Why do some cooperatives flourish while others continually struggle? The factors of success are not entirely obvious when the weather is great, crops are bountiful, and prices are favorable, because all cooperatives can thrive in such conditions. However, as economic and competitive pressures mount, small difficulties in board behavior can lead to poor firm performance.
I suggest that the very best board of directors typically share five important practices. An excellent board will:
- Represent both the members and the cooperative
- Provide examples of personal and organizational integrity
- Promote loyalty among board members and the members
- Develop a culture of continual learning
- Establish a vision and strategy to guide management
Your board’s adherence to these practices will help develop a quality of resilience that will see you through turbulent economic circumstances.
1. Represent both the members and the cooperative
An exceptional cooperative board represents the interests of the members while simultaneously protecting the assets of the cooperative.
Your cooperative was initially formed to fill an economic need of the members. Perhaps it was cost savings from economies of scale, the provision of needed market services, or to combat unfair market power. Regardless, your cooperative exists to meet the needs of the members. But it must first exist if it is to help them. Your cooperative is a business, and like any business its continued existence is based on its ability to extract economic value from its competitive advantages. In short, it must be profitable. Members need to be reminded at times that they are investors in a business, and not participants in a discount club. Investors receive a share of profits, but only when profits have been made. When a board chooses to redeem member investments without the use of current year profits, they are essentially deciding to liquidate a portion of cooperative equity. It is the responsibility of the board to represent the members’ interests as both customer and investor. The cooperative comes first in performance, and members come first in purpose.
2. Provide examples of personal and organizational integrity
An exceptional cooperative board adheres to a code of ethics that promotes a diverse culture where all can be heard without fear of punishment or retribution.
A cooperative is one-part business and one-part social group. Therefore, it is not surprising that each cooperative has a different culture or manifestation of its customs, attitudes and behaviors. At the most basic level, this culture reflects the needs and desires of the members, but it won’t flow through the company if the directors fail to define this for management and employees. In this light, the board can greatly influence the ethical behavior of employees by modeling integrity in the boardroom. Ethical behavior of board members includes standards of honesty, integrity, dependability, and confidentiality. Board conversations are not to be shared outside of the boardroom. A good rule of thumb is that when items from board meetings are shared with the public, it should be done collectively by the entire board or by the chairman speaking on behalf of the board. Additionally, a characteristic of a flourishing cooperative is diversity. The cooperative must recognize the value and importance of all its members regardless of gender, age, ethnicity, or size of operation. Differences in personalities and backgrounds provide new perspectives that will drive creativity and ultimately, better strategy. A board that is trying to grow membership among a certain type of producer, would be aided by having that group represented on the board.
3. Promote loyalty among board members and the members
An exceptional cooperative board fosters loyalty to the cooperative through accountability to one another, transparency to the members, and their personal business transactions.
Meetings of the board of directors should be focused on providing direction to management, setting policy, establishing strategy, and overseeing the proper and effective use of assets. Each meeting should add to the progress of ones that came before. A thoughtfully prepared agenda helps the board to focus their limited time on director responsibilities and avoid the temptation to spend time on managerial decisions. Meeting minutes and agendas help board members to be accountable to one another through follow up on assignments and effective use of their time.
Loyalty thrives on trust. For a board to be viewed as trustworthy to its members, it must be candid, both among board members and (to the extent possible) with the public. An exceptional board treats boardroom discussions with strict adherence to confidentiality. It is possible to be both transparent (by sharing what you are doing) and confidential (by not sharing intimate details of discussions and decisions). Members will respect the honest answer “I can’t talk about that.” Sensitive issues that need to be shared with members or the public should be done by the board as a whole or by the chairperson speaking on behalf of the board. Finally, board members themselves need to be prime examples of loyalty by doing as much business as possible with the cooperative.
4. Develop a culture of continual learning
An exceptional cooperative board is continually learning about board duties, the operation of their business, and the trends impacting their industry.
Profitability is found through sustained competitive advantage. Competitive advantage is found by individuals who are constantly improving their understanding of their business and the industry in which it operates. The very bestcooperative boards make it a high priority to receive continuing education to stay current with business skills, strategies, and industry trends. A board can set itself apart from others by devoting time for training at each board meeting. Outside experts can offer a few minutes of thought-provoking discussion that may lead to breakthrough strategies. The review of internal documents like employee handbooks, bylaws, and corporate policies may lead to best practices that protect the cooperative from legal liabilities. Continual efforts focused on board education will demonstrate to members and legal authorities that the board is striving to fulfill its fiduciary duties.
5. Establish a vision and strategy to guide management
An exceptional board of directors provides vision and strategy while letting the manager manage.
Sometimes, the most difficult task for directors is to step aside and let management do their job. It is the duty of a director to establish the vision and mission of the firm, to determine strategy to achieve that mission, to set objectives and goals dictated by that strategy, to oversee the acquisition and use of assets, and to monitor the performance of the firm.
To do this, the board hires a general manager or CEO and contracts professional services (like auditors and lawyers) related to the monitoring and administration of the firm. That is where the operational duties of the board stop. Managers have the responsibility to establish budgets, use the firm’s assets to achieve stated objectives, monitor day-to-day operations, set short-term goals, hire and fire employees, and establish levels of pay and bonuses. In other words, decisions on the operation of the cooperative or the use of its employees are the sole responsibility of the manager. If the board is making these decisions for the manager, they not only put the cooperative at risk by ignoring the hired expertise, but they also take time away from their fiduciary and strategic responsibilities.
Directors, then, have the responsibility to establish strategy. An exceptional board of directors will discuss strategic issues in every board meeting and periodically dedicate themselves to more intense strategic planning.
Representation, integrity, loyalty, education, and vision are the hallmarks of an excellent cooperative board. By adhering to these qualities and being true to the role of directors, a truly exceptional board will be poised to lead their cooperative to achieve sustained competitive advantages and new heights of profitability.
Park, John. “The 5 Practices of Boardroom Excellence.” Southern Ag Today 5(47.5). November 21, 2025. Permalink
