1. ACE Institute Raising the Bar on Cooperative Governance David A.H. Brown, Executive Director © Brown Governance Inc. and the Canadian Co-operative Association

2. Corporate Governance Is … Cadbury Committee Report (UK 1992) system … the system by which organizations directed are directed controlled. and controlled.

3. Cooperative Governance Is … system … the system by which cooperatives directed are directed controlled. and controlled.

4. Principals Board Agents Direction Agency Theory

5. Citizenship Principle Based Governance Leadership Stewardship Reporting Innovation Monitoring

6. Direction: Core Governance Roles l Leadership: –Active input into the Strategic Plan and review/approval –Active involvement in board, committee renewal and CEO succession l Stewardship: –Ensure resources are allocated wisely: risk management, budgets –Delegation of authorities – board, committees, CEO, management

7. The 4 Core Sets of Documents for the Directional Side of Governance 2009/12 Strategic Plan 2009 Budget 2009 ERM Risk Assessment and Map Board and Committee Charters CEO Job Description (Delegation of Authorities) Where are we headed? What obstacles and opportunities might we face along the way? Who will do what? How will we resource our efforts?

8. Board’s Role in Strategic Plan 1. What is our Purpose? 2. What are our Priorities? 3. What are our key / critical measures of Performance success?

9. Board’s Role in Stewardship l How well does the annual budget reflect the plan (purpose, priorities and performance success)? l How clearly are delegated approval limits and reporting limits understood at the Executive Director / General Manager level? At committee level? l How well are major risks assessed?

10. Boards Take Explicit Responsibility

11. Board Renewal (% of boards)

12. Influence in Selection Process (Who?)

13. Criteria for Selection (How?)

14. Board Size

15. Board Independence

16. Principals Board Agents Direction Control Agency Theory

17. Citizenship Principle Based Governance Leadership Stewardship Reporting Innovation Monitoring

18. Control: Core Governance Roles l Monitoring: –Using the right measures of success (performance) and getting the right level of information –A robust audit and control system –CEO Evaluation and Compensation –Board, Committees Evaluation l Reporting: –Continuous and periodic disclosure and accountability to principals (members)

19. The 4 Core Sets of Documents for the Control Side of Governance 2009/10 Annual Report Including MD&A 2009 Interim (Quarterly) Financial Statements YTD 2009 Key Performances Indicators (KPI’s) Scorecard and Risk Reports Board and CEO Evaluations Where are we compared to where we said we would be? How do we measure up and how well have we mitigated our risks and acted on opportunities? How well did the Board and CEO perform? How are we doing compared to budget?

20. Board’s Role in Monitoring l What are the major gaps (variances) between actual and plan, and do we understand why? l How reliable are our financial and non- financial reports? How strong are our internal and external audit systems? l How well do evaluations and compensation align to our plans and performance?

21. Board’s Role in Reporting 1. Annual Report: how clearly can our members / stakeholders / public see what we are doing, and how well? 2. Web / on-line / media releases: are we keeping our members / stakeholders “in the loop” year round?

22. It Looks Something Like This … 2009/10 Annual Reports Including MD&A 2009 Interim (Quarterly) Financial Statements YTD 2009 Key Performances Indicators (KPI’s) Scorecard and Risk Reports Board and CEO Evaluations Where are we compared to where we said we would be? How do we measure up and how well have we mitigated our risks and acted on opportunities? How well did the Board and CEO perform? How are we doing compared to budget? 2009/12 Strategic Plan 2009 Budget 2009 ERM Risk Assessment and Map Board and Committee Charters CEO Job Description (Delegation of Authorities) Where are we headed? What obstacles and opportunities might we face along the way? Who will do what? How will we resource our efforts? Direction …………………….Control

23. Performance Evaluation

24. Meetings

25. Board Committees

26. Governance Models and Board Committees l 3/10 co-op boards have adopted the reform model (Audit, HR, Governance and no Executive), overwhelmingly adopted by Canada’s corporate boards l 5/10 co-op boards use the traditional model (Executive, Nominating, others on a functional basis) l 2/10 co-op boards have adopted a hybrid or mixed model (Executive, Nominating, plus Audit, HR on an oversight basis)

27. Citizenship Principle Based Governance Leadership Stewardship Reporting Innovation Monitoring

28. Citizenship and Innovation l In the co-operative’s wheelhouse?

29. How Well Do Boards Apply the Co-operative Principles? l Voluntary and open membership … 4.7/5 l Autonomy and independence …… 4.5 l Concern for community ………… 4.3 l Democratic member control ……. 4.3 But: l Member economic participation …. 4.1 l Co-operation among co-ops ……… 4.0 l Education, training and info ……… 3.9

30. Member Engagement Beyond the AGM

31. Non-Financial Measures Reported to Board

32. Training and Development

33. Other Co-op Governance Trends: Glass Half Full or Half Empty? l Code of Conduct and Conflict of Interest guidelines broadly in place (8/10) ……. but many co-ops lag on social responsibility: only 3/10 boards work to develop strategy, 2/10 measure l Compensating co-op directors is more widely accepted (7/10), and is steadily increasing (meeting fees) ………… but many co-ops report not “sufficient turnover” among directors

34. Final Thoughts: Diagnostics to Test Your Own Governance

35. First Four Diagnostics Brown Governance Inc. (1) How active is your board now? (2) Why? Governance theory now? (3) How active should it be? Therefore … what direction should you be moving in? (4) What are our next steps (models, practices) in governance?

36. Next Four Diagnostics (5) How well have you articulated clear governance principles? (6) Is the board engaged at all three levels of risk management? (7) How well do the board and management work together in strategic planning? (8) How well is its succession plan resulting in skilled, complementary board and management members?

37. Last Four Diagnostics (9) How confident are you that your cooperative is “in control”? (10) Are you receiving the right measures at the board level? (11) How well do you communicate – understanding and disclosing to – your different membership / stakeholder groups? (12) How well do your accountability levers (evaluation, compensation, renewal) reflect all 11 prior steps? Purpose – priorities – risks – measures – stakeholders?

38. Implications for our Co-operative and our Board? Let’s Talk ….

39. For further info or help … www.browngovernance.com Best Practices and Benchmark Research Board and CEO Evaluation Governance Audits and Reviews Director Training and Education Board Succession and Profiling Agendas, Minutes and Meetings Corporate Secretariat Art of Chairmanship Financial Literacy Risk Management Corporate Social Responsibility

40. How To Access the Research l Highlights free to all respondents l Full report will be available for purchase via CCA and Brown Governance web sites l Customized data cuts and reports available by contacting CCA or Brown Governance directly

41. Profile of Co-ops in National Cooperative Governance Research l 5,300 average membership l $79 million average assets l $95 million average revenues l 44 average full-time equivalent staff l 56% credit unions, 19% retail or wholesale co-ops, 10% housing, 6% agri, 4% service l 37% Prairies, 32% Ontario, 16% BC, 14% Atlantic, 1% Quebec