This document provides an overview of cooperative governance and features of professionally managed cooperatives. It begins by outlining the session objectives which are to explain the meaning and importance of governance, good governance practices in cooperatives, and important features of professionally managed cooperatives. Several definitions of corporate and cooperative governance are then provided emphasizing the relationships between management, boards, owners and stakeholders. Key aspects of good governance practices for cooperatives are listed such as properly constituted boards, fit and proper criteria for directors, and adequate representation of members. Unique features of cooperatives around dual identity and regulation are also highlighted. The document concludes by detailing features expected of professionally managed cooperatives including established policies, computerization, compliance, transparency, and preventing corruption.

1. Welcome to a session on
Cooperative Governance &
Features of Professionally
Managed Cooperatives
D V Deshpande
Professor, VAMNICOM
dvdesh@gmail.com
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2. Session Objectives
At the end of the sessions, the participants
would be able to:
• Explain meaning and importance of
governance
• good governance practices in Cooperatives
• Important Features of professionally
managed cooperatives
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3. “Corporate governance involves a
set of relationships between a
company’s management, its board,
its shareholders and other
stakeholders ..also the structure
through which objectives of the
company are set, and the means of
attaining those objectives and
monitoring performance are
determined.” (OECD Definition)
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What is Corporate Governance?

4. Governance – another definition
Set of relationships among
the board of directors,
management, and owners
of a business entity
through which the
objectives are decided and
the means for achieving
them and monitoring
performance are
determined
Board of
Directors
OwnersManagement
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5. Indian Definition of Governance
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6. Is Coop.society a body corporate?
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7. WHY IMPORTANCE OF GOVERNANCE
IS GROWING?
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10. PMC Bank Fraud Case
- A case of poor governance in Coop Bank
(Sept 2019)
• Total amount of the bank fraud - Rs 4,355 crore
• The crux of this bank fraud is that the higher
management of the PMC bank gave huge loan to the
Housing Development and Infrastructure Ltd (HDIL) and
its group entities
• The PMC bank allegedly favoured HDIL
• Around 21000 bank accounts were opened by bogus
names to conceal 44 loan accounts
• Bank's software was also tampered to conceal these
loan accounts
• All this can not happen without top management
involvement
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• Properly constituted board as per the Act, Rules
and Byelaws
• observing fit and proper criteria – Qualifications &
Disqualifications
• enforcing model code of conduct for the Board
members
• training of board members in the functioning of
the Society
• one person one post principle to avoid one man
show
• adequate representation for Small farmers –
weaker sections, women, & all classes of members
in the Board
Good governance practices

12. Unique features of cooperatives
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• Dual identity & Dual regulation- as a cooperative
and as a business entity- e.g. cooperative bank is a
cooperative society and a bank licensed by RBI also
• Owners are also users- so there is a conflict of
intersest- as users they want best deal (lowest prices
in a consumer cooperative) but as owner they want
best return on their investment- how both are
possible – so the cooperatives have to balance the
two aspects
• Chairman/ BOD act as a trustee of other members
funds/ interest (not owner)- Fiduciary responsibility

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• Induction of professional directors
• proper representation of professional directors in
sub committees of board
• Voting rights for professional directors
• procedures for conduct of board meeting, Number
of meetings, proper notice, etc
• Constitution of sub committees of board–like Risk
Committee, Audit Committee, Purchase Committee
etc.
• division of responsibilities between BoD and
Committees
General Governing Practices

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What is conflict of Interest?
“A conflict of interest between a
director and a cooperative arises
whenever a director has a material
interest in a contract or transaction
that affects the cooperatives, its
members or to which the cooperative
is a party”

15. Managing conflicts
• Conflicts between the Professional
Management and Democratic Management
• Conflict between the Society and the
Regulator /Registrar of Government
• Conflict between the Society and other
Societies
• Conflict between the Board with a member
of the Board on business transactions
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16. Features of professionally managed
cooperative
• Policies- are important policies approved by the
BOD and circulated to staff/ members
• Computerization: of all operations
• Website management- upto date- important
policies/ practices displayed ?
• Compliance to all laws- “Chief compliance officer”
designated?
• Financial dealings- clear policy, transparency,
acknowledgement of payments/ receipts,
encouraging digital /bank account transactions
rather than cash

17. Features of professionally managed
cooperatives .. continued
• Accounts audited timely- published, compliance
submitted
• Contract allotment/ orders to suppliers/ vendors
• Staff selection: Policies, nepotism, informal
considerations
• Respecting own Guidelines – OR “Show me the man
and I will show you the rule!!”
• Timeliness- guidelines – office opening in time?
Attendance?
• Corruption?
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19. Namaskar
THANK YOU!
Jai Sahakar!
dvdesh@gmail.com
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