RSS Conference Presentation 2015

Understanding the Challenges of Co-

operative Governance

2

A Member Uprising

3

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

5

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

6

Rural Electric Co-operatives

7

Co-operatives and CED Assumptions

8

9

Co-operatives and CED Assumptions

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

10Source: Molk 2014

11

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

12

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

13

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”

14

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

15

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

16

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

17

Analytics: IAD Framework

18

Analytics: Design Principles for Robust Institutional Governance

19

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

20

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)

21

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

22

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

23

Conclusion