Exploring Board Leadership Opportunities
If you are contemplating joining a co-op board, whether at the encouragement of a neighbor, an invitation from a colleague, or after exploring ways to give back to your community, you likely have questions. Directors play a vital role in leading their cooperatives, taking on various legal duties and other responsibilities. As you explore the opportunity to serve on a co-op board, consider whether you can effectively uphold these duties and responsibilities.
The following questions, based on recommendations for individuals considering corporate board leadership from the American Bar Association’s Corporate Director’s Guidebook, may help as people consider cooperative leadership via the board.
- Do I have sufficient time to diligently perform the duties required of a director? For example, do I have scheduling conflicts with the board’s regular meeting schedule? Do I have sufficient scheduling flexibility to respond to unexpected needs?
- Do I have skills and experiences that allow me to meaningfully participate as a board member? Are there special skills I should develop to participate in board activities more fully?
- Do I have a sufficient understanding of the cooperative’s business to be effective as a director? How can I further develop this understanding?
- Do I have confidence in the cooperative’s current senior management and directors?
- Do I have a compelling interest in engaging in board leadership?
Rod Kelsay, who served as the executive director of a council of cooperatives and allied organizations, shares recommendations for development of a cooperative’s first board of directors.
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Electing the First Board of Directors and Building the Board over Time
New cooperatives have the important task of developing the enterprise’s first board of directors. After determining the right number of directors for the co-op, which can depend on the cooperative’s size, type, and development stage, the qualifications of directors, the terms of service for directors, and more – these factors are generally outlined in a cooperative’s bylaws — the organizers of a cooperative will need to recruit people to serve on the first board. Generally, the initial board of directors is either named in a new cooperative’s articles of incorporation or elected at the first official meeting of the cooperative’s membership following incorporation. The publication, “How to Start a Cooperative” from the U.S. Department of Agriculture’s Business and Cooperative Programs suggests calling for nominations of members to create a panel of at least one candidate for each position on the board, possibly more than one per position.
The work of recruiting new board members continues throughout the life of a cooperative and boards can systematically assess and update how they engage and recruit new directors to ensure they have the “right mix of people” on the board. Based on a recent survey of cooperatives across the United States, participating co-ops use multiple strategies to identify and recruit directors, including identifying candidates through networks of current directors and senior managers, nominating committees, and other strategies. In a survey of 67 agricultural cooperatives, researchers found that “use of a nominating committee structure is positively correlated with cooperative performance and delivering value to members” among participating cooperatives.1 Sometimes, cooperative boards may change their composition, for example their size or the required qualifications of directors, for a specific purpose or in response to a major change like a merger and such changes may require approval by the co-op’s membership.
Check out the blog article, “The Benefits of Building More Diverse Cooperative Boards” for considerations about creating a diverse co-op board.
Build Board Policies, Set Expectations, and Grow Culture
As cooperative boards develop and evolve over time, there will be various practical considerations. For example, emerging cooperative boards will have to consider practical questions like when and where the board will meet, whether the group will adopt procedural rules or norms like use of Robert’s Rules of Order, how they will ensure directors have the materials they need to effectively participate in meetings and make decisions, and more. Below are a few tips boards can use to host effective meetings, although these practices are by no means exhaustive.
- Use an agenda to identify major topics for discussion and timing for meetings;
- Develop and share materials, including an agenda, operational reports, financial reports, and other items, with directors prior to the meeting with ample time for review;
- Open and adjourn meetings on time to respect everyone’s time and effort;
- Allow sufficient time for discussion and action for agenda items;*
- Compile clear and concise minutes from meetings and present them to directors for review according to the board’s policy; and
- Ensure that each director participates and contributes to discussion to make certain that a minority of directors do not control most discussion.
*How a board allocates their meeting time may seem to rank low in the relative importance of all the things a board needs to consider, but there is evidence from agricultural cooperatives that co-ops that believe they spend the right amount of time on various topics like member relations and organizational performance in the boardroom report better self-rated performance than cooperatives that spend too little or too much time on a topic, of those cooperatives participating in the study referenced. This is particularly true for risk management and strategy.
