Corporate Governance In Cooperatives

Corporate Governance-

Corporate Governance and Cooperatives : global issues

CorporateGOVERNANCE Governance-

Quality of Management

CorporateCOOPERATIVE Governance-

GOVERNANCE

COOPERATIVE GOVERNANCE REPRESENTS A DEMOCRATIC SYSTEM OF MANAGEMENT, WHEN THE EXERCISE OF AUTHORITY I S DERIVED FROM ITS MEMBERSHIP

Corporate Governance-

Characteristics of SUCCESSFUL COOPERATIVES

• PROFESSIONAL GOVERNANCE • COOP VALUES AND PRINCIPLES • STRONG CAPITAL BASE • IT INTERVENTIONS

Corporate GovernanceGOVERNANCE REQUISITES

TRANSPARENCY

PARTICIPATION

ACCOUNTABILITY

PREDICTABILITY

Corporate Governance-

ELECT MGT

EXECT MGT

1

Governance Models Elected Management

Exect. Mgt

Corporate Governance-

ELECT MGT

EXECT MGT

Governance Models

Elected Management

Executive. Mgt

1A

Corporate Governance-

2 Governance Models

Elected

Executive

Corporate Governance-

A global context •Recent scandals helping to drive up standards in Public, Private and Cooperative sector eg. Enron, Lehman Brothers, Madhopur •Growing recognition of the diversity of business models •Need to develop corporate governance standards for them

Corporate GovernanceWhere do co-operatives fit in ? A well governed cooperative and mutual sector of the economy is not just good for its members, it is good for public as well. Co-operatives now on the radar of the World Bank Global Corporate Governance Forum It commissioned a paper on CG issues for Co-operatives in Developing Countries

Corporate Governance-

Research Findings •Reflects general lack of interest and research into Co-operative sector •However achieving better corporate standard for Co-operatives increasingly being viewed as important in the developing world. •Driven in part by impact of Fair Trade and wider Development agenda eg Transparency and Governance initiative.

Corporate Governance-

Cooperative Conflicts •Members v Boards •Members/Directors v managers •Cooperatives v Governments •Men v women

Corporate GovernanceMember participation •General consensus on the need for more and better member participation •Empower co-operatives and reduce the Controlling hand of governments •Need the development of an enabling governance environment •Together with a massive culture change

Corporate Governance-

Is a single governance model appropriate ? Great diversity in size and shape of co-operatives Different co-operative traditions No real consensus/benchmark on what is a co-operative Need to be careful not to view co-operatives as Government

Corporate GovernanceAgenda for the Future •If good corporate governance of co-operatives is a common good, who is responsible ? •Can education prevent agency conflicts ? •How to promote women's empowerment? •Can the growing convergence of co-operatives globally offer a common governance paradigm •The need for further research, knowledge sharing and Good (and bad) practice case studies •Should we be aiming for a Co-operative Corporate Governance Standard at international level ?

Corporate Governance•Transparency For Stakeholders •Ethical Conduct Of Business •Growth Through Stakeholders •Improving economic efficiency •Avoid financial Disasters •Strengthening Credibility

Need For CG (Murthy Report )

Corporate Governance-

COMPANIES

COOPERATIVES

2. Role Of The Board 3. Role Of The Committees 4. Gaps In Governance 5. Suggestive Action

Corporate Governance-

1/A

COMPANIES

Role Of Board

Corporate GovernanceTHE BOARD DIRECTS Formulate &review policies/strategies Major plans of action Risk policy Annual budgets & business plans Setting performance objectives Monitoring corporate performance Overseeing major cap. Exp. Acquisitions & divestitures Compliance with Applicable laws

Corporate Governance-

Fiduciary Obligations Of Board

Ganguly Report

•For Shareholders •Effective Functioning Of Bank •Safeguarding Interest Of Stakeholders

+ Social Obligations &

•Shaping Strategies •Monitoring Performance

Compliance With Regulatory Framework

Corporate GovernanceBOARD COMPOSITION

PROMOTERS NON EXECUTIVE DIRECTORS EXECUTIVE DIRECTORS NOMINATED DIRECTORS

Corporate Governance1/B COOPERATIVES

Role Of Board

Corporate Governance-

Board Powers & Responsibilities

•Raising Funds •Advancing Loans •Investments •Transfer Of Shares •Approve Budget •Supervision Of Societies •Managing Assets •Financial Reporting to Members •Appointing Committees •Approving Capital Expenditure •Framing Regulation •Framing Policies

Corporate Governance-

Composition •Elected Members including Reserved For women etc •Nominated Members •Co-opted Members

Corporate Governance-

COMPANIES

COOPERATIVES

Role Of Committees

2

Corporate Governance-

COMPANIES

COOPERATIVES

 Audit committee

Administrative Committee

 Remuneration Committee

Loan Committee

 Grievances Committee

Recovery Committee

Committees

 Nomination Committee

Staff Committee

 Supervision Committee

Purchase Committee

 Risk Management Committee

Development Committee

 ????????

Audit Committee  ??????????/

Corporate GovernanceNomination Committee To nominate Directors Representing Shareholders

Grievances Committee To look into the Grievances Of Shareholders

Board Risk Management Committee Committees

Audit Committee To Strengthen the Internal Control, Externa lAudit and Take Corrective Action

Formation & Operationalization as per RBI guidelines

Corporate Governance-

3

COOPERATIVES

Gaps in Governance Approach

Corporate Governance-

Gaps In Governance

Code of Governance Recommendations-mandatory & non mandatory Governance Report Chairman-Executive & non Executive Independent Directors- pool by RBI Type Of Board Committees Nominated Directors Disclosure & Transparency Director’s Qualifications(Fit and proper, financial Literacy) Related Party Transactions-Arm’s Length Functional Separation-CMD

Corporate Governance-

4 Suggestive Action Ganguly Report

•Directors appointment-fit and proper •Independent Directors-appointment from pool •Inducting Professionals •Importance of Independent Directors in Meetings •Briefing to Directors about His Role •Formulating Policies Relating To Credit Dispensation •Need Based Training For Directors •Long Tenure For Whole time Directors •RBI to bring Updated charter of Guidelines •Undertaking From Directors about Their •Responsibilities •Remuneration May Match Contemporary Standards •Separating Role of Chairman & Chief Executive •

Corporate Governance-

Organisations That Do Not Employ Meaningful Governance Procedures will Have To Pay A Significant Risk Premium When Competing For Scarce Capital In Today,s Public ‘Narayan Murthy Committee-2003’ Markets

Corporate Governance-

Thanks