Governance: What you need to know

This section outlines the main features of co-operative governance and introduces the idea of a governance document, and governing body. Most sections include additional information to read, where necessary.

The governance aspects of setting up your co-operative will involve drawing up governing documents, ensuring individuals within the organisation have clear roles and responsibilities and putting policies and procedures in place.

Once your co-operative is up and running, treat all these resources as living systems and processes and they will help throughout the lifetime of your organisation.

What is governance?

Governance can be described as the systems and processes concerned with ensuring the overall direction, supervision and accountability of an organisation.

  • The key distinction to be made is between the governance of an organisation and the day-to-day running of it, most notably that the role of the board should be to direct, but not manage, activity.
  • In practice it involves establishing and maintaining appropriate structures for strategic decision making, setting clear roles and responsibilities, and – importantly – putting all the systems and processes into practice to ensure your organisation is well run, financially sound and legally compliant.
  • Get it right and you will enable everyone involved in your co-operative to understand how the organisation ticks and how they can engage positively to ensure it is effective, accountable and sustainable.

All businesses have governance arrangements, but there are certain features of a co-operative’s governance that set it apart from a conventional business.

What makes co-operative governance ‘co-operative’?

  • In a co-operative, the board must lead the co-operative and at the same time operate in accordance with the International Co-operative Alliance Values and Principles.
  • Most co-operatives have a mission to ‘be a successful co-operative business’, and their boards must consider and embed these Values and Principles in their governance structures, processes and decision making.
  • There is a stronger emphasis in co-operatives on active, democratic member participation, with members encouraged to play a part in governance.
  • A co-operative board is expected to engage with members and maintain close relations.
  • There is an understanding that a co-operative board is collectively acting as custodians of the co-operative to secure the business for future generations of members; compare this to the boards of listed companies which are required to act to generate value for the shareholders in the here and now.
  • A co-operative board should make business decisions based on what is in the best interests of the members and providing member value; unlike a board of listed company which will be interested in stakeholder value.

We provide a number of model governing documents and an advice service where one does not exist to suit your purpose. Nevertheless, it is useful to understand in advance what the purpose of a governing document is and what sort of information it will include.

Creating a governing document

You will already have identified the main features of your governance during the feasibility and business planning stages, such as what you will do, who your members are and how they relate to your organisation. 

The next stage will be to formalise features, which you will do alongside your legal form by creating something called your governing document. The governing document will define why your organisation exists (its purpose), what it intends to do and how it will do it.

It will also detail your co-operative’s relationship both to its members and to the outside world. As a co-operative organisation, your governing document will embed the International Co-operative Alliance Values and Principles.

Read more about the purpose and detail of governing documents.

The governing body is a group of people who are delegated by the membership of an organisation to undertake the strategic management of that organisation. In a co-operative enterprise, the governing body is typically elected from within the membership.

The governing body

There are different ways of organising the governing body to include all or fewer members, or different classes of membership.

The main ones include:

  • Collective management: strategic decision-making is undertaken by meetings of the entire membership
  • Committee management: the members elect a smaller governing body and delegate some of their powers to it
  • Constituency governance: multi-stakeholder co-operatives that bring together different interest groups may choose to have “constituencies” or different “classes” of members.

Read more about the governing body.

Codes of governance

If you are setting up a worker co-operative, consumer co-operative or agricultural co-operative, take a look at the relevant booklet in Co-operatives UK’s series of codes of governance based on best practice from co-operatives in the UK and internationally.

The next few pages continue to talk about co-operative governing documents and governing body. Whilst this is important content, you can also skip this and go straight to working out your co-operative structure.

Updated: 21/03/2016