Accommodating Two Worlds in One Organization: Changing Board Models in Agricultural Cooperatives

Abstract

While most economic organisation literature on cooperatives has focused on changes in income rights, we study changes in the allocation of decision rights between board of directors (representing members) and managers. The traditional role of the board is to direct the activities of the managers. However, professional management increasingly makes most strategic decisions, pushing the board into a supervisory role. We present two groups of findings on changing board – management relationships. We identify three corporate governance models: traditional model, management model, and corporation model, and we present an empirical illustration showing a relationship between the choice of board model and product portfolio and performance.

Keywords: corporate governance, management, diversification, cooperatives, board

JEL Classification: L2, Q13