What are the roles of directors?

Last Updated on Saturday, 01 May 2010 22:31 Written by David Griffiths Thursday, 29 April 2010 02:13

Directors are accountable to members. They are elected by the members are report to members through the Annual Report and the Annnual General Meeting.

These are not the only ways that directors account to members. How accurate do you think your board's assessment of member expectations ? What sort of survey of members' expectations is likely to yield the most useful information in a reasonable timeframe Can members be surveyed at the AGM ? Should member surveys be reported in the annual report ? Do the annual reports, business plans and budgets realistically address the expectations of members

Planning Strategically

A thorough and well-structured strategic planning process helps a co-operative see the forest and trees and successfully navigate to an agreed destination or direction. Against the framework of the organisation's vision and mission, it sets out goals and objectives and indicates the required resources.

A strategic direction is a clear and shared vision on how the co-operative will fulfil its vision, mission and meet its member needs and where the Board and management aree jointly seeking to take the business operation of the co-operative.

With such a framework, an action plan for training and education of a co-operative's directors, members and staff could outline development targets and report against these to its members.


Ethics

Co-operative principles require ethical behaviour. Arguably, the community and co-op members expect more from a co-operative than from an investor-owned company focussed simply on achieving the best return to shareholders.

Good Faith

Co-operative directors and employees have an obligation to recognise that the interests of the co-operative and its members has priority over any personal interests.

Not only do directors and employees have an obligation to ensure compliance with legislation and regulation. They owe it to the co-operative to act in good faith in the performance of their duties. The fiduciary responsibilities of directors could be summarised as follows.

• Not to obtain or seek to obtain personal profit from any decision or transaction of the board.

• To exercise highest standards of honesty and integrity.

• To avoid conflicts of interest.

• To be aware of their duties and responsibilities.

Acting in good faith means that a director must act for the benefit of the co-operative and not harm the co-operative to further the director's own interest. Directors must not be in a position where their duties and interests conflict.

Manage Risk

Risk is anything that prevents a co-operative from achieving its objectives.

The board has to ensure that the co-operative complies with law and regulation, ensure the co-operative is managed to meet the needs of the members and maintaining financial stability.

To achieve this, it is necessary to manage risk.

Has the co-operative ever undertaken a risk audit? What was covered in the audit. Is there a lack of experience and expertise on the board that is creating risk for the co-operative ?The management of risk is fundamental to the ongoing success of a co-operative. The key areas are:

Liquidity risk
Market risk
Credit risk?
Data risk
Operations risk

Risk is an activity or function that has uncertain outcomes e.g.

Products not selling.
Members cease supplying the co-operative.
A lack of co-operative leadership.
Not meeting members needs and expectations.
Failure to implement and communicate industrial relations policies.

Internal controls are the policies and procedures established and implemented by a co-operative to minimise and monitor operational risk - identifying, assessing, measuring, mitigating, communicating and monitoring the risks.

The board is responsible for ensuring the risks are identified and managed. The internal controls adopted by a co-operative must be reinforced by the co-operative's culture and policies. The purpose of internal controls can be summarised as to:

Safeguarding assets.
Verifying efficiency and effectiveness.
Preventing fraud.
Preventing waste.
Assuring reliability of financial information.

There are two broad types of internal control - administrative and accounting.

Accounting controls - to provide assurance that transactions are authorized nd recorded in conformity with accounting principles e.g. daily posting, recording of transactions,sequential number and audit trail.

Administrative control - to provide assurance that lines of authority and responsibility are clear and operational and recording functions are separated e.g. accounting system, written policy and procedure and board approval monitoring and cash control. The key questions about managing risk are as follows:?

• Have significant risks been identified and a risk profile created?

• Is there a risk policy and is this clear including the roles and respective accountabilities

• Does the board and the Manager/CEO have clear strategies for dealing with these risks

• How are the processes and controls for identifying, monitoring and dealing with risk adjusted to reflect new or changing risks or operational deficiencies

• Are authority, responsibility and accountability clearly defined

• Are the decisions and actions of different parts of the co-operative appropriately co-ordinated

• Does the co-operative analyse the efficiency and effectiveness of its risk management and internal compliance

• Does the board receive regular, reliable and timely reports on progress on business objectives and risks

• Are there established procedures for managers, staff and members to report suspected breaches of legislation and regulation

• Are there procedures to monitor the effective application of policies, practices and activities related to internal control and risk management

• Are there appropriate reports to the board on the effectiveness of the ongoing moinitoring of risk

• Does the board review at least annually risk management

Represent the Co-operative

?Directors have dealings with a range of stakeholders in addition to members and the co-operative's workforce. The way they conduct themselves will reflect on the co-operative. Their effectiveness in lobbying governments or funding bodies or handling the media can have significant consequences for the co-operative.

Understand the Business Lifecycle

Businesses form, develop, mature, reinvent or die. Different stages of the business life cycle are associated with different risks and expectations. They may need different management styles to meet the needs of their customers.

Co-operatives, and other businesses, that live long enough, typically start with an entrepreneurial seat-of-the-pants management style, then move onto a stable administrative infrastructure and well-planned and managed development.

Do members and the board know where the co-operative is in the business cycle?? Are there indicators that the co-operative is moving from one phase to another and, if so, what are these indicators? How is the board adjusting to the business cycle in terms of the co-operative's vision, mission, membership, size, activities, locations and mix of resources?

Understand the Co-operative Lifecycle

Co-operatives have distinct lifecycles that need to be understood in the context of the business lifecycle.

The most distinct lifecycle changes are the differences created by the founding members and directors and their subsequent departure and the emerge of members and directors who were not involved in the foundation of the co-operative.