An Agreement for Disagreements

I wish I could say it is a rare occurrence, but unfortunately I get these disturbing calls all too often.

"Hi KZ," the caller starts. "We've got this problem situation with our board of directors. A board member has ...," and the caller goes on to describe how a director has "stepped over the line" and created an awkward situation.

I've heard some amazing stories -- directors getting into shoving matches with managers, directors demanding special treatment from staff, directors leaking plans to a local newspaper before the affected staff have been informed, directors holding special secret meetings and arranging votes without including all board members. But the basic scenario is the same -- directors who don't respect the board's agreed-upon role and behave unprofessionally or in a way that could cause the co-op serious financial or image problems. We know there are two sides to every story; some of these stories may be more misunderstanding than inappropriate behavior. But some of them are true and some have caused great pain and damage to the co-ops these directors were elected to serve.

Perhaps you're thinking, "That would never happen here!" Think again. No matter how well your board is functioning and how smoothly things work at your co-op, no co-op board is immune. It is the very nature of our cooperative structure that no small group has control over the actions and behavior of the board. The board is elected in an open, democratic process that should not exclude any eligible and qualified member. Or perhaps you're thinking, "That happens here all the time; that's the way co-op boards operate." I hope you will be encouraged to hear that this, also, isn't true.

Of course, it's a good idea to do all you can to avoid these situations. Regular board training sessions and retreats to clarify roles and solidify working relationships are very constructive and important. An energetic and motivated nominating committee with good community contacts and a commitment to finding the excellent potential directors among your membership will also be invaluable. Good meeting packets with clearly written proposals distributed to all directors in advance will help reduce misunderstandings and keep the board focused on its job. Well structured, focused committees will help enhance communications and involvement of members and directors in appropriate ways. Effective co-op officers and good leadership by the board as a whole will help identify potential problems before they become crises.

An ounce of prevention

Equally important is a code of ethics or code of conduct for your board. Such a code spells out the board's agreements regarding its role, how all directors will approach awkward situations, and the conduct expected of all directors. By approving such an agreement before a problem occurs, boards set a good example, modeling a business that is open, trusting, professional, and respectful of all stakeholders. In addition, by approving such a statement, the board has a benchmark that can be used to determine if and when a director has really "stepped over the line."

To be truly useful, this agreement has to be more than a yellowing piece of paper stuck in a binder in the co-op's office. I recommend that each board have such an agreement and approve it every year. A good time to do this is at the first meeting of the new board following elections. Along with electing officers, convening committees, and organizing its work for the next year, the board can review and approve the code of conduct that it will follow.

A sample "Statement of Agreement" for co-op boards of directors accompanies this article, developed from a variety of codes used by co-ops and credit unions. Some of these codes are more general about the behavior and overall role of the board, while others are more specific about behavior expected of each director. Both have value, so I've combined these approaches into one Statement of Agreement: a "code of ethics" for the whole board, a "code of conduct" for individual directors.

And a pound of cure

One of the most common complaints I've heard from boards about possible codes of behavior is, "That's fine, but what teeth does it have?" For that reason, I have added a statement at the end of this agreement that each director signs. In signing, a director agrees to offer his/her resignation if a majority of the remainder of the board agree that the director has violated the letter or spirit of the board's code.

Of course, this is still a voluntary agreement, but it can go a long way and is certainly better than nothing. There are no guarantees that an offending director would actually stand by such an agreement. Most bylaws have some provision (rarely used, in my experience) for removing directors that would be the final resort. But a director who doesn't agree to sign such a statement would certainly alert the board that one director is not willing to play by the rules of the board. In such a case, it would be valuable for the whole board to discuss in more detail what behavior is expected and what doesn't meet the board's standards of professionalism. Working out those expectations in advance and obtaining each director's support to follow this code is what good leadership is all about.

In The Dilbert Future, the latest Scott Adams book, "Nostradogbert" predicts, "In the future, the most important career skill will be a lack of ethics." My hope is that your co-op doesn't find itself on the cutting edge of this coming trend!


