Blog article

The make-up of the board – making your own luck?

I am pleased to reveal details of a new set of guidelines developed to help co-ops consider the different routes open to them when recruiting directors to a board.

First, some context. I write this blog as Chair of the Co-operative Governance Expert Reference Panel. The Panel was set up after members of Co-operatives UK asked for an independent voice within the sector to produce and share best practice on co-op governance.

The Panel has been operating as one of Co-operatives UK’s Member Groups for the last 18 months. We are a group that is experienced in a range of co-operatives of different sizes and complexities, and we’re very passionate about how co-ops can deliver good governance.

That’s why the Panel is producing guidance and resources for the co-op sector to use and own – including a governance 'wheel', introducing the key elements of co-op governance, and a document outlining the role of a co-op board, plus much more to come.

Our latest output seeks to respond to an increased scrutiny around the process of recruiting directors to co-op boards, an issue that has very much put the co-operative sector under the spotlight in recent years. The guidance we’re publishing is based on research we commissioned from Liverpool John Moores University, completed by Dr Paul A. Jones who has wide experience of credit union and corporate governance.

Should boards be making their own luck?

The report’s focus is on planning for board composition and succession – how can boards ensure they have the right mix of skills and experience to safeguard the future success of a co-op? Is it enough to rely on the member nominations and elections process to deliver you the right people? Or are there other factors that should be considered?

The role of the board really is critical to the long-term success of a co-op. Boards need directors with the right mix of experience, expertise and democratic connection to the membership, and who are willing to challenge, scrutinise and lead.

Our research found that is not uncommon for co-op boards to be made up of like-minded individuals with similar interests, experiences and backgrounds. Whilst this might mean having a board that works well together, it in fact increases the risk of a “homogenous” board – one where a lack of diversity of thought can result in insufficient constructive challenge.

Ideally, a board would have directors generating effective discussion and debate around the co-op’s focus, potential risks and proposed developments. In order to achieve this, a range of relevant skills, competencies and perspectives is required.

The Panel has produced a new set of guidelines that we would encourage co-ops to consider as part of developing an effective and sustainable board. I summarise the key points below. It should be noted that in all cases and at all times, a focus on co-operative values and principles should be allied with transparency and clarity in the purpose and policy of the board and the directors.

  1. An agreed statement of the role of a director (a job description) should be available to all members, that sets out expectations of commitment, skills and experience that directors should have, or could reasonably expect to gain.
  2. Co-ops should undertake regular director and board evaluations to help identify strengths and gaps, and inform future director training and recruitment.
  3. Recruitment of new directors should not seek out solely “business” or “professional” skills, to the detriment of the democratic process or the ability to apply co-operative values and principles.
  4. Where co-ops have directors elected entirely by and from the membership – whether those members are workers, customers, tenants, suppliers, or a mix – you should ensure your processes for getting members nominated and elected are strong enough to give you the best chance of recruiting the best candidate, and filling the identified gaps.
  5. If your member election processes do not always offer up the candidates that fill gaps identified on your board, it is worth considering recruiting additional expertise to help optimise the performance of the board, in the interests of the future of your co-op.
  6. In considering the composition of the board, the appointment of executives and independent / non-executive roles may be appropriate, to bring an alignment of objectives, professional skills to the board and independent perspectives. In addition, employees who are not senior managers could be encouraged to join the board, potentially through reserved places. The success of introducing such new board roles is dependent on engagement with members – who should retain overall democratic control of elections to the board.

Not all of these points will be applicable to all co-ops, but these are paths worth considering to achieve the right mix for a successful co-operative board.

Some of the issues we have addressed are contentious in the sector – which is, of course, why Co-operatives UK members are keen for guidance from the Panel. We believe our approach is solidly rooted in the principles and practice of co-operative values, and should have applicability to co-operatives of all shapes and sizes.

Some of these issues are challenging, but we feel it’s important for the sector that co-operators debate these topics. The Panel welcomes constructive discussion on governance across the movement.

This is only a brief overview of the key recommendations. Watch the film and download the accompanying resource.

More information

Written by Nick Money
Updated: 19/07/2017