Members are the foundation of all cooperatives. They are the source of capital and control as well as patronage of the co-op. The co-op’s purpose is built around their shared values and their needs, and based in the concept of democratic member control. As co-ops grow larger, some of these connections may not be as easy to see. How do thousands of owners exert their control of their co-op? How do we know the co-op is built around their shared values? How does the board carry out their wishes and be responsible to them? We look to the empowerment and accountability stream to answer these important questions in our cooperatives.
In this article we will look at four aspects of membership empowerment: control, capital, patronage and shared values.
The co-op has bylaws, and that legal document describes the membership’s empowerment to the board. It spells out how the elected body is to carry out its work on behalf of the co-op owners as a whole. According to Todd Wallace, board leadership consultant, “It’s impossible for the whole membership to do all the things necessary to make the co-op thrive. Electing the board allows the members to have meaningful outcomes realized on their behalf. Therefore part of the board’s job is to show members how they set priorities and ensure that the co-op achieves those goals,” Wallace said.
Yet some co-ops struggle with this important aspect of the empowerment stream. Few members participate in voting, attend meetings, or keep up on co-op news. Wallace suggests examining whether it’s an opportunity for better outreach and education (which helps the owners empower their board) or if it is “true apathy” which he defines as stagnation and demonstrated negative sales trends. It is a significant issue in either case because the whole empowerment-accountability stream starts with the membership. If that’s not functioning well, it will affect all stakeholders up and down the stream.
Wallace cited Brett Fairbairn’s Three Strategic Concepts for the Guidance of Cooperatives and how important transparency is for any co-op to succeed. “It’s not enough for the board to do things, but people need to know about it. It’s how the board is accountable to the members. Not only do they need to know about the status of the business, but show that what the co-op is doing is important and that it matters to the community.” The accountability systems in place for the board to communicate how these goals are being met include the annual meeting, annual report, newsletter updates, making minutes available, and any other communication carried out from the board to members.
One of the strongest messages of empowerment the board gets from the membership is their investment in the co-op. Members invest capital in the co-op because they believe it is in their best interest and that of other members. Whether it is growth in membership and member investment, or retained patronage dividends, capital from members keeps the co-op growing strong. At no time is this more important than when the co-op is starting up or expanding its operations. “Expanding the co-op often brings up a lot of questions about how the co-op is serving the needs of the members,” said member capital development specialist Tami Bauers.
The board’s accountability to members in this area is demonstrated by their due diligence and formalization of the process of raising capital to secure the future of the co-op for everyone. It goes beyond just individuals investing money.
“The members’ financial empowerment provides a vehicle to finance the co-op’s growth, but it also recycles money in our communities. When boards and members think in those terms the structure of member capital allows the co-op to do more. We empower our co-ops to do more values-based work,” Bauers added.
The reality is food co-op owners may be most closely connected to the co-op through its products. Member patronage also gives boards indicators of co-op success in serving its members. The power of user-benefit in the co-op could be overlooked because after all, people are just “shopping.” But in the food co-op, patrons are also supporting user-benefit and local ownership and control, even if they may not always be completely aware of it. “Member support of the co-op through shopping has brought the co-op to a place beyond groceries. Co-ops by their nature are always looking to do more good in the community, and this is another aspect of empowerment to the board,” Bauers said.
Bauers cited examples of co-ops around the country who have translated their financial success into expanding stores, buying organic farms, creating bake houses and restaurants, developing purchasing programs and standards for fairness in commerce, and being more involved in building healthy communities. “Member patronage and the dollars that it generates has given boards more freedom of movement and decision-making and opens up whole new areas for food cooperatives to operate in,” she said.
“What do members want? We may not completely know for sure,” said Joel Kopischke, board leadership consultant. “We will never be able to hear from everyone.” He pointed out that there are good ways to find out more, through surveys and member engagement projects. But empowerment and accountability at the board level to the members is just as much an art as science, and part of that is looking at the co-op as a whole. “You have to act in the role of advocate, make decisions for the greater good,” Kopischke said, and for that reason not all of the board’s decisions will be universally popular with members.
He pointed to a hypothetical patronage refund example. “Would everyone want more money back if you asked? But the board is expected to hold fiduciary responsibility,” he said. Therefore the co-op is probably going to retain earnings and build equity to be stronger and better positioned for the future. That’s what’s in the best interest of the owners and the co-op. “It’s a great example of how co-op boards have to wrestle with what members may say they want and the long term goals,” he said.
Kopischke also pointed to transparency as the key to managing this balancing act within the empowerment and accountability stream. “We need to do lots of communication and education to our members. People need to understand why the board makes the decisions it does.” Yet Kopischke said there’s one easy way to ascertain whether the member-board relationship is healthy. “Members get their power from the co-op’s success. People will be there patronizing the co-op. It’s a good barometer.”
Have more questions?
Get in touch with one of our consultants.