Boards can identify ways to improve their board meetings using the “Board Meeting Productivity Assessment” that is part of the publication Assessing Performance and Needs of Cooperative Boards of Directors developed for cooperatives by the U.S. Department of Agriculture.
Further, cooperative boards are generally responsible for adopting, reviewing, and updating the policies of a cooperative, although management also has a role in policy development and maintenance. Policies can vary depending on the nature of the cooperative’s business and stage of development. They provide a roadmap for the board to address recurring situations and create internal controls. For example, emerging co-op boards may want to consider basic board policies like a confidentiality policy, a conflict-of-interest policy, and a code of conduct for directors. A basic example of a co-op board confidentiality policy from the U.S. Department of Agriculture reads:
“A director may not disclose information obtained by virtue of his or her position as director before such information is made available to all members at the direction of the board, nor provide such information to selected persons under circumstances giving business or other advantage to the director or other persons.”2 [make this a block quote]
Read more about policy development and sample policies for cooperatives in the U.S. Department of Agriculture publication, “Sample Policies for Cooperatives” and the publication “Cooperative Policy Development” from Oklahoma State University’s Cooperative Extension Service.
Cooperative scholarship recognizes that interpersonal dynamics among a board of directors, including factors like trust, respect and positive regard, a sense of mutual responsibility, as well as open and honest communication, impact a board’s functioning. For example, there is evidence to support the idea that cooperative boards that allow for healthy dissent inside the boardroom have better self-rated performance relative to strategic growth for the cooperatives who participated in the referenced survey. Cooperative boards could consider building relationships among directors through simple activities outside of meetings like shared meals, activities inside the boardroom like “ice breakers” to begin meetings, or formal structures like peer support programs.
The Importance of Co-op Principle 5: Education and Training in Co-op Governance – update existing content with CGRI info!
Co-op members exploring future board leadership, and even directors who have led their board for many years, can benefit from ongoing education and skill-building. In fact, the International Cooperative Alliance (ICA)’s Cooperative Principles specifically include Principle 5: Education, Training and Information, recognizing that, “Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. . .”3
Further, as cooperative directors face increasing public and legal scrutiny, there is an increasing awareness of the important role of ongoing education and training for directors. Two legal scholars explained, “Directors are now expected to have more than a passing understanding of financial statements, their fiduciary responsibilities to the cooperative, and other essential items.”4
Dr. Chris Bruynis studied the key factors that contribute to success for emerging agricultural cooperatives. Dr. Bruynis and his collaborators found that emerging agricultural co-ops that provide ongoing training to the board of directors and management team are 15% more likely to remain in business, 41% more likely to achieve growth, and enjoy a 26% increase in member satisfaction.
Dr. Chris Bruynis shares the importance of board and member training for the overall success of a cooperative.
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Most Cooperatives Provide Board Training in Key Responsibilities
Cooperative board training programs can help directors understand their roles and responsibilities, including ensuring that new directors, and even seasoned directors, have a firm grasp of their fiduciary duties, among other areas. In a survey of 500 cooperatives across industry sectors and the United States, participating co-ops shared the topics in which they train directors:
- 80% or more of responding cooperatives train board members in fiduciary duties, financial topics, and the cooperative model
- Many cooperatives, between 53% and 78% of responding cooperatives train directors in ethics and compliance, industry-specific topics, legal and regulatory issues, and risk management
- Almost half of responding cooperatives (49%) train directors in corporate social responsibility/sustainability/social impact
- Some responding cooperatives train their directors in meeting facilitation and conflict resolution – 41% and 32%, respectively5
Whether directors prefer to learn through reading, in-person teaching, or connecting with peers, there are many resources to build governance knowledge and skills. Directors can ask their co-op leadership what type of training programs are provided for directors, whether the co-op is a member of any organizations that provide cooperative education, or whether the co-op partners with co-op educators. Directors can also explore learning resources individually. Below are a few places to start!
- Multidimensional Governance Assessment for cooperative directors developed by researchers at Texas A&M University.
