CO-OPERATIVE CORPORATE GOVERNANCE

BY JAMES MWASI EDITED BY STEPHEN MWANGI

What is a co-operative?
A co-operative is an autonomous association of people who have gathered in a voluntary way in order to satisfy their economic needs as well as, social and cultural aspirations by means of a joint owned and democratically-managed venture So we can say co-operatives are people made, people lead, people financed, people governed.

The peoples welfare can best be secured by institutions organized by the people themselves, because these institutions are most likely to possess the characteristics that appeal to the people and therefore the stability to perpetuate their servicesAlphonse Desjardins

Co-operative is a system. For a co-operative society to succeed it has to learn, it has to be a learning organization. It has to expand its ability to create its future through viewing itself as a system. A system is defined as a collection of parts that interact with one another to function as a whole.

However a co-operative just like any other systems is not the sum of of its parts, it is the product of their interactions. And therefore when this system is taken apart, it losses its essential properties and so do the parts.

Governance

The manner in which power is exercised in the management of economic and social resources for sustainable human development. There is a growing consensus that most cooperatives in developing countries collapse due to weaknesses in governance.

Governance in our society

1. What characterizes governance in our own society? 2. What role have we played for the governance of our society to be what it is today? 3. Are you proud of the governance in your society or does it haunt you? 4. Is it a governance that you want to be associated with even 10 years down the line or you would it rather changes?

5. Do you think it makes people want to associate with your society and do business with you or does it make people cautious if not avoid your society? 3. What are you doing to ensure a standard of good governance you would be proud to talk about?
Good governance is the heart of any organization.

What shows confidence in co-operatives?

1. Members willingness to save their money with the society 2. Members agreeing to leave their deposits with the Sacco 3. Other staff members willing to join the Sacco 4. Enhanced business to business relationship

Corporate governance

1. The manner in which the power of a corporate entity is exercised in the stewardship of the societys total portfolio of assets and resources to protect and cause to grow members fund. 2. Refers to the processes by which cooperatives are directed controlled and held responsible

3. Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a cooperative is directed, administered or controlled. 4. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed.

Participants in Corporate Governance in co-operatives

The principal stakeholders are: 1. The shareholders/members 2. Management (staff) 3. The board of directors 4. Customers 5. Donors, potential investors and strategic partners 6. Creditors (e.g., banks, bond holders), suppliers 7. Regulators (MOCD&M and SASRA).

Importance of good governance

1. Guards the reputation of the society 2. Positions the society well among other players 3. The society remains relevant, legitimate and competitive; 4. Contributes to the growth and survival of the society 5. Enhance the accountability and performance of those entrusted to manage society affairs 6. Promote efficient and effective use of limited resources.

Pillars of good governance

Accountability-shareholder engagement, CSR, compliance Efficiency and effectiveness Probity (adherence to the highest principles and ideals) and integrityleadership that is honest, faithful and diligent

 Responsibility-leadership that is representative and conscious of its obligations Transparent and open leadership with accurate and timely disclosure of information relating to all economic and other activities of the Society

Fundamental fact
The survival, growth and the future of any institution is dependent on good governance. This is dependent on a membership that is alert, interested and objective in discharging their mandates as the supreme authority of the society in a sober and business like manner.

Members role in good governance

The supreme authority of a Society society is vested in general meetings. (Coop Soc. Act section 27) In exercising the responsibilities of the supreme authority, members shall jointly and severally ensure that only credible members are elected to the board of directors.

Board of directors
A committee by the people and for the people Must be seen to: Be fully representative-Gender Reflect the diversity within Articulate the wishes of the members

 The Board should ensure that the society complies with all relevant laws & regulations, Appointments to the Board of Directors should, through a managed and effective process, ensure that a balanced mix of proficient individuals

How to institutionalize good governance Societies should develop: 1. Code of conduct 2. Service charter 3. Policies human resource, credit, investment, savings, liquidity, information preservation, dividend and risk management policies

Strategic issues
They are at the heart of ensuring survival Do we have a clear picture of where the society is going? Does it depend on us to move the society? Can you say for sure whether the society will survive the next five years? This calls for the society to develop a strategic plan Failure to plan is planning to fail

Other instruments of good Governance

Budget To be prepared three months before the end of the preceding financial year. Questions: 1. Do you understand it or you just approve? 2. Do you follow to see its obeyed?

Audited Accounts To be presented to members within four months after the end of the accounting period (sec 25). Questions: How timely are your accounts? Do you get it within a reasonable period before AGM?

Credit management

The Sacco Society shall have a credit policy consistent with the Act, regulations and any other applicable law. The policy shall contain the following:

General lending procedures

-Loaning procedures and their documentation -Eligibility requirement for a loan -Permissible loan purposes and acceptable collaterals. -Terms (loan types, interest rates, frequency of payments) and conditions

Disclosures
-Terms and conditions of insider lending. -Maximum loan approval levels for each officer and committees. -Guarantee requirements. -No director or employee of a Sacco or immediate family members may receive preferential treatment in connection with any loan made by a Sacco.

Ministry responsibility in good Governance

1. Continuous monitoring-Extension services 2. Guidance and advisory services 3. Training and education 4. Inspections (sec 58)

5. Inquiries (sec 58) 6. Surcharge (sec 73) 7. Settlement of disputes (sec 76) 8. Elections 9. Regulation and supervision

Indicators of bad governance

1. Exaggerated expenses 2. High committee allowances/remuneration 3. Unmanaged risks 4. Lack of morale 5. Conflicts

6. Unachieved objectives 7. Laxity 8. Stagnant growth 9. Poor flow of information 10. Lack of successful leadership. 11. Manipulation of members

Conclusion

Good governance is an effort of all of us in the society. It takes good people to do nothing for evil to prevail.

THE END