Issue of gouvernance of    cooperatives

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Issue of gouvernance of cooperatives

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1. Issue of gouvernance of cooperatives Présenté par Oumou Sidibé VANHOOREBEKE Expert en microfinance, chef de projet CCOM

2. Plan de la présentation Part I : Cooperatives Types Nature of cooperatives Financial cooperatives Assumptions Part II : Governance Concepts Democratic structure Dual structure Characteristics of the cooperatives Management demands Combination of governance strategies Roles of the stakeholders Conclusion

3. Cooperatives general characteristics Types of cooperatives Two groups of cooperatives Financial cooperatives (savings and credit cooperatives, Sacco, housing cooperatives) Non-financial cooperatives: Workers’ Producers’ (coffe, cocoa, cotton…) Consumers Shared services

4. Nature of cooperatives A cooperative could be defined as a corporate body bringing together individuals who have shared economic and social concerns and whom, in order to address them, join forces to run an organisation in accordance with standards, norms, principles and values proper to co-operative actions.

5. Cooperatives (cont.) A company controlled by an association constituted of persons (members) This association groups one or many types of user of the company - suppliers and/or clients, and/or employees

6. Cooperatives (cont.) 3. The first objective of a cooperative is not to maximise profit, or to effect social change? but to maximise the benefits or profits that its members can earn from their transactions with the cooperative. 4. This form of company is regulated (governed) by particular rules of equity and values.

7. Financial cooperatives A group of people constituting a legal entity, which is non-profit and with variable equity, based on the principles of union, solidarity, mutual help, with the aim of collecting the savings of its members and offering them credit.

8. Consensus General consensus about: the role and impact of cooperatives in economies a large number of members are involved Possible contribution to achieving the millenium goals, Cover an increasing number of people widespread: Europe, North America, Africa, Asia, Latin America They are neglected by policies makers because of their structure, The view of cooperatives is changing Good governance is fundamental to the viability of cooperatives and influences their rate of growth

9. Part II : Governance of cooperatives

10. Governance Concept: All institutional and behavioural assets governing the life of an institution are implemented to achieve its goal « L’ensemble du dispositif institutionnel et comportemental régissant la vie d’une institution et mis en œuvre pour réaliser sa mission»

11. Particular structure (all types) Association Board of managers Administration committee Credit committee Control Committee Ethical or deontology Committee General Assembly Company Management Staff

12. Special Characteristics ….. Rules of associations Members are influenced by their living conditions Influenced by politics Rules of the corporation Management demands, Performance, Efficiency Viability

13. A democratic structure

14. Financial cooperative Because of a cooperative’s nature, it has both an economic and a social goal; that is to offer advantageous financial services (or other types of service) to its members whilst also providing training to its members. So, if the members constitute a homogenous group with similar concerns, their financial service requirements will be the same (segmentation) and decisions about the direction that the cooperative should take and the products that it should offer will be easier to negotiate. Therefore when the target group is heterogeneous, and individuals approach a cooperative with a range of ambitions and expectations (this is usually the case), the management and the elected postholders’ tasks become very complex.

15. Stakeholders State Members (owners, representatives, clients) Employees ( salaried ), Officials, or board members (administration, supervisory or control committee, deontology committee) Partners

16. Dual structure…. Association Board or managers Administration committee Credit committee Control Committee Ethical or deontology Committee General Assembly Benevolat Company Management Executive Staff Salariat

17. Double structure The board of directors is the link between the association and the company. He is responsible for general management, the establishing of performance targets, the employment or dismissal a general manager, the definition and validation of the pay and staff management policies. Its role, its cohesion, solidarity and its integrity are essential for the survival of the cooperative and the Union.

18. Management requirements If cooperative values and principles have not changed much, a range of roles and responsibilities for the elected post holders emerge as the cooperative itself develops (different phases of the institution). However, changes in the external environment in terms of behaviour and social values (on the part of the clients, staff, the competition etc) also bring new demands for the managers.

19. Management requirements As the result of the global shift in the economic and social environment, today’s leaders must be skilful in order to anticipate future developments, solve problems, lay down strategic objectives, make choices, reduce uncertainties, evaluate performance, re-direct, and lay down objectives. These are also the challenges facing the leaders of the cooperatives. However, competence is not one of the criteria that is necessarily considered when there are elections (one member one voice) and this results in shortcomings in some places.

20. Examples of governance problems Confusion of role and mission, Culture of silence Gerontocracies especially in Africa Conflict between the principles of profitability and the social objectives, Slowness in the decision-making Lack of confidentiality concerning the strategies, Lack of solidarity Conception of volunteering (the Benevolat), Politicisation of the system Corruption Increase in costs Poor motivation amongst the staff. All these problems have a direct impact on the image of cooperatives

21. Combination of governance approaches A combination of the elements within the organization The structure of the process, the division of power throughout the institution should be dynamic and proactive in accordance with the internal environment but also in accordance with the external environment. Here are some elements of this governance make-up drawn from my own experience

22. Element of governance mix To institutionalise the mechanisms and means of control and protection Mechanisms to ensure the re-taking control of power (preventive and curative measures) Develop a company culture based on the performance (economic, gender and social issues) Limit the leaders’ mandates and prevent an accumulation of functions Renew board (one third of members or partial renewal) and have a limited term To remain faithful to its mission If the need for a renewal of the cooperative is accepted, the question is then who is to fulfil which role and at which level? Can one have a common charter for all types of cooperative?

23. Principles Elements that are external to the institution: National law governing cooperatives revised regularly , Standards of performance, institutional supervision mechanisms... etc Elements that are internal to the institution: Statutes and internal regulations revised regularly Manual covering policies, procedures and accounting practices Codes of ethics applicable to the leaders and the employees, Clear separation between the administrative and the supervisory bodies

24. Conclusion If it is clear that a cooperative needs to be renewed, we must determine: what the common principles are, what the indicators should be, what the management norms should be, and the roles of each stakeholder Establish what is necessary to create an enabling environment. What the internal control measures should be What the role should be for: the government, partners, professional associations, UN organisations, international cooperative organisations and practitioners Determine whether it is possible to have the same legislation, or standards for all types of cooperative Of course all this should happen within the framework of the governance of cooperatives

25. Thanks , Merci, obrigada Oumou Sidibé vanhoorebeke

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