The Governance of cooperatives and mutual associations: a paradox perspective

Abstract

ABSTRACT**: This paper presents a new theoretical framework for understanding the governance of co-operative and mutual organisations. The theoretical literature on the governance of co-operatives is relatively undeveloped in comparison with that on corporate governance. The paper briefly reviews some of the main theoretical perspectives on corporate governance and discusses how they can be usefully extended to throw light on the governance of co-operatives and mutuals. However, taken individually these different theories are rather one dimensional, only illuminating a particular aspect of the board's role. This has lead to calls for a new conceptual framework that can help integrate the insights of these different theories. The paper argues that a paradox perspective offers a promising way forward. Contrasting the different theoretical perspectives highlights some of the important paradoxes, ambiguities and tensions that boards face.

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

“…In spite of the diverse governance models existing within the cooperative sector (Chaddad and Cook 2004;Cornforth 2004;Theurl and Kring 2002), common features can be found across it which are most prominently reflected in cooperative principles (see also Laurinkari 1994;ICA 2012) that form the core of cooperative governance.…”

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

“…Indeed, some authors have authoritatively recognised in the limitations of cooperative governance a source of inflated governance costs, making cooperatives less viable and efficient solutions than investor owned organizations (Hansmann, 1996). From a slightly different angle, other approaches acknowledge the paradoxes of formal democratic governance, as for example in Cornforth (2004) and Hernandez (2006). These approaches recognise the incommensurable tensions that typify internal relationships between groups with different roles, such as between the board and the membership, which the board should represent; or between the board and the management, where the board's role is to assess managerial choices against the best interests of the membership.…”

“…These approaches recognise the incommensurable tensions that typify internal relationships between groups with different roles, such as between the board and the membership, which the board should represent; or between the board and the management, where the board's role is to assess managerial choices against the best interests of the membership. The relationship between the membership, the board and the management contains inherent tensions as it involves both support and control (Cornforth, 2004). Such tensions, as Hernandez (2006) explains in the context of a large Mexican cooperative, are ongoing in the decision-making process at different levels of governance (the board, the management, the general assembly), which paradoxically encompass both democratic participation and concentration of control power within restricted groups.…”

“…The multiplicity of perspectives on how to achieve members' welfare through resource allocation, can generate, as pointed out by Cornforth (2004), tensions among board representatives, managers, and members, as well as within each of these groups, the reason being that the utilisation and distribution of surplus is "subtractive" (Ostrom 2010). In particular, this engenders trade-offs which, in the absence of proper regulation, can become unsolvable social dilemmas.…”

“…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).…”