Governance Good Practice: Worker Cooperation and Employee Ownership

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Governance Good PracticeWorker Co-operation
and Employee Ownership

• Saturday 20th May
• CONGRESS 2006

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Introduction

• Sam Roger, member of Co-operativesUKs Employee
  Co-operative Council
• Call for submissions to find out key governance
  issues
• Aim of today launch this work to develop a Code
  of Governance for Worker Co-operatives and
  Employee-owned businesses.
• Siobhan and John - Why is this important? And
  what are the current issues we know about
• Tim Gausden On the Eighth Day, give an insight
  into the governance issues of Manchesters most
  established worker co-operatives.

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A Code of Governance for Worker Co-operative and
Employee-owned Businesses

• Dr JOHN BUTLER, Secretary
• and
• SIOBHAN MCLOUGHLIN,
• Research Information Officer

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Definitions of Corporate Governance

• Governance is the systems and processes
  concerned
• with ensuring the overall direction,
• effectiveness, supervision and
• accountability of an organisation.
• (The Governance of Voluntary Organisations,
• Cornforth 2003)

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Importance of Corporate Governance

• GOOD CORPORATE GOVERNANCE enables
• Balance interests
• Achievement of Objectives
• Safeguard members assets
• Inspire confidence

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Everyone is considering governance

• Formal UK Reviews Listed Companies
• - 2003 Combined Code
• - Higgs
• - Smith
• Other Sectors
• - Building Societies Association
• - Life Mutuals
• - Governance Hub

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Co-operativesUK and Governance Best Practice

• Early 90s governance scandals
• 1995 the Co-operative Union produced first Code
  of Best Practice for Consumer Co-operatives
• 2001 Confederation of Co-operative Housing Code
  of Governance
• 2005 New Code of Corporate Governance for
  Consumer Co-operatives
• 2006 ABCUL start work on a Code for Credit Unions
• Congress 2006 Code for Worker
• Co-operatives?

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Why is this important to Co-operativesUK?

• Rule 16 of Co-operativesUK Rule Book - CODE OF
  BEST PRACTICE
•   The Board shall establish a series of
  codes of best practice on corporate governance
  and appropriate arrangements for implementing and
  monitoring pertinent to the different categories
  of membership.
• Revised Corporate Governance Code submitted by
  the Employee Co-op Council
• This Co-operative Congress asks
  Co-operativesUK to develop corresponding codes
  for all other membership categories of the
  Co-operative Movement
• Terms of Reference of the Corporate Governance
  Review Group
• To consider the need for separate provisions
  within the Code to recognise the diversity of
  co-operative societies in the UK

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Director Questionnaire

• Conducted in February/March 2004
• Sent to all directors of co-operatives in
  membership of Co-operativesUK
• Received 38 responses from worker
  co-operatives representing 19 different
  organisations

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Findings of Director Questionnaire

• High degree of SATISFACTION with current role as
  a director
• Key Reasons for SATISFACTION for W.C. directors
• Happy with way business has developed
• Good working team/Board/relationship with
  management
• Rewarding Enjoyable
• Key Reasons for DISSATISFACTION
• Still learning/gaining confidence
• Lack of time/conflict with other commitments
• Co-op structure problematic

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Findings of Director Questionnaire

• Worker directors were most keen to have more
  training (68)
• Key areas were
• - Legal Responsibilities / Legislation / Law
• - Finance/Financial Management
• - Marketing / Promotion
• - Business Management/Systems

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Findings of Director Questionnaire

• Understanding of Role
• 42 had complete understanding of their role as a
  directors
• 58 had complete understanding of the role of the
  board
• 53 considered the board to be actively engaged
  in the organisations performance
• 37 felt they made a very effective contribution
  to the board

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Findings of Director Questionnaire

• Barriers to effectiveness
• Lack of time/other commitments (58)
• Too many responsibilities elsewhere (53)
• Too involved in the day to day running of the
  organisation (34)
• Lack of information (26)
• Personal faults/lack of ability (21)

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A Code of Governance for worker co-operatives?

• THE PROCESS?
• Regular meetings of the Review Group
• Established Sub-Committees
• Expert Presentations
• Advert in The Guardian
• Regional meetings
• www.goodgovernance.coop
• Questionnaire to, and as a result, statistics
  about, co-operative directors
• Interim Report
• Consult on a draft Code

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A starting point The Code
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Preamble and Principles

• ICA Statement of Co-operative
  Identity
• Nine Universal Principles of Good Corporate
  Governance

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The Code and Appendices

• Code divided into six sections
• Members
• The Board
• Remuneration
• Disclosure
• Co-operative and Social Responsibility
• Compliance Assessment
• And Fifteen detailed Appendices e.g. Annual
  Report Checklist, Terms of References for
  committees of the board etc.

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The Steering Group

• Important to have diverse representation on the
  working group
• Strong chair to lead the process
• Consider telephone conference and email
  correspondence as well as meetings
• Co-operativesUK provide secretarial and drafting
  assistance

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What next?

• Questionnaire deadline 9th June
• Nominate candidates for steering group
• Process to be led by the Employee Co-op Council
  next meeting 21st June
• Set timetable for work programme