TOPIC 7, Stage 4, Micro. This paper studies cooperative governance responses to an increasingly bifurcated agriculture environment. As the gap between large and small farms widens, cooperatives have adopted a variety of... [ view full abstract ]
TOPIC 7, Stage 4, Micro. This paper studies cooperative governance responses to an increasingly bifurcated agriculture environment. As the gap between large and small farms widens, cooperatives have adopted a variety of governance and financial strategies to retain the commitment of large members. Differential pricing, based on size, is now an accepted practice at many cooperatives. Cooperatives have realigned their equity plans to eliminate small accounts and raised the sales requirements to qualify for voting membership. Another proposed strategy is weighted voting, based on patronage, which is currently legal in less than 20% of U.S. states.
We examine responses to bifurcated markets through the lens of a cooperative in a highly competitive global industry. CRI is a holding cooperative with three subsidiaries. Two of them are cooperatives with roots dating to the 1920s, and one is a recently acquired investor-owned company. CRI is considering two governance changes: proportional voting and adding non-members to the board.
Theorists have stressed the role of perceptions of homogeneity of interest and equality in augmenting trust in cooperatives. (Hansmann, 1996, Fulton and Giannakas, 2001). We look at the impact of proportional voting on perceptions of legitimacy and trust (James and Sykuta 2005). Adding voting non-members may have diverse effects. We consider the impact of adding diverse voices to an all-member board, drawing on agency theory, theories of diverse governance frameworks (Conforth 2004) and studies of contested strategy-making in organizations (Kaplan 2008).
As cooperatives respond to marketplace realities, they are exploring significant re-structuring of long-held governance models. This paper expands our understanding of the dynamics inherent in these responses.
References:
Conforth, C. J. 2004. “The governance of co-operatives and mutual associations: a paradox perspective” Annals of Public and Co-operative Economics 75: 11-32
Fulton, M and K. Giannakas 2001, “Organizational commitment in a mixed oligopoly: agricultural cooperatives and investor-owned firms” American Journal of Agricultural Economics, 83, 5: 1258-1265
Hansmann, H. 1996. The Ownership of Enterprise, Belknap Press of Harvard University, Cambridge, MA.
James, H. and M. Sykuta 2005. “Property right and organizational characteristics of producer-owned firms and organizational trust” Annals of Public and Co-operative Economics, 76: 545-580
Kaplan, S. 2008. “Framing contests: strategy making under uncertainty” Organization Science, 19, 5: 729-752
