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Being a Board Member in a Co-operative Business

The board of directors is central to the operations of a co-operative business. The board is elected from the members to oversee the day-to-day operations of the co-op — managing staff, creating policies and procedures, and making decisions that benefit the business. It is important to have good people in these positions to ensure the well-being of the co-operative. This page outlines what a board of directors is, what it means to be a board member, the roles common on most boards, and some of boards’ key responsibilities.

What is a board of directors?

Every co-op is governed by a board of directors. The board is a group of members that has been elected to represent the interests of all other members in the decisions of the co-operative. Boards come in all shapes and sizes and have varying degrees of responsibility.

Each province sets the minimum number of directors required to serve on a board of directors (5 in Saskatchewan and 3 in the other western provinces). When a group is first creating a co-op, they need to decide on the size of the board and state that in the articles of incorporation. Most co-ops will set a range for the number of directors (usually from 5 to 9). However, in very small co-ops with only 3 to 7 members, such as worker or producer co-ops, all members may serve on the board.

There are different types of boards that take on different responsibilities and roles. One type is a policy board. Large organizations that employ staff members to conduct the business of the co-op usually have a policy board. In this situation, the board is the decision maker that sets the direction for the co-op and creates policy, but leaves most of the work of running the business to managers and staff. Smaller co-ops or start-up co-ops may have a working board. This type of board takes on more work within the co-operative, making decisions as well as carrying out much of the business.

The type of board a co-operative will have is often a result of its size, ability to hire staff, and capacity of directors. In all cases, co-operatives have boards that elect directors from their membership, rather than by special appointment.

Being a board member

To become a director, a person must hold shares in or be a member of the co-operative. They must be willing to let their name stand for nomination and have met the requirements to serve as a director as set out in the organization’s bylaws and outlined in legislation. They:

  • must be 18 years old
  • must be of sound mind
  • must not hold the status of bankrupt

Co-op boards are elected at the business’s annual general meeting, where every member gets one vote. The directors can be elected for a period that is defined in the co-op’s bylaws (usually 1 to 3 years).

Once elected to the board, most directors benefit from some form of training to equip them with the skills and knowledge they will need to carry out their new responsibilities. This can take many forms, including participating in board governance courses, reading manuals for directors, or simply getting a crash course in how a co-op board operates from someone with more experience. There’s no need to become in expert in co-op governance, but being familiar with basic procedures will help avoid confusion down the road.

(Want to learn about what good board governance looks like? Check out our Good Governance Matters online course, developed in partnership with the Centre for the Study of Co-operatives at the University of Saskatchewan.)

All directors have a fiduciary responsibility to manage the co-operative. This means they are entrusted to make decisions that ensure the co-op’s resources are used efficiently and effectively, the co-op is fulfilling its objectives and mandate, and the co-op is being set up for future success.

If a director is failing to act in the best interest of the co-op, the issue must be raised and resolved at the board table. This is important to note in co-op federations, worker co-ops, or producer co-ops where board members may have interests in organizations other than the co-op. Having a good conflict of interest policy and director code of conduct are good means of ensuring directors are on the same page and understand their role on the board.

Roles on a board of directors

Being a member of the board of directors does not necessarily require specific skills. Being a director means doing the best you can as an ordinary person. There are positions on boards that will require some skills, but this can be supported by staff members or supporting organizations like Co-operatives First, universities, or provincial co-op associations. Government regulation and common practice usually includes the following positions:

  • President: this position provides leadership to the board and the co-operative. The president serves as chair for all board and general meetings, maintains a strong relationship with management, and often serves as the face of the organization. The president should be familiar with important policies and procedures governing co-operatives.
  • Vice-president: this position is tasked with fulfilling duties assigned by the president or filling in when the president is not available.
  • Treasurer: this position is often combined with the secretary. The duties of the treasurer require some understanding of financial reporting and accounting practices and is often given to a manager or hired expert (e.g. an accountant) that can perform the duties efficiently. The treasurer often oversees the co-operative’s finances, filing the annual return, preparing a budget, and keeping the board and shareholders informed on financial matters.
  • Secretary: this position maintains the records of the co-operative including policies and procedures, meeting minutes, and an up-to-date membership list. In many co-ops, the secretary serves as a point of contact for members on matters including share redemption, submitting resolutions, or concerns with the co-op.

Many co-operatives create additional board positions or committees that reflect the needs of the members or the sector. For example, in a housing co-operative there may be a maintenance committee with a director of maintenance.

Some co-operatives make it a priority to find directors that have the experience and qualifications to fulfill the duties of board members. This can be achieved by actively screening new board members that would be able to manage a complex organization. In most cases, people who get involved in board leadership do so because of their skill sets and desire to dedicate time and energy to managing the co-op. An understanding of policy and financial reporting is important, but those skills can be acquired over time.

Responsibilities of the board

The board of directors is central to the operation of a co-operative business. Directors discuss matters affecting the co-op, make decisions that shape and guide the co-op, and prepare information and recommendations to members to discuss and decide on. Much of what a board does is responsive, reacting to events, ideas, and opportunities facing the co-operative. It is important for directors to be forward-thinking as well, seeking out ways to improve their practices and enhance the co-operative’s well-being. The following list provides an overview of the important responsibilities of the board of directors:

  1. Manage financial matters of the co-operative: The board of directors should maintain an understanding of the co-operative’s financial position. Depending on the size of the co-op this can be done with support from staff or an accountant. The board should lead the creation of an annual budget, monitor ongoing revenue and expenses, and present the annual return and budget back to the members at the annual meeting. Some members of the board will have signing authority on the co-operative’s accounts and their signatures will be required for items like cheques, agreements, chequing accounts, annual returns, and applications.
  2. Strategic Planning: The board is tasked with providing leadership to the organization and shaping its direction. A key component of this will be creating, updating, and maintaining strategic plans that demonstrate the co-operative’s agenda, important goals, and key opportunities. Identifying projects and managing the co-operative’s investments are some of the strategic plans the board will have to decide regularly.
  3. Create policies and procedures: A lot of this work can be completed during the incorporation stage of building the co-operative, but policy will also be created in response to the business the co-operative does, or challenges and opportunities that arise. Some policies commonly designed by the board relate to finances, membership, conflict of interest, information and technology, safety, and elections.
  4. Give the co-operative a voice: This responsibility can be shared with management and is critical for co-operatives that want to promote themselves to the public. The board, as representatives of the members, should be able to speak on behalf of the co-operative when working with partners, funders, media, or other audiences. They should be able to provide information to members at meetings and give direction to staff. There should be a consistent understanding of how the co-op communicates with other parties, and a communications strategy is one way of creating clarity and shared understanding among directors.
  5. Management: Depending on the size of the co-operative, the board may directly manage the day-to-day affairs. In larger co-operatives, the board usually provides oversight to professional managers or an executive team. The board will have the final say on many important decisions and may have to mitigate the conflict or debate that could arise from their actions. For example, the board must determine how to allocate surplus revenue, balancing the need to reserve funds, invest in the co-op, and distribute among the members. Such decisions can lead to conflict, but this can be minimized through inclusive management practices that draw ideas from the members.
  6. Engage the members: At the end of the day, the co-operative exists to serve its members. The board should engage members in important decisions and happenings with the co-op. Communication is essential to maintaining a sense of ownership and attachment among members, and this should be fostered by the board.

 

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