Overview of Corporate Governance Issues for Co-operatives - IFC

developed ones, governance codes have been developed. Some resources to promotegood governance can reasonably be expected from within the co-operative movementitself. What types of support are best generated from within the co-operative movementitself? What kinds of support are best obtained from external agencies?Should the role of co-operative federations and apex bodies be to sustain a governanceand supervisory role for member co-operatives in the developing world? Or should theyprioritise advocacy and representation on behalf of co-operatives?Both governments and inter-governmental organisation play a role in driving goodgovernance in investor-owed and state-owned enterprises. The OECD code (and thevariants for non investor-owned enterprises) is promoted by the OECD itself throughresearch, publications and events. However, as an inter-governmental body, it haslimited experience of working with co-operatives unlike the ILO which is the lead UNagency in work with co-operatives. Is the ILO a more appropriate vehicle for activelypromoting good practice in co-operative governance?Governments play a role through adopting and amending Company Law and also play apromotional role. Do they have a similar role in promoting good governance in memberownedenterprises and co-operatives? However government support has all too oftenmeant government interference. How can new models of support from governments bedeveloped?What other means of support at the local and national levels are appropriate to facilitatethe development of better systems of governance?Target groups and sectorsThirdly, co-operatives vary from tiny enterprises of a few dozen members to hugeorganisations. To roll out new governance standards across such a diverse sector willtake some time, and ‘winners’ may need to be selected. It may be that thoseco-operatives that have become most involved in global supply chains could be amongthe first to adopt new governance practices. Research on the market-driveninterventions of Fair Trade and other external stakeholders indicates they have alreadymade an impact on aspects of governance for producer co-operatives in particular.Two consistent findings across the literature are that members can becomedisempowered in co-operatives and that when this happens, the absence of democraticcontrols and engagement can lead to rent-seeking behaviours by elected directors andappointed managers. The latter group can also take control by manipulating directorswho have a poor grasp of the business.This implies that three groups require clearly defined rights and responsibilities:members, directors and managers. In the developing country context, where educationand literacy levels can be low, how do members and directors exercise these rights andPage 33