How Cooperatives are Controlled
Cooperatives have a unique governance structure that reflects the fact that they are owned and controlled by their members. Effective cooperative operations depend on four groups: members, the board of directors, management, and employees.
Click on any group below to see more information about its roles and responsibilities.
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Members own the cooperative, which is organized and operated for their benefit. Members are expected to financially support the cooperative business by investing in it and by using its services. Without these activities, cooperative operations may not be sustainable.
Members usually exercise control of the cooperative by voting to elect a board of directors to act on their behalf. Members also directly vote on changes to articles of incorporation and bylaws, and on cooperative mergers or dissolution. In Wisconsin, each cooperative member typically receives one vote. Members must understand the issues facing their cooperative so they can make informed voting decisions. Member communication and education programs are essential for informed decision-making and are a sound investment in the cooperative’s future.
Board of Directors
The board of directors establishes long-term business strategies that balance the needs of the membership with the cooperative’s financial sustainability. They review and evaluate all financial reports, assess the capital needs of the cooperative, and determine patronage refund allocations. They establish operating policies and are responsible for hiring and evaluating the general manager. Directors must avoid conflicts of interest so that their decisions serve the needs of the entire cooperative, rather than specific member interests within the business.
A cooperative’s management is hired by the board to carry out its strategies and objectives. The general manager or CEO oversees the day-to-day operations of the cooperative and reports on the co-op’s financial and operational performance to the board. The general manager makes recommendations for long-range planning and develops the budget for board approval.
A co-op’s employees carry out cooperative operations that provide the goods and services needed by the members. Employee understanding of cooperative principles and objectives can be an important part of positive member relations. In the case of worker-owned cooperatives, management and employees may also be members.
The Circle of Responsibilities for Co-op Boards. USDA Cooperative Information Report 61, 2014.
Cooperative Essentials: What They Are and the Role of Members, Directors, Managers, and Employees. USDA Cooperative Information Report 11, 2014.
Agile and Efficient: Board Committees and Committee Structures that Work. Cooperative Grocer, January-February 2013.
Board Committee Charter Template. UW Center for Cooperatives.
Assessing Performance and Needs of Cooperative Boards of Directors. USDA Cooperative Information Report 58, 2000.
Sample Policies for Cooperatives. USDA Cooperative Information Report 39, 1993.
Cooperative Directors: Asking Necessary Questions. USDA Cooperative Information Report 62, 2018
Decision-Making in Cooperatives With Diverse Member Interests. USDA Research Report 155, 1997.
Board Communication Best Practices. Northcountry Cooperative Foundation, 2019.
Governance as a Determinant of Success and Failure: What Other Co-ops Can Learn from Co-op Atlantic. University of Saskatchewan Centre for the Study of Co-operatives, 2015.
A Life-Cycle Perspective on Governing Cooperative Enterprises in Agriculture. Choices Magazine, 2011.
Benefiting from the Board: A Case Study. UW Center for Cooperatives, 2008.
The U.S. Department of Agriculture (USDA) Rural Development has an extensive library of useful publications, especially those related to agricultural producer cooperatives.