfortunately their representatives are scantly aware about responsibilities and role they are supposed to play. Their knowledge about the business dimensions, vision, business acumen and sharpness to take control of the business initiatives is far from desirable.

In case a healthy environment for good governance, if it is to be set up, there is an absolute need to make them aware about the existing laws for cooperatives, awareness about their role and fraternising them with the existing business environment.

It has also been observed at most times that the professionals also exploit this inherent weakness and take away the control and initiatives from the elected representatives. In this situation the organisation shirks from catering to the felt needs of the members and, thus, actually functions as a private business enterprise.

Essential expected role of the elected leadership in setting up a good governance, therefore, would be to take care of the members’ needs, transparency and right of information to members, develop consensus in decision making (democratic decision where the dissent is not to be over-looked) and above all, to ward off the interference by the non stake holders like government and politicians.

COOPERATIVE LAW

In most countries the ‘cooperatives’ were recognised as an important economic tool, therefore, were, in most cases, formed at the ‘encouragement’ from the Government. States assumed for themselves the responsibility to develop cooperatives.

The Governments in various countries are thinking to give greater autonomy to cooperatives and amending the erstwhile cooperative laws. In India the Government of India recently in the year 2002 had enacted the Multi-state Cooperatives Societies Act 2002 with a view to provide more autonomy in the functioning of National Level Cooperative Societies.

ROLE OF THE GOVERNMENT

In most countries, the role of the Registrar of Cooperative Societies has no longer remained of a “friend, philosopher and guide” of the Cooperative Movement, but his office is now, in most cases, being used as a ‘single’ key option to exercise control.

Government should recognise the Cooperative Movement as a distinct & major stakeholder in both national and international affairs

Governments should recognise that the Cooperative Movement is highly democratic, locally autonomous but internationally integrated, and a form of orgnisation of associations and enterprises whereby citizens themselves rely on self-help and their own responsibility to meet goals and objectives.

Governments seek to support the Cooperative Movement and to wor closely with it to develop an effective partnership to achieve their respective goals.

Government to take into account the special character of cooperatives and the Cooperative Movement, which differs significantly from that of associations and enterprises not organised according to cooperative values and principles.

Governance, and for that matter, good governance, is not the game of singles. In this case, the governments and the Cooperative Movement have to join forces to bring about positive changes in favour of the ultimate basic members.

FEDERAL STRUCTURE

In order to effectively serve its members and to also strengthen and propagate the Cooperative Movement, it is desirable that the cooperatives not only have a well-knit and widely spread structure at different levels through multi-tiered structure, the federation aspect of cooperatives has also been expressed in the 6th ICA Principle of Cooperation "Cooperation among Cooperatives". The 6th ICA Cooperative Principle states:
"Cooperative serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures."

It may, however, be ensured that these upper tiers do not grow at the cost of primaries. The upper federal tiers of cooperatives should be made to play more positive role in promoting the interests of primaries rather than acting as their competitors. The various tiers should function through ‘inter-dependence’ so that the need for each tier remains in prominence.

VALUE BASED PROFESSIONAL MANAGEMENT

It is the collective responsibility of the Board of Directors to protect the interests of the members and carry out the business of the cooperative society according to expressed needs by the members,the role of “professionals” in setting up good governance cannot be ignored.

The professionals who are associated actively in the jobs of the cooperatives should be necessarily inducted into understanding cooperative philosophy, cooperative way of functioning and, above all, respecting the democratically expressed needs of the members.

The concept of value-based management emanates out of the thinking that there should be only one unified board in a cooperative society to build a collective competency by bringing in professional managers as a united team on the Board to achieve the objects of the cooperative society.

The team of professional managers on the board, such as functional directors, allows them to comprehend the thinking of the elected leaders in totality and thus are able to serve their members without compromising their professional management capabilities.

This concept will have ample scope to allow policy formation to be driven by both member-lead philosophy and business results.

SOCIAL AUDIT

To judge the effectivity of a cooperative society to the purposes it has been formed besides the financial and management audit, the society should also conduct social audit so that it may receive a positive feedback about the reach of the services it is rendering to its members.