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Scoping the current practice of dynamic governance in co-operatives

I'm currently putting together a proposal (invited to do so) to the UK Co-operative Governance Expert Reference Panel (of which I am a member) around their focus for the next couple of years. I'm proposing that we look at the emerging popularity of dynamic governance (sociocracy for example) in co-operatives and particularly co-operatives that may never physically meet. I'm thinking that the emerging practice in platform co-ops will be particularly interesting, but with application for more traditional large co-operatives.

I'm interested in your opinion of the questions we should be addressing. I include below my initial thoughts around this and you can see an earlier thought piece here.

The questions I've come up with so so far:

  • What is dynamic governance (what are we including?)?

  • Which co-ops are using dynamic governance?

  • What are the differences between the different models/instances?

  • What are the benefits?

  • What are the downsides?

  • How well do current resources around good co-op governance apply to this practice?

MS

Martin Strube Mon 20 Jan

Hi Mark

I would add that an element of good governance is assuring the quality of the democracy. At the least, this should include regular internal reviews as to how well the actual practices and processes work in accordance with the intended spirit of the governing instruments.

For more in depth study, an objective external study could be undertaken by a neutral third party, perhaps along the lines of the attached.

Best wishes,

Martin


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MSC

Should there have been an attachment @Martin Strube ?

PB

Pete Burden Mon 20 Jan

Hi Mark

I think those are good questions - most of which are better answered by other people in coops. The question I'd like to add is 'how is Sociocracy/dynamic governance strategically different - what is is it broader contribution/fit with the cooperative approach?'

For example, the benefit I'd like to draw out is the very real difference between the assumptions behind Sociocracy/dynamic governance and more traditional ways of making decisions. This, for me, is much less about 'lack of hierarchy', as I think there is always hierarchy (for example, general circle vs sub-circles). And much more about core assumptions.

I think many people who practice Sociocracy understand that it is impossible to predict the future with any certainty, or control it. We focus more on what emerges and respond to that, rather than believing that somehow we can make the 'right' or 'correct' decision, rationally.

'Less control - more doing, more being.'

This is also closely related to another core idea - that emotional labour/intelligence in the groups we which we belong is central to being productive. And I mean productive both in the sense of achieving results and also in the sense of building strong, sustainable relationships.

'A more nuanced understanding of 'purpose', focussed not just on profit (surplus).'

Both of these seem to me to be really important differences that a cooperative approach can and does contribute to society more broadly, and that there's a good fit with dynamic governance/Sociocracy.

Best

MSC

Yes. Consider it added Pete. Thanks

NBC

I think your illuminating comments @Pete Burden also have a relevance for how they challenge traditional business planning. Business planning has its own problems. Some people really struggle with the concept of projecting the future or go the other direction to "this will happen because the business plan says it will". We mostly use traditional business plans to convince investors (community shares, loanstock or CCF, they all need a business plan). If we are to be more honest about not knowing the future, should that honesty extend to the business plan (goddam co-op values) and what impact does that have on raising finance. The workaround of having a business plan that says one thing but behind closed doors working to another seems a little dishonest. Just a thought about how we square that circle, not a challenge.

CM

Cliff Mills Mon 20 Jan

These are really insightful and helpful comments @Pete Burden and @Nathan Brown (Co-op Culture/Co-operantics) . It is interesting to compare the business planning approach underpinning investor-ownership: in that context, a capital raising exercise is an offer to potential investors set out in a prospectus to implement a plan, which with the current executive team and their expertise is expected to yield X by way of return on capital invested. It is all predicated on delivering "X", leading investors and market-expectations pressing for it to be achieved (whatever the negative externalities), and executives duty-bound to deliver for their own credibility. It is one of the reasons why to promise returns causes investor-owned business to play such a significant part in the climate crisis.

Historically, it has been harder to articulate the co-operative proposition. If the the investor-ownership proposition is "invest in our company, and we undertake to maximise your return on investment and aim to deliver at least X", what is the the comparable co-operative proposition? I think that it is a behavioural proposition based on values and principles, which constantly have to be updated as circumstances, science and events change things.

That is why I think that you are right @Pete Burden that it is about "more doing, more being" (rather than delivering outputs); and your point @Nathan Brown (Co-op Culture/Co-operantics) about being "more honest [or just honest!] about not knowing the future" is really helpful in teh business planning context.

PB

Pete Burden Mon 20 Jan

Nice - that's nailed one of the issues @cliffmills and @nathanbrown

It is much harder to articulate the co-operative proposition, and all those people do want a business plan.

An off the cuff response from me is to cite Jack Ma who apparently put down the ginormous success of Alibaba to having 'no money, no technology and no plan'!

We're working against a traditional, conservative, risk-averse narrative - but there are counter examples if we look for them I think.

IS

Ian Snaith Mon 20 Jan

@Cliff Mills I take your point about the "return on capital employed" test. The advantage of that, tho, is that it's a way of making sure management are getting it right or at least not too badly wrong on the business side and it allows comparison with the performance of competitors in the same market. The co-operative proposition is harder, but as @Mark Simmonds (Co-op Culture & Platform 6) points out with the Daily Bread example), not impossible to measure. Scale of business is relevant on this - as is balancing the use of the limited liability of each separate co-op to limit risk while federating in a way that allows effective competitiveness so as to survive in the marketplace. Then there's the vexed question of capital ( loan or share capital or retained earnings) and how patient it will be.

