Co-operatives Act, 2005 (Act No. 14 of 2005) Regulations Principles of Good Governance for Co-operatives 5. Management of Co-operative

 

Good management of a co-operative is what makes a co-operative successful. Many options are available for the co-operative to appoint a manager. A co-operative can be managed by one of the board of directors, a member of the co-operative or by a professional manager or professional management team depending on affordability, size and nature of the co-operative.

 

 

The board of directors is responsible for the management of the co-operative and is accountable to the members, who are the owners of the co-operative. The board of directors is appointed at the annual general meeting by the members of the co-operative. Only members of the co-operative may be elected as directors or executive directors of the co-operative. Associate members may only be elected as non-executive directors. In the event of a vacancy the board may by way of resolution appoint a director for the remainder of the period as stipulated in the constitution of the co-operative, provided that such appointment is ratified at the next general meeting.

 

The board should elect a chairperson. A chairperson has the ability, power and commitment to guide and organize the work of the board, initiate and monitor strategic decisions and has the know-how and experience to lead the board.

 

The members of the co-operative may by special resolution, either through a meeting convened by the supervisory committee or at least 25% of the members if such a co-operative does not have a supervisory committee, agree to dissolve the board if such members find justifiably good reasons that the board is dysfunctional.

 

The board may delegate functions to a director or manager if this is provided for in the constitution of the co-operative. The constitution of the co-operative must also stipulate the conditions under which functions or responsibilities of the board may be delegated. Should the board decide to delegate the management of the co-operative to a manager, the board remains accountable to the members regarding the management of the co-operative. It is thus important that the board ensures appropriate management and performance systems are in place should it decide to appoint and delegate the management function of the co-operative to a manager.

 

Meetings of the board are called by the chairperson or any two directors of the board and a quorum is a majority of the directors of the board unless stipulated differently in the constitution of the co-operative. For purposes of ensuring a quorum, directors participating telephonically or electronically in the meeting are deemed to be present. Decisions are also taken by majority vote and in the event of equal votes the chairperson or the person acting as chairperson has the casting vote. The number of directors as well as period for which they are elected is stipulated in the constitution of the co-operative. A resolution in writing signed by all the directors entitled to vote on such a resolution at a meeting of the board is valid as if such resolution was passed at a board meeting, unless the constitution of the co-operative provides otherwise. Records of minutes of meetings of the board must be kept in a minute book.

 

A director or a manager of a co-operative may not accept any commission, remuneration or reward from any person for, or in connection with, any transaction to which the co-operative is a party unless such commission, remuneration or reward is given in the course of usual business or profession as director, manager or employee and the director, manager or employee has declared his or her interest to the co-operative.

 

All co-operatives must, in writing, notify the registrar of the full names, addresses and identity numbers of each person elected as a director within 30 days of such appointment or any change of address of a director or any vacancies.

 

If provided for and approved by members, board members should be paid a realistic compensation for their work.

 

In the execution of their powers, the board of directors must develop a set of processes, customs, policies and structures that drive the manner in which the co-operative will be directed, administered and controlled for consideration and approval by members. Examples of these are human resource policies, remuneration policies and resource utilization policies. Compliance to these policies should be enforced by the management of the co-operative and reported to the board of directors. In instances where a co-operative has appointed a supervisory committee, the supervisory committee should also oversee and ensures compliance to approved policies. Co-operatives may also decide to appoint an Ethics Committee.

 

 

The board has to oversee and ensure the strategic decisions in pursuance of the objectives of the co-operative as informed by the constitution of the co-operative as well as leadership to maximize the benefits for the co-operative. The board must exercise leadership, entrepreneurship, integrity and sound judgment in directing the affairs of the co-operative.  The board of directors must also look after the interests of their members needs whilst simultaneously remaining competitive in the market. Member proximity or participation is thus very important. Member participation can only be obtained by ensuring regular, frequent and meaningful interaction with members. It is thus important that the board identify, disseminate and uphold best practices in member participation, engagement and involvement.

 

The Board must develop internal policies and plan to ensure the efficient and effective running of the co-operative. The Board must also develop a risk plan and report on the risk plan at the annual general meeting to members. Policies or plans developed by the board must be ratified and endorsed by members at the annual general meeting. The policies or plans to be developed by the board include the following:

 

The board is responsible to ensure good governance and compliance to legislative requirements as well as the requirements stipulated in the constitution of the co-operative. A director of the board or the board of the co-operative may do all things necessary to carry out the objectives of the co-operative provided that such action is allowed in terms of provisions of the constitution of the co-operative. A director or the board of the co-operative must not pursue any objective or perform any act that is not authorised by it constitution. A co-operative or director that is found guilty of contravening the requirements of the constitution of the co-operatives is guilty of an offence and may be liable to a fine not exceeding one million rand.

