The best interests of a cooperative

Abstract

Most cooperatives are incorporated, with a board of directors who bear legal responsibility for supervising management and setting strategic direction. How should boards exercise that role? While for-profit corporate directors can turn to practical guides, academic literature, and popular non-fiction to guide their decisions, there is much less direct guidance for directors in the coops context. The paper argues that the legal duty of cooperative directors to act in the “best interest of the cooperative” is a promising conceptual starting point to develop such guidance. It then draws from for-profit corporate governance debates and the ICA Cooperative Principles to map the promise, disadvantage and limits of three broad approaches to satisfying the best interests standard: member primacy, stakeholder approaches such as the Trustee Model and the Team Production Model, and purpose-based approaches which identify the best interest of a cooperative either with its specific, formal purpose or with the purpose(s) of cooperatives more broadly.