Understanding the Challenges of Co-

operative Governance

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A Member Uprising

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QUESTIONS1. How did our governance systems get here? 2. How might pluralistic governance impact co-op performance?

ANALYTIC METHODS: Institutional and archival analysis of Choctaw Electric Co-operative.

http://www.onthecommons.org/magazine/elinor-ostroms-8-principles-managing-commmons

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Core Features of the Co-operative Firm• Member-owner self governance• Member-owner control over capital (and surplus wealth)

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Rural Electric Co-operatives

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Co-operatives and CED Assumptions

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Co-operatives and CED Assumptions

Source: http://plektix.fieldofscience.com/2011/04/freedom-and-public-goods.html

10Source: Molk 2014

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Co-operatives and CED AssumptionsHow does the co-operative firm actually operate (a question of the black box of governance)• Oliver Williamson’s Twin Problems of Governance (rules-in-form do

not always equal rules-in-use)1. Opportunism2. Bounded rationality

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Rural Electric Co-operativesStandard Co-operative Design Features• Democratically governed• Member-owned

Attributes specific to electric co-operatives• Spatially bounded (community of place)• Exhibit strong path dependence

• Enormous sunk capital• Policy reactive• Deep culture (remnant of New Deal)

• Cross-linked with utility and agricultural co-operatives • Similar culture• Significant board interlock

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Rural Electric Co-operativesRecent Disruptions• Member and stakeholder alienation• Board capture

• Lack member/community responsiveness• National association major opponent of EPA coal regulations

• Electric co-operative member uprisings• Emergent board and management “coups”

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Theories of GovernanceStakeholderless/Memberless Governance• Most well-development, most-utilized: principle-agent• Critical scholars and rational choice economists seem to agree on one point:

DO NOT TRUST MANAGEMENT!!!!• Paradox in the rationalist model: board governors tend to abdicate many governance

duties to centralized management• Corporate• Third sector

• Nonprofit• Co-operative

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Theories of GovernanceRoots of the Dominant Theories of Governance• Roots• Taylorite management• Weberian bureacratic administration• Wilsonian public administration• Hardin and the tragedy of the commons

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Theories of GovernanceRural Electric Co-operatives• Elite governed (unitarist)

• Siloed• Instrumental federalism

• Simplicity over complexity• Input-output functionalism

• Mitigates stakeholder governance (and management)• Significant management power

• Ease of profiteering/demutualization• Furtherance of economic enclosure

• Reduced information flows and policy solutions• No stakeholder skin in the game

• Limited “classrooms of democracy”

How do we advance a pluralist governance?• Bloomington School Tools of Institutional Analysis

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Analytics: IAD Framework

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Analytics: Design Principles for Robust Institutional Governance

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Analytics: Institutional Analysis of Choctaw Electric Co-operative

Identifying Governance Ruptures1. Boundaries unenforced2. Incongruence with local conditions

a. Excessive ratesb. Member expectations/demands

4. Negligent monitoring

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Analytics: Institutional Analysis of Choctaw Electric Co-operative

Identifying Pluralist Governance Practices1. Member-owners flexed their rights to governance6. Member-owners able to use conflict resolution mechanisms

i. Petitioning

8. Nested systems of governancei. Oklahoma Bureau of Investigationsii. Local media (transparency/shaming mechanism)

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Theories of GovernanceGovernance Assumptions of Co-operative Advocates Inclusionary!• No clearly articulated theory of governance and practice?• What if this permeates the entirety of the co-op sector?• Consumers as co-producers

• Reinforces self governing capabilitie awareness, rights, and capacities

• Multi-stakeholder engagement offers a great deal of positive benefits• Especially labor• Exclusionary paradox of traditional Co-op member-ownership

• Choice of one class, privileges one group above another

Stakeholder class

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Conclusion1. Challenges of stakeholderlessness/memberlessness

a. Multi-stakeholder governanceb. Appropriate levels of governance

2. Theories of collective action and institutional performancea. Shift stakeholders from consumer mindset to co-producer orientation

3. Underdeveloped praxis4. Co-ops, civic society, and social change

a. Paradox of traditional co-op member ownership

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Conclusion