 

The board must ensure transparency in terms of management decisions; the financials of the cooperative as well as accountability to the members of the co-operative. The board must provide members with the information necessary to make sound judgements regarding the affairs of the co-operative as well as their membership to the co-operative. To ensure transparency and accountability the board must establish effective communication mechanisms to ensure communication with members, management as well as all relevant stakeholders.

 

The board has a responsibility to increase the number of members to the co-operative and to ensure that members actively participate in the operations and decision making within the cooperative.

 

5.3        Liability, personal financial interests and returns relating to directors

 

Directors must, in writing and in the prescribed manner as determined in section 37 of the Act, disclose to the co-operative the nature and extent of any financial interest in a contract or transaction or a proposed material contract with the co-operative or any change to such contract, transaction or proposal if it is a contract or a transaction that is not available or customarily entered into between the co-operative and its members.

 

A co-operative must not pursue any objective or perform any act that is not authorised by its constitution and record all business transactions concluded with members and non-members in its annual financial statements.

 

A director or employee of a co-operative may not use his or her position or any information obtained whilst in his or her capacity as a director or employee to gain any commission, remuneration, reward or other advantage for themselves or for any person other than the co-operative, unless he or she has disclosed full particulars of the nature and extent of such commission, remuneration, reward or other advantage and the material circumstances relating to its acquisition in writing to the co-operative and the co-operative has given its written approval to such acquisition by the director, member or other person, as the case may be.

 

Notwithstanding the aforementioned provisions, a director or employee of a co-operative may not in any circumstances use his or her position or any information obtained while acting in his or her capacity as director or employee to gain any commission, remuneration, rewards or other advantage for him or herself or for any person other than the co-operative through or in connection with any transaction to which the co-operative is a party.

 

A director of a co-operative is required to inform the co-operative in writing of any change in his or her address. In return a co-operative must, in writing, amongst other notify the registrar of (a) the full names, address and identification number of each person appointed as a director within 30 days of such appointment; (b) of any change of address of a director, within 30 days of knowledge of such change; (c) after any director has vacated office, within 30 days of such vacation; and (d) of the reason for the registration or removal of a director.

 

A co-operative or director of a co-operative that contravenes any of these provisions is guilty of an offence.

 

5.4        Managers

 

The constitution of a co-operative may stipulate the provisions regulating the appointment of a general manager or executive manager by the board of directors.

 

Managers in a co-operative are responsible for the effective and efficient day to day management of the co-operative and are accountable to the board of the co-operative. Apart from the management function, managers also have an entrepreneurial function to ensure the relevance and economic growth of the co-operative by advising the board of directors accordingly. Managers should also be responsible for risk management.

 

Boards of directors often also delegate the supervision of employees to the management of the co-operative. If the managers are responsible for the employees of the co-operative it is important to ensure that performance management and review systems are in place for employees, that employees are trained and that all employment requirements are complied with.

 

Managers should agree with the board of director on a performance review process to monitor and evaluate their own performance.

 

5.5        Supervisory committee

 

The constitution of a co-operative may provide for the appointment of a supervisory committee. A supervisory committee so appointed is a committee of members elected by the members of the co-operative to exercise supervision over the board of directors. The constitution of a co-operative will stipulate the manner in which the supervisory committee may be constituted. The supervisory committee must be elected at the first annual general meeting within 18 months from the registration of the co-operative. The supervisory committee consists of members of the co-operative who are not directors.

 

The functions of the supervisory committee include the following:

 

The co-operative must, as in the case of general meetings and meetings of the board of directors, also keep minutes of meetings of the supervisory committee at its offices.

 

Although it is voluntary for a co-operative to elect a supervisory committee it is advised that all co-operatives with more than 20 members elect a supervisory committee to strengthen internal control and good governance.

 

 

The Board must be elected at the annual general meeting of the co-operative for such period as set out in the constitution of the co-operative. The constitution of the co-operative must also stipulate the number of directors to be appointed as well as the term of office, which should be reasonable. The constitution of the co-operative will also determine if a director may be reappointed for a consecutive term of office. Only members of a co-operative may be appointed as executive directors. Associate members may thus only be appointed as non-executive directors.

 

In the event of a vacancy on the board, the board may appoint a director for the remainder of the stipulated period as set out in the constitution of the co-operative, subject to any requirements of the co-operative, provided that such resolution must be ratified at the next general meeting of the co-operative.

 

The board of a co-operative may be dissolved by special resolution passed by a special general meeting convened by the supervisory committee or a general meeting called by 25% of the members of the co-operative where such co-operative does not have a supervisory committee.