Why Do We Need Policy Governance?
by Dawn Goddard, on behalf of the Maple Street Co-op Directors

Regular readers of the newsletter and those hardy Co-op members who attended the Co-op's AGM may have heard various mutterings about and references to the Carver Policy Governance Model that was adopted by the directors last October. Some of you may be wondering why we need Policy Governance and exactly what the Carver Model is that the Co-op's Board has adopted. To answer these queries, some background details are called for.

We need to realise that not-for-profit community groups and cooperatives are operating in a different climate than they were a decade or so ago. For example, boards of cooperatives have to adopt the same onerous compliance requirements for accountability and efficiency that are placed on "for-profit" business boards, although some may see these as bureaucratic and an unnecessary waste of time, energy and paper. However, a review of the Cooperatives Act of 1997 shows that the demands on directors are similar to those under the Companies Act of 1997. (To clarify, a "not for profit" group in the Co-op's case means that any profits made are retained within the cooperative and not distributed as dividends.)

If we look at the big picture, we see that, globally, governing boards of small grassroots community groups, organisations and co-ops are slowly but surely being "professionalised", albeit slightly unwillingly. Many of these groups are opting for governance systems that formalise outcomes which take into account ethical, social and environmental impacts and benefits that arise as a result of their organisation's activities as well as delineate who is responsible for these activities. A shining example close to home is the Maleny Credit Union, whose Board has adopted international cooperative principles and "triple bottom line" accounting guidelines along with Carver Model governance policies that clearly define their aims, such as ethical investment, a sustainable local economy and good environmental outcomes, and the boundaries within which success will be achieved. The MCU is enjoying great success, with increasing membership and profitability.

These relatively small organisations, businesses, co-operatives and community groups are providing not only enormous benefit to the communities and local environments in which they are situated, but are also redefining what a successful business is. Graeme Samuel, chairman of the Australian Competition and Consumer Commission, penned an article for the July 2005 issue of the Business Community Intelligence newsletter in which he applauds the idea of businesses existing as full participants in the Australian community and says they must develop social responsibility – yet he also writes that "triple-bottom-line accounting and ethical investment guidelines will lead to a diversion from fundamental principles of good business management and to a box-ticking mentality".

In contrast, United Nations Secretary-General Kofi Annan believes that "[f]ounded on the principles of private initiative, entrepreneurship and self-employment, underpinned by the values of democracy, equality and solidarity, the co-operative movement can help pave the way to a more just and inclusive economic order". This quote was taken from the website of the International Co-operative Alliance which represents and serves cooperatives worldwide, with 223 member organisations from 89 countries active in all sectors of the economy (www.ica.coop.org). Together these co-ops represent more than 800 million individuals worldwide.

Concentrating on purpose and outcomes

Many institutions and businesses, from governments, hospitals and schools through to cooperatives, function with governing boards comprising intelligent, capable and organised individuals who conduct business without a clear idea of their role and without proper frameworks to support logical and consistent planning and decision-making, mission implementation, fiduciary responsibilities, agenda control, budgeting, reporting, CEO/manager evaluation, and so on.

To rectify this situation, Dr John Carver has developed a "universal" theory of governance. Boards that adopt the model must clearly define the purpose and outcomes of the organisation, the stakeholders to whom the board is accountable (in our case, Co-op members), and the cost or relative worth of stated outcomes. The model enables a board to focus on the larger issues, delegate with clarity, control management's job without micromanaging or meddling, evaluate accomplishments and truly lead the organisation forward.

Linda Stier, writing on Policy Governance for Cooperative Grocer, a journal produced on behalf of 350 food co-ops across the USA and Canada, said: "...the board's focus is to think and operate in a manner consistent with what it is to own the organization – distinct from thinking and operating in ways that are consistent with what it takes to effectively run the organization. This subtle distinction in thinking produces a shift in the board's ability to be accountable to the owners (members). Owner accountability is a critical factor in co-operative success. We may not know what would be possible if co-operative boards were truly owner accountable. If owner accountability is to be distinguished and put into effective practice anywhere, the co-operative sector is a fertile arena… With Policy Governance, the owners have the opportunity to have a say on fundamental values common to the whole. They can be confident that their agent, the board, is fully serving them – synthesizing their diverse views, defining the common elements, allowing the broadest opportunity for success and then ensuring success happens. People in our communities are left with a new experience of democracy. If co-op boards mastered the tool for owner accountability – Policy Governance – such a future could be realised. Imagine the impact across sectors and in all aspects of our lives."

We are confident that Policy Governance, once fully implemented, will provide the Board with the structure and clarity required to serve Maple Street Co-op through the next 25 years of "busyness", and we look forward to meeting the challenges and changes with grace and unity.

Editor's note:
Dawn Goddard worked closely with fellow director Kamala Alister in drawing up Carver Model guidelines for the Co-op, and also with new director Mike Eales in preparing this article. Dawn plans to expand on the more detailed workings and implications of the Carver Model as adopted by the Co-op in a subsequent article. Copies of John Carver's book, Reinventing Your Board, are available the Co-op.

Sources and References
• John Carver, Reinventing Your Board, Jossey-Bass Inc., San Francisco, 1997.
• John Carver and Miriam Carver, "Carver's Policy Governance Model in Nonprofit Organisations", in Gouvernance: Revue internationale, vol. 2, no.1, Winter 2001, available at http://www.carvergovernance.com.
• Graeme Samuel, "'CSR' in perspective: competition and compassion", BCI Newsletter, July 2005; article at http://www.ourcommunity.com.au/files/bci_firstedition.pdf.
• Linda Stier, "Demystifying Policy Governance", Cooperative Grocer, issue 108, Sept/Oct 2003; available online at http://www.australia.coop/issues/co-operativegovernancemanual/co-operativegovernancepublications/co-operativegrocer/demystifyingpolicygovernance.

[From "Maple Street Co-op News", February/March 2006; published by The Maple Street Co-operative Society Ltd, 37 Maple Street, Maleny, Qld 4552, Australia,
telephone (07) 5494 2088, email maplest.coop@serv.net.au,
website www.maplestreetco-op.com.au]