Adoption of nontraditional governance characteristics in US farmer cooperatives

Abstract

Although the governance of farm producer‐owned and ‐controlled organizations is shaped by the complex interaction of mixed member, director, and manager objectives, its conceptualization in the literature is limited to the assignment of control to members, board directors, and managers. Such a categorization is imperfect as there exist other governance characteristics such as member vote distribution, board director identity, manager identity, and CEO identity. Using 371 survey responses from US farmer cooperatives, we inform the adoption of nontraditional governance characteristics in terms of proportional vote distribution, nonmember board directors (i.e., outside directors), and nonmember managers and CEOs. Furthermore, we relate the adoption of nontraditional characteristics to the competitive scope, organizational function, organizational size, and capital structure of the survey respondents by means of various empirical techniques. Generally, nontraditional adaptation of the governance structure, which implies an advanced delegation of control to decision specialists who are non‐members, is positively associated with the competitive scope and organizational size. Also, such nontraditional adaptation is more common to marketing cooperatives as compared to supply cooperatives. Our study motivates a multi‐dimensional conceptualization of governance, which is necessary to better understand the internal coordination of member and manager objectives. [EconLit Citations: Q13].