When forming a business, governance documents usually take a back seat. Governance documents are bylaws and operating agreements that spell out decision-making, how members or owners exit the business, and conflict resolution. Only when problems arise do owners usually realize the value of a through governance document.
There are many good resources for writing governance documents, like our Farmers’ Guide to Business Structures. Now, a brand-new resource gives us a rare peek behind the curtain of cooperative governance.
The University of Wisconsin-Madison’s Center for Cooperatives has published findings from its 2021 Cooperative Governance Research Initiative (CGRI) Survey. They’ve surveyed 500 cooperative leaders on governance structures.
The agricultural industry has good representation in this data as 14% of the respondents were agricultural producer cooperatives, most of the 25% of retail respondents were from food coops, and several farm credit cooperatives also participated.
On the threshold question of how voting in a cooperative is structured, the report divulges that 95% of respondents practicing direct democracy have fewer than nine members. Larger coops routinely rely on representational governance, meaning members elect a small group of members to make decisions. It is clear that newer cooperatives with fewer members to manage function well, giving every member a seat at the Board of Directors’ table, but that efficacy diminishes as the cooperative grows.
The survey also addresses whether employees are typically allowed to serve on cooperative boards. Only 22% of the participating cooperatives have a voting seat for their CEO on the Board, and a quarter also have Board seats reserved for employees other than the CEO.
We always encourage farmers to be creative in forming their legal documents. This survey will help you walk through all the essential questions in your bylaws and compare and contrast similar businesses across the nation.
As one respondent put it, there is a “fear that some cooperatives have lost their way over the generations [and this] research will reconnect cooperatives with…member needs.” Use this survey to spark a discussion about your own bylaws and revisit any governance issues that haven’t been adequately addressed.