Brett Fairbairn and Murray Fulton
In our Two-Hats post, we argue that directors of a second-tier co-operative must put the interests of that organization first when they are actively engaged with the board. This, in turn, means they cannot act as a “representative” of their first-tier organization while sitting on a second-tier board. But, if this is the case, where does representation occur?
It is important to note that representation of some kind is important. Indeed, the ability of members to express their views and potentially influence the organization is part of what makes co-operatives unique. The feedback from members about prices, quality of service, and activities is critical in ensuring the co-operative acts in ways that benefit the members, thereby differentiating itself from other organizations. Equally, members require knowledge about the leaders of the co-operative and the reassurance that they understand the members. This, too, is an aspect of representation.
Representation of some kind is clearly important in co-ops. But there are different kinds of representation. Below we unpack different meanings of the word relevant to governance:
- First, a person who acts on behalf of others is their representative. The people who give instructions to the representative are the principals. The representative is responsible in an almost legalistic way for advancing the views and positions of the principals; he or she may negotiate deals on their behalf and will certainly report back to them. Think of a solicitor or a lobbyist you hire to represent you to a public authority. To keep things clear, we will call this role a delegate — someone who follows the instructions of others and reports back to them.
- Second, someone who serves as a spokesperson is a representative of a group. The representative upholds the general interests of the group, without necessarily being bound to them or reporting back in a formal way. Think of people interviewed in the media who step forward to speak on behalf of a group affected by certain events — let’s say, to urge better treatment of armed-forces veterans. We will call this role an advocate — someone who draws attention to the interests of a group.
- Third, a person or group of people is representative of a larger group if they exemplify the characteristics of that group. We will call this role an exemplar.
Now, back to governance. It is, particularly, the first of the three definitions above — serving as a “delegate” — that is incompatible with the fiduciary duty of good board governance. In our view, it is risky for a board to include directors who understand themselves as representatives in this sense. If they feel bound to specific external positions (instructions from their principals), they are less likely to enter fully into the give-and-take of board discussion that leads to a consensus about the best interests of the group. And if they report back to their principals in any detail, the frankness of board discussion may suffer markedly. This kind of representative will experience the “two-hat problem” and likely exemplify why it is an issue.
The second and third senses of “representative” may, with some qualifications, apply to boards. We want directors in a co-op to advocate for the interests of the membership, and we want the board as a whole to be sufficiently representative of the members that they will trust its judgement. The qualification here is that it is the general membership that is to be represented on the board, not subgroups and interests. Advocacy for specific groups or individuals is to be particularly avoided.
What about the first sense of representation above? If directors do not convey positions and report back, who will do so? We would argue that many co-operatives should create separate forums or processes, distinct from the board of directors, where this can occur.
A formal place for member feedback to be conveyed may be in a delegates’ meeting, advisory council, or general members’ meeting. These forums should be designed as places where people speak and vote (if they are voting bodies) their individual/ organizational interests. In these forums, majority rules; hence there is no strong expectation of collective responsibility or consensus.
Some co-operatives may deal with representation issues less formally, through management rather than through governance. Conversations between managers at different levels might be critical to solving problems, even though these conversations will not appear on an organization chart. Co-ops may also use things such as focus groups to obtain the views of their members.
While the members’ views are important, theirs are not the only perspectives that need to be considered. Using the language we introduced in our previous post, the members’ perspective tends to be particularist. It is rooted, as it should be, in the particulars — members reside in particular communities, they have particular clienteles, and they provide particular mixes of products and services.
Yet each of these particulars captures only a portion of what the second-tier co-operative is dealing with. We need some method to bring the different perspectives together. As was argued in the “Two-Hat” post, it is the role of the board to behave in a non-particularistic fashion — directors must use their wisdom to understand the long-term impact on the whole system and not simply on their own organization.
Directors at the board table of a second-tier co-op should work hard to represent the interests of all members. They should feel this responsibility keenly. It is likely to cause discomfort for them sooner or later, when different groups of members have conflicting interests. In such cases, it is all the more critical to have directors who strive passionately to find the best good for all, the long-term member interest, the sustainability of the co-operative’s mission.
Image source: Brooklyn Community Board 5 website at http://brooklyncb5.org/2016/01/06/monthly-board-meeting/