Cooperatives

1
Co-operatives
UK

• Role Effectiveness of Directors
• Research Survey
• (March 2004)
• Presentation
• Prepared for Co-operatives UK
• Prepared by Chris Braithwaite
• Date 26th April 2004
• Project 7184

2
Background

• Co-operatives UK designed and distributed a
  questionnaire to directors of three types of
  co-operative business in February/March 2004
• Retail Co-operatives
• Workers/Employee owned Co-operatives
• Credit Unions
• The objective of the survey was to
• Review the role and effectiveness of directors
• CBA Marketing Research were tasked with analysing
  the questionnaires and producing the following
  report of the findings.

3
Coverage

• Methodology
• Profile of Directors and the Boards
• Recruitment
• Training Induction
• Current Role
• Internal Control Audit Committees
• Information Communication
• Governance
• Improvements
• Conclusions

4
Methodology Questionnaires and Response

• Questionnaires were broadly similar for each of
  the three types of directors, but with
  variations.
• Self-completion ? respondent could choose to not
  answer a question. Leads to a category of no
  reply within the results. No reply has been
  included as it indicates an inability/unwillingnes
  s to answer a questions. This, in itself, may be
  indicative.
• Questionnaires comprised two parts-
• Main Questions (14 pages)
• Profile of Director and Board (2 pages)
• We would consider it to be long questionnaire
  and, therefore the response to be good - both in
  terms of numbers of questionnaires and completion
  of the questionnaires.

5
Methodology Sample

• A total of 680 questionnaires were sent out with
  238 returns 35
• Only 1 Housing Co-op questionnaire was returned ?
  not included

39
29
32

• Sample is dominated by responses from directors
  of Retail
• co-operatives. Consequently, results are
  shown for each type of director.

6
Profile of Directors Boards

• Response
• 87 of respondents completed the section on the
  Profile of Directors and Boards.
• Number of Co-operatives Represented
• 76 different co-operatives are known to
  represented
• Retail 31
• Work/Employee 19
• Credit Union 26

7
Profile of Directors
Gender

• Board Members are predominantly
• Male (72)
• 55 (62)
• White (92)

Age
Diversity
8
Profile of Directors Boards

• Director Profile Type of Co-operative
• Tendency for directors of Worker/Employee Co-ops
  to be younger,
• include more women and be more ethnically
  diverse

9
Profile of Directors

• Position on Board
• Director ... 57 President/Vice
  President. 8
• Chairman/Vice Chairman..15 Committee Member
  .. 8
• Secretary.. 11 Treasurer/Credit
  Controller. 6
• Length of time in current role
• lt 5yrs Retail.42 Work/Empl.70 C
  Union.74
• Length of time with Society/C Union
• 10 yrs Retail.38 Work/Empl.24 C
  Union.11
• Other Directorships held
• Yes Retail.31 Work/Empl. 9 C
  Union.26

10
Profile of Boards

• Board Meetings
• Retail Monthly (70) More
  Frequently (26)
• Work/Empl Monthly (29) More Frequently
  (62)
• Credit Union Monthly (92) More Frequently
  (2)
• Number on the Board Varied between
• Retail 4 to 29
• Work/Empl 2 to 18
• Credit Union 4 to 17
• Committees (most common)
• Retail Audit (66) Remuneration (65)
• Work/Empl Personnel (32)
• Credit Union Supervisory (83)
• Sitting on (at least one) Committees
• Retail Directors..64 Work/Empl47
  Credit Union.43

11
Fees Benefits for attending Board Meetings

• Highly variable by type of Co-operative business
• Retail Most received Fees many also received
  Other Benefits
• Work/Empl Vast majority received no
  remuneration
• Credit Union Around a quarter received expenses
  only

12
Main Survey Questions

• Recruitment
• Training Induction
• Current Role
• Internal Control Audit Committees
• Information Communication
• Governance
• Improvements
• Conclusions

13
Motivations to becoming a director

• Key Motivations to becoming a director
• 
  different by type of co-operative
• Retail ? To represent
  members Contribute to society
• Exercise skills Promote co-operative sector
• Work/Empl ? To help manage the business
  Exercise skills
• Employee of a worker co-operative
  Represent members
• Credit Union ? To contribute to society
  Promote idea of Credit Union Exercise
  skills Help manage the business

