Maintain Good Board-Manager Relations

The differing responsibilities of the board of directors and the manager must be clearly understood and carried out.

Directors represent members and are legally responsible for the performance and conduct of the cooperative. All corporate powers of the cooperative, other than those specifically conferred on members, are vested in its directors and outlined in the bylaws and in State and Federal legal statutes.

Directors’ three major responsibilities are to set policies, employ and evaluate the general manager’s ability to carry them out, and provide adequate financing for the cooperative.

The board also has some specific management responsibilities such as functioning as trustees for the members in safeguarding their assets in the cooperative; setting goals, objectives, and general policies; adopting long-term strategic plans; employing a competent manager and evaluating performance; preserving the cooperative character of the organization; establishing an accurate accounting system; adopting an annual operating budget; appointing an outside firm to perform an annual audit; controlling the total operation; and authorizing distribution of cooperative net earnings and redemption of members’ equities.

The board, in turn, delegates responsibility for daily operations to a hired general manager or chief executive officer. The general manager hires or discharges employees, including department heads, who with the manager comprise the hired management staff or team.

Responsibilities of hired management include managing or directing daily business activities; carrying out policies set by the board; setting goals and making short-term plans; employing, training, and discharging employees; organizing and coordinating internal activities in compliance with cooperative goals and objectives and board policies; keeping complete accounts and records and developing an annual operating budget; and providing the board with periodic reports.

Questions often arise as to the division of responsibilities between the board and hired management. Sometimes they overlap and an exact division cannot be made. Some factors to consider are: the time period-long-term decisions are the responsibility of the board while management makes short-term decisions; idea decisions are usually introduced by the board and actual decisions implemented by management; decisions involving policy are the responsibility of the board, and cooperative functions are handled by management; broad primary control activities usually concern the board, while secondary controls pertaining to short-run operations are the responsibility of management. When it comes to staffing, the board hires the manager who, in turn, selects the staff of the cooperative.

Use of policy and procedure manuals and job descriptions along with frank discussions of questions when they arise can help maintain an understanding of the division of responsibility.

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