Co-operative Identity and Corporate Governance: Which way for decision makers By Robert Mbeza ACCOSCA 4 th SACCO Leaders Forum Accra - Ghana 12 March 2013
Outline ICA Statement on the Co-operative Identity Corporate Governance Principles of CFI Governance Board and Management Relationship Managers influence on the composition of the Board Using Co-operative Identity to enhance good governance Code of best practices 2
Co-operative Identity The International Co-operative Alliance(ICA) Statement on the Co-operative Identity States : A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural aspirations, through a jointly owned and democratically controlled enterprise. 3
Co-operative Identity Co-operative Principles: 1. Voluntary and Open Membership 2. Democratic Member Control 3. Member Economic Participation 4. Autonomy and Independence 5. Ongoing Education, Training and Information 6. Cooperation Among Cooperatives 7. Concern for Community 4
Co-operative Identity Co-operative Values: self-help, self-responsibility, democracy, equality, equity and solidarity. 5
Co-operative Identity In the tradition of the founders, cooperative members believe in the ethical values of: honesty, openness, social responsibility and caring for others. 6
Corporate Governance Defined as: "a system of law and sound approaches by which co-operatives are directed and controlled focusing on the internal and external structures with the intention of monitoring the actions of management and directors and thereby mitigating risks stemming from the deceitful actions of these officers. 7
Corporate Governance Involves monitoring: Roles and relationships between management, board of directors, members of the CFI and other stakeholders and, The goals for which the CFI is governed. 8
Principles of Individual Governance In order to perform their collective duties, the individual board members and managers have an obligation to: Maintain ethical conduct and professionalism Speak with a single voice once board decisions have been made. Possess the skills necessary to fulfill their duties 9
Principles of Individual Governance Integrity Competence Transparency Compliance Accountability Commitment Be knowledgeable (Informed and responsive) Development (Enhance skills through training and Education) To membership (Keeping the best interests of the membership) 10
Board and Management Relationship BOD Must Focus on What Needs to Be Done to Address the Members Needs and the Requirements of the External Environment. A Board Must Focus on WHAT They Want to Accomplish. Leave the Details on the HOW TO to Accomplish These Results to the Manager and the Management Team. 11
Board and Management Relationship Board of Directors Must not Participate directly in any managerial activities or operations of the CFI, its role is to provide guidance. Must not Judge the operations and decisions taken by CFI Management on their personal interest or malice Must not Create antagonism between the Board and Management 12
Board and Management Relationship The Board is expected to provide direction, focus on the big picture and the long term Management is expected to deal with operations, the specifics and details Management has the expertise and time to run the CFI Board has the overall authority 13
Board and Management Relationship Management may recognize the need for Board s contribution, but their efforts are sometimes regarded as interference The relationship is characterized by the Them Vs - Us which brings misunderstandings, mistrust and even power struggle in CFIs these relationships affect the performance of the Board and management and ultimately the entire CFI 14
Managers influence on the composition of the Board The governance of CFIs is characterised by: an emphasis on trust, co-operation and informal contracts. These informal systems of governance are more effective in small and locally rooted CFIs but are problematic with larger CFIs 15
Managers influence on the composition of the Board The development of managerial dominance within co-operatives is taking centre stage in large CFIs There is internal transformation of democratic member control into manager-led co-operatives. This relates to: Growth in size and complexity of the enterprise which enables management to take advantage of growing member apathy and distance from the original core co-operative values 16
Managers influence on the composition of the Board There is a growing tendency especially in large CFIs for: The diminishing role of membership in governance Less pressure on managers because of low levels of member participation The development of powerful and entrenched managers who have more control A growing domination of commercial values fostered by a professional management distanced from cooperative values 17
Managers influence on the composition of the Board Managers involvement with the politics of the board Providing incentives to board members to buy them off e.g. Proposing and increasing board allowances External travel for difficult board members Increasing frequency of meetings to enable board members get more sitting allowances Practicing the principle of divide and rule. Influencing members at the AGM to elect their favoured members into the board 18
Using Co-operative Identity to enhance good governance Successful co-operatives are normally those able to attract capable and committed board members who: Achieve a high degree of participation Isolate their decisions from political influence, and Maintain an environment in which co-operative values thrive 19
Using Co-operative Identity to enhance good governance Democratic governance and accountability are key factors for success. Better educated membership results in the election of directors with higher levels of literacy and related skills. Overall quality of co-operative boards improves Co-operative Values and Principles must be the pillar for good governance 20
Using Co-operative Identity to enhance good governance Good governance stems from clearly defined roles and responsibilities of the board of directors, committees and management. It also stems from codes of conduct which directors and staff at every level sign on to and respect. 21
Code of Best Practices The main pillars of the Good Governance are: Transparency, Accountability, Risk management and control. 22
Code of Best Practices Good co-operative governance will: Ensure that board and management pursue objectives that are in the interests of the CFI and members; Lead to effective monitoring of activities of the CFI; Ensure efficient and effective use of available resources; Reduce conflicts; and Increase accountability and transparency 23
Code of Best Practices - BOD The BOD shall abide by the following codes of ethics and good governance: Leadership & Management Exercise leadership, entrepreneurship, integrity and sound judgment in directing the affairs of CFI Provide guidance for long-term and short-term planning Transparency and Accountability Adopt the principles of transparency and accountability Ensure good governance 24
Code of Best Practices- BOD Compliance Ensure compliance with all statutory and legal requirements, together with co-operative values, principles and prescribed codes of best practices Control and Supervision Set up a monitoring mechanism to assess performance Ensure regular performance appraisal of the management and staff 25
Code of Best Practices - BOD Independence of the Board of Directors Should be independent Must not involve in related party transactions Communication Should establish effective and ongoing communication between stakeholders at all levels Co-operative Principles and Values Boards should adopt co-operative principles and adhere to co-operative values 26
Code of Best Practices - Members Members shall comply with the following codes of ethics and good governance: Rights of Members Know their rights and exercise these rights as members/ owners of societies Have access to relevant and required information on a timely basis and in an understandable manner for analysis and comments thereon Participation of Members Participate actively and fully in all activities Participate actively in deliberations at the annual general meetings and any special general meetings 27
Code of Best Practices - Members Responsibilities of Members Abide by rules and observe co-operative values and principles Refrain from acting to the detriment of the CFI Ensure that policies and performance are in accordance with the stated aims of the CFI and values and principles of co-operatives Use the services of the CFI and settle their liabilities/ debts 28
Code of Best Practices - Management Accountability and Responsibility Ensure that policy decisions taken by the Board are implemented Follow the objectives and guidelines set out by the Board Ensure that the functioning of the CFI is in line with cooperative values and principles, and the prevailing legislation Be accountable to the Board and members 29
Code of Best Practices - Management Efficient Management Ensure that resources are used productively for the betterment of the CFI and its members Build up the image so that trust, reliability and confidence prevail Transparency Be committed to integrity and transparency in operations Ensure that financial statements are transparent and that the statements give a true and fair view of the state of affairs of the CFI 30
Code of Best Practices - Management Supply of Information Supply all required information on a timely basis and in the correct format Keep up to date information, especially as regards the books and accounts of the CFI Communication Have effective and regular communication with the Board and other stakeholders. 31
Code of Best Practices - Management While many factors contribute to the governance of an institution Good governance begins and ends with the board 32
Board of Directors main responsibility is to Ensure. 33
Thank You 34