We Want Our Co-Ops Back
24 Pages Posted: 18 Sep 2012 Last revised: 26 Sep 2012
Date Written: September 25, 2012
We can reform all our large voter organizations, including democracies and corporations, by starting with reforming our co-ops (including financial co-ops such as credit unions). Most large institutions lack effective democratic control by voters. Even though citizens of democracies can vote, corporate shareowners can vote, and co-op members can vote, those voting rights are ineffective if voters lack the information, insight and nomination rights necessary to elect the best leaders. This paper outlines how we can better implement the fundamental co-op principle of democratic member control, even when co-ops grow very large. Later we can apply these ideas to our democracies and corporations.
Democratic accountability to voters need not come with a cost of decreased effectiveness of the co-op's management. On the contrary, if democratic reform includes a voter information system that gives voting members insight into which director candidates would better serve the co-op and thus its members, the result will be improved performance of the co-op.
Instead of co-ops following corporations down the path of undemocratic governance, they can lead corporations toward democratic governance. All that's needed is for us voters to learn which governance changes are democratically empowering, and which are disempowering. In particular, improving our voter information systems can enhance director elections and board accountability.
Co-ops that grow large (e.g. over 10,000 members) often tend to become less democratic. Voter turnout falls, and boards become less accountable to members. Boards may create bylaws and rules that shift power from members to boards. Directors may become more allied with a co-op's senior staff than with the members. As this trend progresses, a co-op's power structure can become an oligarchy. But the trend is not inevitable -- we can reverse it. The further a co-op slides toward oligarchy, the harder it is to reverse; but it's never too late, as the Arab Spring has recently reminded us.
Keywords: cooperatives, co-ops, democratic reform, governance, oligarchy, self-serving bias, voter information, free-rider problem
JEL Classification: D71, D72, D73, L33, P13
Suggested Citation: Suggested Citation