Director Diligence: Co-Ops Should Assess Director Skills and Ability to Fulfill Duties

Article excerpt

An effective board of directors is a key ingredient in a healthy and successful cooperative. Well-run, efficient meetings and sound board-nominating and election procedures are necessary for all successful co-ops. But most important of all is that a co-op be governed by qualified, experienced directors with the skills needed to carry out their responsibilities to the co-op.

James Baarda in The Circle of Responsibilities of Co-op Boards (CIR 61, published by USDA Cooperative Programs), describes seven major responsibilities for directors:

1. Represent members;

2. Establish cooperative policies;

3. Hire and supervise management;

4. Oversee acquisition and preservation of cooperative assets;

5. Preserve the cooperative character of the organization;

6. Assess the cooperative's performance;

7. Inform members.

Director responsibilities may be further broken down as follows:

* Hire a competent manager/CEO, determine the salary, outline the duties and authority of the position and formally review his/her performance at least annually.

* Adopt broad, general policies to guide the manager and cooperative.

* Develop and adopt long-range business strategies.

* Require written monthly financial reports and operating statements for board meetings to keep directors informed of both adverse and favorable operations.

* Direct the manager to prepare, before the end of each year, an operating budget for the next fiscal year for board approval.

* Employ a qualified auditor to make an independent audit at least once each year.

* With the aid of the manager, plan and conduct the annual meeting to keep members informed about the status of their business, including operations, finances and policies.

* Determine the patronage refund allocation and per-unit retain level.

* Ensure competent legal counsel is available.

* Keep a complete record (e.g., minutes) of the board's actions.

* Communicate with members as necessary.

* Work to promote the cooperative.

More specific duties

There are also many more specific duties directors should fulfill. These duties include, but are not limited to, the following:

* Determine the boundaries of districts/divisions and locations of operations offices/facilities.

* Approve or disapprove of major capital expenditures.

* Establish the co-op's financial structure and authorize changes to it.

* Establish appropriate election and voting procedures to maintain accurate representation of members. This includes timely filling of vacancies on the board, committees or any other organizational body that results from a resignation, death, disqualification or similar occurrence.

* Decide what the appropriate relationship should be with other cooperatives and associated organizations.

* Determine corporate membership in other organizations, associations and federations.

* Establish the responsibilities and duties assigned to each committee that the board creates.

* Establish basic policies about legislative or administrative decisions on local, state, national and international levels that affect the welfare of members.

Directors carry out their duties and responsibilities during board meetings, membership meetings and on their own. Directors need to learn to conduct these necessary tasks and functions. They must have an in-depth understanding of cooperatives and their unique principles. They must also keep abreast of the many associated issues that will arise.

Assessing directors

Directors should periodically undergo an assessment to ensure that they are fulfilling their responsibilities and duties. A "best practice" is to conduct such a skills assessment when any new director joins the board. …