Governance in Cooperatives

Introduction

Governance is essential for the success and survival of any company, organization or government. For the past few years, it has been recognized that there are numerous governance problems at all levels, including in governments, private companies, political organizations, and even in some organizations with a social nature. These problems are reflected in a low level of efficiency and effectiveness in achieving the organizational objectives or those of the State, in the case of governments.

Administrative and financial corruption is what turned the cyclical fluctuation, that is part of normal economic processes, into a deep and momentous economic crisis. Most responsible for this crisis were banking and financial institutions, which enjoyed true debauchery in their practices for many years.

This crisis was due in part to the lack of regulation of certain financial instruments created by these institutions, but also to the inability of authorities to fulfill their role of protecting consumers and common citizens; an exponentially overwhelming credit spiral was allowed compared to the beneficiaries’ ability to fulfill their obligations. But, above all, the crisis was due to the fact that, to promote a volume of operations needed to justify the absurd salaries and bonuses of those who organized those risky credit piñatas and murky derivative instruments, financial regulations that were supposed to protect the interests of savers and investors were dismantled.

In other words, it is a crisis caused by greed, unbridled speculation, irresponsible indebtedness and the absurd claim of obtaining profits without producing anything or making any effort.

That said, we must mention that cooperatives do not escape governance problems, which are manifested mainly in the disenchantment and loss of interest in their activities by their members.

Ungovernability is manifested through abuses and privileges at certain levels of the organization, in poor administration of financial resources, in ‘managerialism’ and ‘presidentialism’, in providing bad service to members, and in a perpetuation of leaders, who remain for many years in their positions, but without receiving any training to be able to respond and contribute to the good governance of their cooperatives.

Cooperatives must get rid of existing practices, that go on for many years, of some leaders focused on struggling for political power in search of personal advantages, that are opposed to the very philosophy of cooperativism.

This confusion between personal interests and those of cooperatives, the confusion of roles between the board of directors, the supervisory committee and general management, represent the greatest threat of corruption, and even of the cooperatives’ survival, being exposed to various forms of political games, dubious compromises or intrigues.

What is meant by governance?

Governance is the ability of a sociopolitical system to govern itself. When a system is structured in such a way that strategic actors interrelate to make collective decisions and resolve their conflicts according to pre-established rules, one can speak of governance.

You can also say that Governance:
 Means political and institutional stability and decision-making, and administrative effectiveness;
 Refers to the continuity of norms and institutions and the rhythm, coherence, and intensity of decisions;
 It is the capacity of permanent adaptation between norms and the actions, between regulations and its results, between demand and supply of policies and public services;
 Refers to the maturity of the organized society and its ability to assume shared responsibilities in the implementation of decisions and the art of good governance.

Political science refers to governability as the capacity to govern, based on ‘legitimacy’, and to achieve it every government must act with ‘effectiveness’. From this perspective, governance is understood as ‘the situation in which a set of favorable conditions for government action, in its surroundings, interact.

To be viable, governance must meet three fundamental requirements:
 Be effective
 Be legitimate
 Adjust to the rule of law

A governance system refers to the set of values, principles, policies, rules, and organs dedicated to addressing the interests of the different actors linked to the company: members, customers, managers, employees, suppliers, consumers, and the community in general.

In the case of cooperatives, governance is the capacity for interrelation and balance between the general assembly, the board of directors, the supervisory board, general management, and the administrative and operational staff, to protect the interests of their members.

Governance in a cooperative is effective when the interests of its members are protected, contributing to improving their quality of life. It is not enough to create a positive image based on productivity or the quality of services, it is also necessary to guarantee trust. Hence, as a basis for cooperative governance, the strengthening of ethics is suggested, understood as the set of values that inspire the life and management of a business organization.

In an upcoming article the topic of good cooperative government, and other aspects related to it, will be discussed.