- Assessing Performance and Needs of Cooperative Boards of Directors by USDA Rural Development Rural Business – Cooperative Service that includes a director self-assessment in multiple areas, a full board assessment, and a board meeting assessment.
- Navigating Your Legal Duties: A Guide for Agricultural Cooperative Directors published by the National Agricultural Law Center that includes chapters in director roles, fiduciary duties, special cooperative issues, and risk management, along with self-assessments for directors.
- Foundations New Agricultural Cooperative Director Training from the Center for Agricultural Cooperative Director Development includes 23 modules areas like board evaluation, CEO evaluation, basics of financial statements, patronage, strategic thinking, and more. This is a paid training developed by scholars at multiple universities across the United States, including individuals at The Ohio State University.
- Programs from the International Centre for Co-operative Management at St. Mary’s University, including degree and certificate programs, webinars, and more.
Co-op boards can also build training directly into their meetings and activities. Regular board training programs can help directors develop their technical and soft skills. To develop a board training program, cooperatives may look both internally and externally. For example, training programs may be specifically constructed and hosted by a local cooperative’s key employees or by a federated cooperative partner. Various education and nonprofit institutions that work with or support cooperative enterprises like councils, cooperative associations, and universities offer generalized training opportunities and educational resources. Further, industry-based associations, like agribusiness, housing, or financial industry associations, often host learning sessions, updates, and professional development opportunities. Dr. Zoe Plakias, an agricultural economist with experience serving on a cooperative board, shares some ideas for practical training opportunities for cooperative directors.
Dr. Zoe Plakias discusses how practical training for board members can increase accountability in a cooperative.
View the transcript.
Autry, C.T. & Hall, R.F. (2009). The Law of Cooperatives. American Bar Association Business Law Section.
Berner, C., Jacobs, K., & Grashius, J. (2023). “2021 Cooperative Governance Research Initiative Ag Sector Findings.” University of Wisconsin Center for Cooperatives and University of Missouri Graduate Institute of Cooperative Leadership. https://resources.uwcc.wisc.edu/Research/CGRIAgSectorReport_FINAL.pdf
Berner, C. & Schlachter, L.H. (2022). “Findings from the Cooperative Governance Research Initiative: 2021.” University of Wisconsin-Madison Center for Cooperatives. https://resources.uwcc.wisc.edu/Research/CGRI_2021Report_web.pdf
Bruynis, C. Goldsmith, P., Hahn, D. & Taylor, W. (2001). “Key Success Factors for Emerging Agricultural Marketing Cooperatives.” Retrieved from: https://www.researchgate.net/publication/46534189_Key_Success_Factors_for_Emerging_Agricultural_Marketing_Cooperatives
Corporate Director’s Guidebook, 6th ed. (2011). Corporate Laws Committee, American Bar Association Business Law Section.
“Cooperative identity, values & principles.” (2018). International Cooperative Alliance. Retrieved from https://www.ica.coop/en/cooperatives/cooperative-identity
Kenkel, P. (2008). “Cooperative Policy Development.” Oklahoma State University Cooperative Extension Service. Retrieved from https://extension.okstate.edu/programs/agribusinessand-cooperative-management/site-files/docs/cooperative-policy-development.pdf
Rapp, G. (1993). “Sample Policies for Cooperatives.” U.S. Department of Agriculture Agricultural Cooperative Service, Cooperative Information Report 39. Retrieved from https://www.rd.usda.gov/sites/default/files/cir39.pdf
Wadsworth, J. (2015). “How to Start a Cooperative.” U.S. Department of Agriculture Rural Development Business and Cooperative Programs, Cooperative Information Report 7. Retrieved from https://www.rd.usda.gov/files/publications/CIR%207%20How%20to%20Start%20a%20Cooperative%20%282015%29.pdf
Wadsworth, J. (2000). “Assessing Performance and Needs of Cooperative Boards of Directors.” U.S. Department of Agriculture Rural Development Rural Business – Cooperative Service, Cooperative Information Report 58. Retrieved from https://www.rd.usda.gov/sites/default/files/cir58.pdf