A board of directors is responsible for the co-op’s actions and for ensuring that the business is managed in a sound fashion. The board is an elected body responsible that oversees the co-op on behalf of the co-op’s owners (the members). The board’s authority extends only to decisions made by the board as a whole; individual board members have no authority outside of a board meeting, except as delegated by the board as a whole. Generally, only members in good standing may serve as directors of a cooperative.
Every state incorporation statute defines the basic role and responsibilities of a board of directors. Most commonly, statutes state that a director is required to act “in good faith, in a manner he (or she) reasonably believes to be in the best interests of the corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances.” All directors are required to meet this standard.
A board has three primary responsibilities:
1. Act as trustees on behalf of the members. Directors do this by carefully monitoring the co-op’s financial status, hiring auditors to review financial records, regularly reporting on the status of the co-op to members, and making sure that the co-op follows its bylaws, policies, and appropriate regulations.
2. Ensure sound management of the co-op. Directors are responsible for hiring and supervising the co-op’s management. Supervising management involves reviewing management reports, monitoring key indicators (inventory turnover, sales trends, other financial ratios) and evaluating management performance.
3. Set long-range goals and ensure planning for the co-op’s future. Directors do this by discussing strategic planning, approving yearly and long-range plans, and setting performance goals.
The board is accountable to the members. Management is hired by and is accountable to the board. Effective boards fulfill their responsibilities and avoid micro-management by focusing their discussion and decision making on two things: clearly defining the results to be achieved by management or those responsible for a project; setting limits to guide performance, including details about what is considered acceptable. Examples of effective directives: or
Most boards meet monthly or at regular intervals. Boards elect officers — president, vice president, secretary, and treasurer — to organize and coordinate their work. Effective boards get regular training to make sure directors understand and can fulfill their responsibilities. Boards that stay focused on providing overall direction and monitoring the co-op’s general performance play a key role in the success of every co-op.