14
Hearing about the position

• Primary means of of hearing about the position
  were through
• Personal contact with other board members
• Also,
• Internal publicity/ Adverts in stores Retail
• Being a Founder Work/Empl Credit Unions
• Volunteer Activities Credit Union

15
Methods of Recruitment to the Board

• Recruitment to the board showed a different
  pattern for each of the three types. Key routes
  were -

( Co-opted These are most likely to be people
who have been recruited via
Uncontested elections)
16
Improvement to Recruitment System

• Around half of both Retail and Credit Union
  directors felt that the
• system of recruitment had IMPROVED during
  their period on the board
• Around a third felt that it had NOT IMPROVED
• 42 of the Worker/Employee directors said Not
  Applicable due to the nature of recruitment.
• Where it did apply, the majority thought the
  system had improved.

17
Main Survey Questions

• Recruitment
• Training Induction
• Current Role
• Internal Control Audit Committees
• Information Communication
• Governance
• Improvements
• Conclusions

18
Forms of Induction

• Induction briefing INFORMAL basis (if at all).

• Those that had received FORMAL Induction briefing
  tended to be more likely to say that the
  induction useful

19
Training for Role

• Key Sources Retail Co-op College
• Worker/Employee CDA
• Credit Union ABCUL

• Those that had received training tended to
  consider it to have been useful
• Retail and Credit Union directors felt that
  training had Improved during their time as a
  director.
• Worker/Employee directors, the majority saw
  it as staying the same or deteriorating.

20
Areas for more Training

• Worker/Employee directors were most keen to have
  more training (68)
• Key areas were
• - Legal Responsibilities / Legislation / Law
• - Finance/Financial Management
• - Marketing / Promotion
• - Business Management/Systems
• Half of the Retail directors would like more
  training (52)
• Key areas were
• - Finance/Financial Management
• - Legal Responsibilities / Legislation / Law
• But also - Strategy/Planning/Policy Making
• - More background on the business
  sector/environment
• 4 in 10 Credit Union directors would like further
  training (42)
• Key areas were
• - Finance/Financial Management
• - Marketing / Promotion
• - Strategy/Planning/Policy Making

21
Main Survey Questions

• Recruitment
• Training Induction
• Current Role
• Internal Control Audit Committees
• Information Communication
• Governance
• Improvements
• Conclusions

22
Satisfaction with Current Role

• High degree of SATISFACTION with current role as
  a director
• (Retail 82 Non Retail 87 Credit Union
  73)
• Reasons for satisfaction
• Feeling of making a contribution
• Seeing the business develop/grow and play a
  part in its community
• Working relationship with other board members
  and management
• It was Rewarding/Enjoyable
• Reasons for dissatisfaction
• Lack of time / conflict with other commitments
  / increasing workload
• Lack of knowledge / Still learning about the
  business/role
• Need for more training
• Board is relatively weak relative to senior
  management
• Highest degree of dissatisfaction was amongst
• Credit Union directors (25)
• compared to Retail (15) and Non Retail (13)

23
Objectives for role as director

• Retail and Credit Union directors
• Only a quarter VERY CLEAR objectives
• Half NO OBJECTIVES at all.
• Worker/Employee directors
• 60 had received objectives, BUT they were less
  likely to be very clear.
• Objectives most often set by
• Board/Directors (or CEO/Management/Executi
  ve committee)
• Generally felt to have improved in clarity

24
Performance Reviews

• Personal Performance Reviews as Chair/Director
• Half (51) of directors in Worker/Employee co-ops
  had Personal Performance Reviews (most
  commonly annually)
• For Retail and Credit Union directors it was
  pretty uncommon
• (14 and 8, respectively)

• Board Performance Reviews
• For both Worker/Employee co-ops and Credit Unions
• around half boards performance was reviewed
• (at least annually)
• Only a third of Retail directors.
• General view that procedures for review had
  Improved over time

25
Remuneration Committees

• Does Society have a remuneration Committee?
• Retail 69 Worker/Employee 21 Credit
  Union zero

