The motivations for being a ward director in a large cooperative

TOPIC 7 STAGE 3 MICRO In the absence of pecuniary benefits, what drives farmers to be directors at the lower echelons (ward level) in large cooperatives? There is insufficient literature to identify if human asset... [ view full abstract ]

TOPIC 7 STAGE 3 MICRO
In the absence of pecuniary benefits, what drives farmers to be directors at the lower echelons (ward level) in large cooperatives? There is insufficient literature to identify if human asset specificities, tradition or simply routines lead to this behavior. Some previous studies in large cooperatives indicate that members do not keep themselves very informed about the cooperative’s business (Nilsson and Svendsen, 2011); exhibit low degrees of loyalty, trust, involvement and satisfaction (Feng et al., in press); and do not consider themselves to have much influence (Österberg and Nilsson, 2009). Through a survey of 191 directors in all the 28 wards of a farmer cooperative with about 30,000 members, we explore several possibilities. The cooperative has operations in 19 countries, though there are no foreign members. Its operations comprise far-reaching vertical integration, spanning from sales of machinery to members all the way to production of consumption-ready products. Using information from the survey, a simple metric of the ‘propensity for directorship’ expressed as a ratio of the age and the duration of directorship is devised. Preliminary results suggest that a significant proportion of sampled directors have a high propensity to continue as directors adding to the puzzle posed at the beginning of the text. Based on these observations we hypothesize that the ward directors are primarily driven by investment in human capital which include deeper sectoral knowledge, access to key information and networks. These investments in terms of time and opportunity costs foregone lead to human asset specificities creating lower values in alternative uses and hence high transaction costs of exit (Staatz, 1984). In this paper we test this assertion using our primary information and discuss results which lead to important policy conclusions.

References
Feng, L., Friis, A. and Nilsson, J. (in press). Social Capital among Members in Grain Marketing Cooperatives of Different Sizes. Agribusines.
Nilsson, J. and Svendsen, G. T. (2011). Free Riding or Trust? Why Members (do not) Monitor their Cooperatives. Journal of Rural Cooperation, 39 (2), 131-150. .
Österberg, P. and Nilsson, J. (2009). Members' Perception of their Participation in the Governance of Cooperatives: The Key to Trust and Commitment in Agricultural Cooperatives. Agribusiness, 25 (2), 181-197.
Staatz, J.M. (1984). A Theoretical Perspective on the Behavior of Farmer Cooperatives. Department of Agricultural Economics, Michigan State University.