Governance in Democratic Member‐Based Organisations

Abstract

This paper considers issues of governance in democratic member-based organisations (DMOs), such as co-operatives and mutual societies. It examines the processes whereby members' interests are mediated through the democratic process, and the board; and it explores some of the factors influencing the power of managers. It goes on to argue that the system of governance in DMOs in their institutional context runs the risks of managers becoming powerful and entrenched in poorly performing social economy organisations, unless countervailing measures are adopted.

The Internal and External Governance of Cooperatives: Membership and Consistency of Values

“…Threats to democratically managed firms may come also from lack of effort in providing or renewing appropriate platforms for participation and engagement (Spear, 2004), but also from the opportunism of the membership, rather than from managerial bias. Managerial slack and members' disengagement, however, are likely to be related.…”

“…Since for SMCs the value attached to participation by the membership is in general higher (Spear, 2004), it follows that a cooperative network based on small sized cooperatives is likely to reflect more accurately the values of membership. Social capital and, at a more formal level, consortia have been an important feature of the development of cooperatives in Italy for example, playing as a major networking mechanism for either large or small organisations (Menzani and Zamagni 2010).…”

“…Previous contributions have analysed the internal problems that afflict cooperation, for example in members' apathy towards participation, failure of democratic representation, mismanagement and lack of skills, opportunism and fraud (Hernandez, 2006;Cornforth, 2004;Spear, 2004;Birchall, 2002). A body of theoretical and empirical studies have accentuated, in parallel, cases of external constraints, as related to ill-suited legal frameworks, access to capital, production conditions and contractual requirements, bargaining and decision-making costs, or external controls of political nature (Russell, 1991;Ben-Ner, 1993;Book and Ilmonen 1989;Lima, 2007;Hernandez, 2006;Speckbacher, 2008;Wanyama et al 2009;Birchall and Simmons, 2010).…”

“…Some contributions have highlighted a crises of cooperative values, as reflected in the isomorphism of procedures adopted by management, or in membership apathy for example, which runs the risk of downplaying the role of membership and mining the sustainability of the cooperative (Cyert and March, 1983;Spear 2004). Although in general ethical behaviour can be reinforced by the values and principles of cooperation, internal governance failures can play against this, and represent a serious threat to the possibility of enhancing welfare through self-management.…”

Optimal Compensation Structure in Consumer Cooperatives Under Mixed Oligopoly

“…First, from an agency perspective, using low-powered incentives for the managers in NPOs is the board's optimal response since the objectives are di cult to quantify (Hallock 2002, Preyra andPink 2001). Since the goals are vague and ill-defined and the danger of giving dysfunctional incentives is high, the use of pay-for-performance is restricted (Theuvsen 2004, Spear 2004). Additionally, in Coops the heterogeneity across members makes it di cult to agree on performance targets, which results in low-powered incentives for CEOs (Hueth and Marcoul 2009).…”