MS

Martin Strube Mon 20 Jan

@Mark Simmonds (Co-op Culture & Platform 6) Apologies. Was attached to the email but seems to have been filtered out. Try this:

CM

Cliff Mills Mon 20 Jan

Mark, this subject interests me greatly as well. I have thought for some time (and briefly discussed with you) that we need to re-write rules and constitutional documents to accommodate dynamic forms of governance, because the traditional models don't do so.

So I am really interested to hear the answers to the questions you are asking, but I am personally interested in working out how co-operative law can accommodate dynamic governance. In particular you raise a really important principle around the relationship between the board and the general meeting.

This is a fundamental question that we have to resolve in writing constitutions, because the law requires there to be, or it will make its own decision about the people who are acting as directors. It requires such people to act according to fiduciary duties. Because this can give rise to personal liability, it is essential that the people owing those duties know that they owe them; and the rules need to be written in a way which provides them with protection.

It is also important to identify what is the general meeting, because this is the ultimate source of authority, even if it retains only limited power. I suspect that your three different approaches (there may be more) will depend (a) upon the size of the organisation/membership; (b) upon the sector it is operating in; and (c) the role members have (workers, users, volunteers etc.).

So whatever you ask the Governance Panel to focus on, it would be good to progress the legal questions too.

Coincidentally, I am writing some material which is recognising the increasingly obvious flaws in traditional co-operative governance where the Rochdale model is "outgrown" by the scale of the business. I have already written about this in this ICA publication http://www.ica-ap.coop/sites/ica-ap.coop/files/ICA%20GOVERNANCE%20PAPER%20-%20EN.pdf

The issue identified in this article is actually an issue in many charities and housing associations, so I am currently writing something to bring out the broader nature of this problem - which will further emphasise the importance of different approaches to governance and particularly dynamic governance.

So to put this in a nutshell (though don't quote me on this), from a legal perspective co-operative governance needs a refresh, and dynamic governance will play a central role in this. You are definitely on the right track.

SWS

Good points. When I’m workshopping legal and governance with startups, I’m generally using current model rules and ‘flexing’ them to allow for asynchronous/platform-enabled meetings, etc. In relation to sociocratic governance this means that the Directors/Committee need to be well trained on their fiduciary duties and powers, which includes delegating decision making as deeply and as broadly as they feel confident to do - which in turn means a very clear remit for circles, including the Directors’/General/Purpose circle, and mechanisms/double links enabling that circle to respond fast and positively when it needs to.

CM

Cliff Mills Mon 20 Jan

Sorry, my contribution to the ICA paper is chapter 8

IS

Ian Snaith Mon 20 Jan

Hello Mark,

I'd add:

"Make sure that the organisation's constitution (rules for a society, members' agreement for an LLP, or articles of association for a company) and the legislation under which it is registered permit the preferred governance system and means of communication."

E.g. the Companies Act 2006 requires members' meetings such as an AGM and a first one within a certain time of first registration of the company so you need to ensure that the articles facilitate electronic participation in those.

Best Wishes

Ian

Ian Snaith
Legal Writer Researcher and Educator

Editor of 2014 Edition of the Handbook of Co-operative and Community Benefit Society Law ( http://www.jordanpublishing.co.uk/practice-areas/charity/publications/-handbook-of-co-op-and-community-benefit-society-law-#.VO8Xny62qHs )

www.iansnaith.com ( http://www.iansnaith.com )

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0752 155 8344


NBC

My understanding is that CA2006 removed the statutory duty to hold an AGM. But your main point is still valid and on point :-)

IS

Ian Snaith Mon 20 Jan

Absolutely right, Nathan, so the written resolution procedure is the norm - even if a 5% minority propose a resolution under section 292. But you still need a meeting to remove the auditor under section 510 or to remove a director before their term expires under s 168 - s 288(2).

NBC

I'm really interested within the "What are the differences between the different models/instances?" question about the impact of scale (members size or worker size if not a worker co-op) on the way that Sociocracy is utilised. This could hold some really valuable learning.

CM

Cliff Mills Mon 20 Jan

Thanks Ian, that's helpful and I agree.

Following on from the discussion about an uncertain future, I have two further questions to add, though maybe they are for a different project as they might make the current scoping exercise rather too big. My questions are:

"Is dynamic governance a more effective way of achieving co-operative purpose today than traditional co-operative governance?" and

"Would it be better for co-operatives to move away from the concept and language and measurement of "return on investment" and other output-based measures to judge success, and towards a commitment to values and principles, and post facto reflection on effectiveness and performance to judge success?"

SWS

Dynamic governance is a new term to me. Is there a pithy definition, and where is the term being used currently?

PB

Pete Burden Mon 20 Jan

They often use this term for Sociocracy in the US I believe Sion - apparently because Sociocracy sounds a bit like socialism! That's the story I have heard anyway.

More seriously I guess dynamic governance would include 'commercial variants' such as HolacracyTM? And other non-commercial variants - Sociocracy 3.0?

https://sociocracy30.org/the-details/why-sociocracy-3-0/

CM

Cliff Mills Mon 20 Jan

And also the Quaker Business Method? I had understood that both sociocracy and holacracy acknowledged their roots here?

IS

Ian Snaith Mon 20 Jan

A quick google search suggests it is another word for Sociocracy but i hadn't heard of the variations mentioned above.

PB

Pete Burden Mon 20 Jan

I believe it was Betty Cadbury (of the Cadbury's family) and Kees Boeke who first put the ideas into practice in their school in the Netherlands. So a definite yes to the Quaker Business Method and Quaker roots.

MSC

It's partly political @Sion Whellens (Principle Six/Calverts) to include co-ops that wouldn't necessarily identify as sociocratic - casting the net a bit wider really