• Members input on Workers Remuneration
• Retail 24 Worker/Employee 66
  Credit Unions 6

• Members input on Directors Fees
• Retail 73 Worker/Employee 32
  Credit Unions 3

• (nb 58 said Not applicable
• or gave No Reply)

• (nb 91 said Not applicable
• or gave No Reply)

26
Main Survey Questions

• Recruitment
• Training Induction
• Current Role
• Internal Control Audit Committees
• Information Communication
• Governance
• Improvements
• Conclusions

27
Audit Committees

• Does Society have an Audit Committee ?
• Retail 79 Worker/Employee 18
  Credit Unions 45

Frequency of Audit Committee meeting with
internal/external Auditors without management to
discuss matter relating to its remit and any
issues arising from the audit? (Those with Audit
Committee only)
28
Audit Committees
Does the Audit Committee have sufficient
Financial Experience to question officers with
confidence? (Yes) Chief Executive Retail
Yes 50-70 Financial Controller Work/Empl
Yes 30-60 Internal C Union Yes
30-50 External Auditors Least
confidence Worker/Employee directors challenging
Chief Exec / External Auditors Credit Union
directors challenging Internal and External
Auditors
29
Audit Committees

• Extra Training as a member of an Audit Committee?
• Retail 45
• Worker/Employee 50
• Credit Union 30

• Requirements for more training
• There seemed to be a requirement for more
  training in all the areas
• suggested on the questionnaire
• - Understanding accounting standards and
  recommended practices (less C Unions)
• - The regulatory framework of your organisation
• - The role of internal auditing and risk
  management
• - Understanding financial statements (less C
  Unions)
• - Role of external auditing (less Unions)

30
Reviews of Performance

• Involvement in reviews of effectiveness of
  Co-op/Credit Union
• systems of internal control (Yes)
• Retail 38 (not applicable 43)
• Worker/Employee 61
• Credit Union 50

Performance of board re risk management Improved
during time in office ? (Yes) Retail
82 Worker/Employee 66 Credit Union
67
Sufficient whistle blowing provisions for staff
to raise concerns (Yes) Retail
65 Worker/Employee 68 Credit Union
63
Around a third think Not/DK
31
Time spent in Board Meetings

• The majority of time was spent on PERFORMANCE and
  STRATEGY
• Relatively little time was spent on subjects
  viewed as Irrelevant
• Proportions are similar for three types of
  director.
• (except Credit Unions spend slightly
  longer on risk, Retail slightly
• more on performance)
• 60 were content with the proportions

32
Main Survey Questions

• Recruitment
• Training Induction
• Current Role
• Internal Control Audit Committees
• Information Communication
• Governance
• Improvements
• Conclusions

33
Information

• Amount of Information
• The majority of respondents felt they received
  sufficient information on
• Finance (91)
• Management Decisions (81)
• Business Strategy (83)
• Fewer received information on
• Human Resources (67)
• - particularly Worker/Employee (63) and
  Credit Unions (53)

User Friendliness of Information Majority felt
information was in User Friendly format easy
to comprehend. Format rated slightly less well
amongst Worker/Employee and Credit Unions
directors but still good.
34
Information
Timeliness of Information Quarter ? only
received information on the day of board
meeting Retail (19) Work/Empl (34) C
Union (25) At least a week in advance ? C
Union (70), Retail (63) but
Worker/Employee (24) Just under a quarter of
directors (all types) were dissatisfied with the
situation.
Timing of Information Around a third ? thought
the timing of information had IMPROVED 60 ?
remained about the same Very few ?
deteriorated
35
Communication
Contact with Members (in role as a director) Most
Frequent Work/Employee 89 at least once a
week (71 everyday) Credit Union 49 at
least once a week Retail 39 at least
once a week
Has opportunity for contact INCREASED during
period on Board ? (Yes) Credit Union
36 Retail 34 Worker/Employee 16
(arguably already very high)
36
Communication
Contact with other Stakeholders (in role as a
director) Retail 30 at least once
a week (10 everyday) Worker/Employee 58 at
least once a week (34 everyday) Credit Union
not asked
Has opportunity for contact INCREASED during
period on Board ? (Yes) Retail
29 Worker/Employee 16 Credit Union
not asked
37
Main Survey Questions

• Recruitment
• Training Induction
• Current Role
• Internal Control Audit Committees
• Information Communication
• Governance
• Improvements
• Conclusions

38
Understanding of Role

• Retail directors tend to feel they understand
  their role, and that of the board, more so than
  Worker/Employee Co-op or Credit Union directors.

