Control Rights, Governance, and the Costs of Ownership in Agricultural Cooperatives

Abstract

Agricultural cooperatives have changed considerably in recent decades. In witnessing these structural changes, scholars have proffered analyses of nontraditional ownership models focusing on residual claim rights. However, crucial information on the allocation of control rights in cooperatives is missing. This study sheds light on alternative ownership-control models adopted by agricultural cooperatives in different regions across the world. In each of these models, we describe the allocation of formal control rights with a focus on decision management and decision control rights. We thus provide empirical evidence on the "separation of ownership and control" in agricultural cooperatives. We also analyze each of the governance models in terms of the associated ownership costs, including risk-bearing costs, the costs of controlling managers, and collective decision-making costs. In doing so, we are able to better understand the forces influencing the organizational efficiency of each cooperative model.

Designing local institutions for cooperative pest management to underpin market access: the case of industry-driven fruit fly area-wide management

“…When participants' investments are not proportionate to the distribution of eventual benefits, incentives for cooperation is diminished. This challenges decision-making (Valentinov 2007) and adds to the transaction cost of achieving consensus (Ostrom 2010;Chaddad and Iliopoulos 2013). It affects whether locals perceive rules as fair, an important condition for gaining support for local institutions.…”

Are consumers willing to pay more for electricity from cooperatives? Results from an online Choice Experiment in Germany

“…Cooperatives can more easily ensure price transparency, reducing uncertainties related to the credence-good character of renewable energy (Müller and Rommel 2011). In contrast to the approaches mentioned already, these facets are quite explicitly taken into account by the Transaction Cost Economics literature on cooperatives (Bonus 1986;Hansmann 1996;Chaddad and Iliopoulos 2013).…”

An Exploratory Study of Cooperative Survival: Strategic Adaptation to External Developments

“…For many hybrid ownership structures, the explicit presence of market-or investor-oriented objectives is manifested by capital-seeking subsidiaries [68]. Similarly, Bijman et al [70] and Chaddad and Iliopolous [71] advanced typologies with control delegation among members, directors, and managers as the main variable. Many modern farmer cooperatives use a corporate model in which effective control is delegated from board directors to professional decision specialists with specific business knowledge.…”