Overview of Corporate Governance Issues for Co-operatives - IFC

Studies on co-operatives in OECD countries have identified the central role thatmember/manager conflicts play and the important role of elected boards in providing ameans of addressing the issue of managerial control. Co-operative corporategovernance strategies need to strengthen the capacities and role of the board. Therehas also been growing emphasis on the need to develop higher levels of memberparticipation in governance structures especially within the European context. This hasalso been accompanied by the recognition that co-operative values and principles arefundamental to effective governance within a co-operative. Corporate governance hasto reflect the multiple bottom lines of a co-operative and not just their economic andcommercial performance.4. Corporate governance issues for co-operatives in developingcountriesSpecific studies into corporate governance issues as they impact on co-operatives inthe developing world are very few and this, of course, presents considerable difficulty inreaching any definitive conclusions. However there are some clear starting points for ananalysis of the key issues which can be derived from existing studies of the co-operativesector in general, several useful case studies, and discussions with co-operativeleaders from the developing world. Given the nature of the evidence, and the generalcharacteristics of co-operatives in the developing world, a region by region approachhas been adopted.Implicit in many of the studies on co-operatives in OECD countries has been theassumption that governments have not adopted an interventionist role with regard toco-operatives. The experience of the majority of co-operatives in developing countrieshas been very different. A starting point for a discussion of corporate governance issuestherefore has to begin with the legacy of government control and intervention into theco-operative sector.This legacy, of course, derives from the colonial origins of the co-operative sector whichinvolved a regime of government control and influence with damaging results that arestill evident today.A recent ILO report comments that:The developing world experienced several decades of working with statesponsoredand state controlled co-operatives – which had been introduced bythe colonial powers as development tools and subsequently used bygovernments of the independent states for similar purposes. Unsuccessful andcostly experiments were carried out on the basis of joint agricultural production,collectives and state farms as way of increasing peasant production andproductivity (ILO 2000:11).Page 17