Complete understanding of role as a director
Complete understanding of role of the board
39
Working Relationships

• Engaging with the organisation is more prevalent
  amongst Retail directors.
• Working relationships appear strongest amongst
  Credit Union directors.

Board actively engages with the organisation (
agree completely)
Board members have an open honest working
relationship ( agree completely)
40
Getting a fair hearing
Communication between Chair and other board
members ( very effective)
Ability to speak up when disagree with senior
executives/management ( agree completely)
Ability to speak up when disagree with
Chair/Other board members ( agree completely)
41
Effective Contribution
Do you feel you make an effective contribution to
the board ?

• Only half of Retail directors and around 4 in 10
  Worker/Employee Co-op/ Credit Union directors
  feel they are making a VERY effective
  contribution.

42
Main Survey Questions

• Recruitment
• Training Induction
• Current Role
• Internal Control Audit Committees
• Information Communication
• Governance
• Improvements
• Conclusions

43
Barriers to effectiveness as a director
Retail - None (30) - Not enough good
candidates/fresh ideas (31) - Inability to
enforce views on executive (21) - Board
papers sent too late (18) - Lack of time /
Commitments (17) Work/Empl - Lack of time /
Other commitments (58) - Too many
responsibilities elsewhere (53) - Too
involved in day to day running of society
(34) - Lack of information (26) - Board
papers sent out too late (24) - (Own)
Personal faults/Lack of ability (21) Credit
Union - Lack of time / Commitment (66) -
Too many responsibilities elsewhere (42) -
Not enough good candidates/fresh ideas (22) -
Too many rules / red tape (20)
44
Barriers to effectiveness of the Board
Retail - Not enough good candidates/ fresh
ideas (46) - Lack of confidence / Towing the
line / Yes men (21) - Cant pay enough to
involve/recruit quality directors (18) - Lack
of involvement in Society/Only turn up to board


meetings (18) Work/Empl - Lack of
time/commitment (51) - Too many
responsibilities elsewhere (44) - Lack of
involvement in Society/Only turn up to board

meetings
(41) - Lack of confidence / Towing the line /
Yes men (23) - Lack of Information
(21) Credit Union - Lack of time/commitment
(66) - Not enough good candidates/ fresh
ideas (34) - Too many responsibilities
elsewhere (33) - Lack of involvement in
Society/Only turn up to board

meetings (27)
45
Opportunity to play a significant part in
Governance

• 63 felt their opportunities to play a part in
  the governance of their organisation had improved
  during their period in office.
• Retail 68
• Worker/Employee 45
• Credit Union 66
• Only 3 felt it had decreased

46
Main Survey Questions

• Recruitment
• Training Induction
• Current Role
• Internal Control Audit Committees
• Information Communication
• Governance
• Improvements
• Conclusions

47
Conclusions

• High levels of satisfaction with role BUT
  realisation that they, as directors, could be
  (even) more effective if they had
• more time / less competing
  commitments
• better understanding of the
  business
• had more time with information prior to
  meetings
• There would appear to be issues surrounding
  Induction and the
• appreciating the Objectives of directors and
  the board
• Despite improvements ? Desire for more training
• particularly on Legal and Financial aspects
• but also Strategy/Planning/Policy,
• Trading environment and
• Marketing/Promotion

48
Conclusions

• There are concerns, particularly amongst Credit
  Union and Retail directors, that boards suffer
  from a lack of good candidates/fresh ideas.
  Possibly symptomatic of the profile of directors
  of these types of society older, male and
  lacking in ethnic diversity.
• Undercurrent of lack of confidence resulting in
  directors unwillingness to challenge decisions ?
  Possibly overcome by
• better briefing/training and more clarity
  in objectives.
• Significant differences in roles of directors and
  approaches adopted by three types of
  co-operatives surveyed ? A generic Code of
  Practice is likely to be problematic.