Guides and Resources

Creating a Co-operative - An Information Guide
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Structure of a Co-operative

A co-operative is both an association of people and an enterprise. It therefore has two different structures:

the association of people requires a democratic structure (general meeting, board of directors, other boards and committees) in which members or their representatives can participate directly or as delegates of groups of members;
the enterprise structure may be simple or complex, depending on the scale and nature of the economic activities, but it will likely be similar to that of other private enterprises.

organigramme

Source: Alain Bridault, Managing the Democratic Process in a Co-operative, from the collection Managing a Co-operative, Sillery, Quebec, ORION research and consulting co-operative, March 1998, p. 36 .

The association of people is directed by a voluntary board of directors. The co-operative is governed by the board of directors and managed by the person holding the position of chief executive officer, general manager, or executive director. An Executive Director usually heads up a non-profit co-operative or an association.

Articles of Incorporation

A co-operative's articles of incorporation may vary according to the particular provincial or federal legislation. For example, it may or may not be necessary for them to contain the objectives and purpose of the co-operative, as well as the share structure.

By-laws

A co-operative's by-laws are like a government's constitution. They define the rights and obligations of each member of the co-operative, and they constitute a legal document. In many cases, they may only be amended by a majority of two-thirds of the members at a general meeting.

Depending on the legislation, the by-laws must include provisions such as:

the co-operative's mission and its fields of activity;

requirements for becoming a member (including the number of co-op shares) and for terminating membership (withdrawal or expulsion);
the procedure for calling the annual general meeting, special general meetings, and meetings of the board of directors;
the powers and responsibilities of the board of directors, the executive committee, and other committees and boards;
the powers and responsibilities of the chief executive officer/executive director.

The Democratic Structure

A co-operative operates according to the rules of parliamentary democracy.

Annual General Meeting

The board of directors must call and organize an annual general meeting. The by-laws may provide for a quorum (number of members or percentage of total members), without which a general meeting may not be held. One member may not vote on behalf of another member (no proxy voting).

In particular, the annual meeting has exclusive authority to:

amend the by-laws;
elect members of the board of directors and of other committees as required;
set the amount of per diem fees for members of the board of directors;
appoint the external auditor;
decide to wind up the co-operative or amalgamate it with another co-operative;
decide to apply for membership in a federation or another inter-co-operative organization.

Board of Directors

The board of directors governs the co-operative on behalf of members. It usually has exclusive authority to:

hire and fire the person holding the position of chief executive officer;
approve salary and human resource management policies;
define the co-operative's strategic and operational objectives;
approve production (type and quality) and sales (price) policies for the co-operative's products and services;
dispose of the co-operative's assets;
propose to the annual meeting the amount and method of payment for patronage dividends;
prepare and submit the annual report of activities to the general meeting.

Chief Executive Officer/Executive Director

The chief executive officer (CEO) has the same responsibilities and powers as in a private company, i.e. planning, organizing, directing and controlling the enterprise on a day-to-day basis. The CEO reports directly to the board of directors and must keep it informed of all the enterprise's activities.

The CEO has the power to hire and fire employees of the enterprise in accordance with the provisions of the by-laws and with the directives and policies issued by the board of directors.

In the case of a worker co-operative, however, the power to fire an employee rests with the board of directors because the employee is also a member. The dismissal of an employee must be in accordance with the clauses and procedures set out in the by-laws. The CEO may, however, assign and transfer members to different responsibilities and positions.

In the case of both worker co-operatives and other types of co-operatives, the by-laws may give the board of directors (not the CEO) the power to hire and to dismiss managers of the enterprise.