Governance: an introduction

Governance is the systems and processes concerned with ensuring the overall direction, supervision and accountability of an organisation.

Why is good governance important?

Good governance is crucial to the effective operation of co-operatives – particularly those looking to grow – regardless of size, legal form or business sector. It supports the governing body of a co-operative in its task of creating and maintaining a strong and sustainable business that meets the needs of its members and is robust enough to embrace change. A neglect of governance weakens accountability and carries multiple risks to the business and its strategy.

Governance: the three key elements

Governance Structure

A suitable structure is at the heart of good governance. Ask yourself:

  1. Do you know what type of legal form your co-operative has and do you follow your governing document (these might be called the rules or the articles)? As co-operatives develop and change it is important that governance structures are reviewed.
  2. Has the governing document been updated following a change in the law?  Were you aware that the law for co-operative societies has changed?
  3. Can you issue shares using your current legal form?
  4. Is the governing body the right size and does it represent the membership?

If not, would your co-operative benefit from a review of its governing document?  Co-operatives UK can help.

Processes & Policies

Governance is not about the day-to-day running of a co-operative. It is concerned with strategic direction. Well governed co-operatives will follow processes and adopt policies enabling them to do the right thing and recognise when things might be going wrong or might need to change. Policies might cover the nomination and appointment process for directors; dealing with conflicts of interest; how member and board meetings are conducted; and how risk is managed. Processes are important as they provide stability and clarity and serve to keep governance on track.

See our Simply Governance publication for a basic overview of governance processes for co-operatives.

Our Conflict to Co-operation publication provides some handy tips on managing conflict within co-operative.

Do you have the correct governance policies and procedures in place to govern your co-operative?  If not, Co-operatives UK can help.

Skills & Behaviours

For successful co-operative governance its members and governing body need to know what their role is and what is expected of them. Ask yourself:

  1. Have members been provided with a copy of their co-operative's governing document? This is important to enable members to understand their rights and how they can participate in their co-operative.
  2. Has the governing body received a full induction and are you confident that its members have the right skills and knowledge to carry out their role properly?  If not, is a skills evaluation necessary to ensure there any no gaps in knowledge? 
  3. Do the members of the co-operative's governing body know what is expected of them and how they should behave during and outside meetings?  Would reference to a Code of Governance be useful?  If so, Co-operatives UK can help.