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Sociocracy in co-operative organisations

Divergence from traditional co-operative governance

Whilst there is a coherence between sociocratic and co-operative governance, the underlying law relating to the various different legal forms used by UK co-operatives has evolved around more traditional hierarchical governance models and not just from a co-operative perspective.

We are in the early stages of trying to fit sociocratic co-ops within these legal forms and potentially resolve the issues that may be barriers to that.  We explore some of these issues below.

Board of Directors

Most legal forms used by UK co-operatives must include the role of a Board of Directors which (unless using collective governance, where all members are Directors) are democratically elected by and from the co-op’s membership.

In a sociocratic co-op the Board is often known as the Mission Circle, with a function the same as that of a traditional Board and the same duties in law for the members of that Circle – the Directors.

However there is a clunkiness in that a pure sociocratic election process would give complete autonomy to the Mission Circle in the choice of its membership whereas in a Society or a co-operative Company the Mission Circle/Board has to be elected or appointed by the members.

Two possible ways to “Circle the square” are as follows:

  1. The election of the members of the Mission Circle is simply treated differently to the Selection Process used in other Circles.
  2. The Mission Circle uses the sociocratic Selection Process described above, which is then subject to a ratification vote at the co-ops General Meeting. This is not such a leap in the dark as many co-operatives already have fairly complex systems (including ratification) around board elections.

The exceptions to the above, where the clunkiness disappears are:

  1. In an unincorporated co-operative, the members would be free to create the internal structures and accountability of their choice. This would be defined in their constitution of partnership agreement,
  2. In a co-operative constituted as a Limited Liability Partnership (LLP) there is no requirement for a separate Board and again the co-operative has fewer constraints on its internal organisation. This would again be defined in their LLP agreement.

The General Meeting

In many sociocratic organisations, they have simply dispensed with the General Meeting, its role being distributed through the whole structure. However in a UK sociocratic co-operative that is neither possible, nor desirable.

There are decisions which various statutes define as being solely the responsibility of the membership (normally in General Meeting). For example:

  1. The decision to appoint auditors, dissolve the organisation or amend its Rules or Articles cannot be delegated
  2. Many decisions have statutorily defined voting majorities and whilst there can be a process designed to achieve Consent, those majority positions remain the default.

In practice, all the above again requires the creation of exceptions to purely sociocratic working in Company and Society models.

You will see the General Meeting included in Circle diagrams as either a Home Circle to the Mission Circle (which it elects) or sometimes as an all encompassing meta-Circle that the rest of the Circle structure sits inside.

Again unincorporated and LLP co-ops will have more flexibility to create purely sociocratic structures.

Delegating authority

The distribution and delegation of power through linked Circles is not that dissimilar to the delegation that already occurs even within the most hierarchical of co-operatives:

  • The Members delegate some of their powers to the Directors
  • The Board of Directors further delegates some of its powers to a Chief Executive and/or sub-committees of the Board.

However the delegation is slightly different in a sociocratic organisation in that a Circle is deemed to be semi-autonomous when operating within its Domain (its terms of reference) whereas in most traditional co-operative structures the ultimate power is reserved to those who delegated the powers in the first instance.

For instance the lack of a formal veto power for a “higher” Circle might be deemed to run contrary to Co-operative Principle 2 – democratic member control. However, the fact that any decision in a Circle will be Consent based and include linked members of the higher Circle provides checks and balances equivalent to a more traditional governance arrangement.

Whilst the law will require formal processes around major decisions in a co-operative, these may well become simple ratification of decisions arrived at through a sociocratic process distributed throughout the organisation through the Circle structure with its checks and balances.

Strategic and executive functions

As stated above, many co-ops will delegate some of their power to a Chief Executive Officer (CEO) – an employee of the co-op who is solely responsible for the delivery of the strategy of the co-op and sits atop of a hierarchical arrangement of staff. This model is prevalent in the consumer co-operative sector.

Implementation of sociocratic governance within such a co-operative would likely only be partial with the CEO role and department heads being employed to be the Leaders of their various Circles rather than selected from within those Circles. This is certainly a common arrangement in sociocratic organisations which aren’t co-operatives.

However within worker co-operatives which commonly dispense with a CEO, you can envisage how such a system would easily blend the strategic Board role with the Executive operational function.

You might consider a typical sociocratic governance arrangement as simply the replacement of the CEO with the General Circle, which is a collective CEO composed of the Leaders and Delegates of the various executive Circles within the organisation.