Statement of Agreement

I. Code of Ethics

II. Code of Conduct

The Board of Directors of __________Co-op adopts the following Code of Ethics to clarify any uncertainty regarding the authority of the board or individual directors. This Code of Ethics is proposed to create greater unanimity and closer coordination between directors, and among directors, management, and employees.

To that end, we the directors of ______ Co-op agree that:

• The board's authority is limited to overseeing the affairs of the cooperative in a manner deemed beneficial to the cooperative as a whole.  To do this, we employ a manager to be responsbile for the overall and day-to-day management of the business under the direction of the board and work with management to set the future direction of the co-op.  We are also responsible for carrying out other duties as provided by the bylaws or by general or specific corporate laws.

• Each director's authority is equal only to the rights and authority of any individual member of the cooperative except when the board is in formal meeting.  No individual director may take action on behalf of the cooperative along unless explicitly delegated that authority by action of the board, and no individual director has any particular rights to information not made available to all directors.

• The authority of the manager, as approved by the board in the general manager's job description, is to manage the affairs of the cooperative.  The manager shall employ, supervise, and discharge all employees, agents and laborers and engage in all negotiations and discussions on behalf of the cooperative as necessary and/or directed by the board.

• While an individual director may disagree with a policy approved by or action taken by the majority of the board, s/he will support policy or action as being the considered judgment of the board.  An individual director shall have the right to present further evidence and argument to the board for further consideration in a manner consistent with the board's practices. The board shall have the duty to reconsider its actions appropriately.

• All directors will maintain confidentiality as needed to protect the co-op's interests and financial viability.  This means that all directors shall not discuss disputed or confidential corporate actions, policies, or issues with co-op members, employees, or the general public unless all directors agree that such information is no longer confidential.  All issues related to personnel, real estate, market strategy and goals, pending litigation, and details of the coop's financial status will be considered sensitive issues subject to confidentiality unless or until full disclosure is approved by the board as a whole.

• Directors serve as representatives of the cooperative.  We shall conduct ourselves in a professional manner which fosters confidence and reflects positively on the co-op, its members, and its staff.  We respect the rights of others -- directors, staff and members -- to communicate their ideas free from interruption and without intimidation.  All directors shall affirmatively and, at all times, disclose any/all economic conflicts of interest.

As a co-op director, I pledge to do my best for ________Co-op and will:

• Devote the time needed to fulfill the responsibilities of the position;

• Attend all regular and special board and committee meetings;

• Be prompt, attentive, and prepared for all board and committee meetings;

• Contribute to and encourage open, respectful, and thorough discussions by the board;

• Attend and actively participate in the board's training sessions and annual planning retreat to enhance board understanding and cohesiveness;

• Consider the business of the co-op and its members to be confidential in nature;

• Disclose any personal or organizational conflict of interest that I may have and refrain from discussing or voting on any issues related to that conflict;

• Be honest, helpful, diligent, and respectful in my dealings with the co-op, with other directors, and with the co-op's management, staff, and members;

• Refrain from becoming financially involved or associated with any business or agency that has interests that are, or could be perceived to be, in conflict with the co-op's;

• Work for continued and increased effectiveness in the co-op's ability to serve its member/owners;

• Be a team player and agree to abide by the majority action of the board, even if it is not my own personal opinion;

• Present the agreed-upon view of the board of directors, rather than my own, when I speak for the co-op to employees, members, shoppers, and the general public;

• Refrain from asking for special privileges as a board member and from interfering with management's authority;

•Work to ensure that the co-op is controlled in a democratic fashion by its members and that all elections are open, fair, and encourage the participation of all members;

• Strive at all times to keep members informed of the co-op's status and plans, and of the board's work, as appropriate;

• Continually seek to learn more about the co-op and its operations and about my responsibilities as a board member by pursuing educational opportunities.


As a co-op director, I agree to abide by this Statement of Agreement.  I agree that if, in the opinion of the majority of co-op directors, I have violated the letter or spirit of this agreement, I shall resign my position on the board immediately and shall not seek to cause continued disruption to the co-op and the co-op board for that action.

__________ (signature of co-op director)

__________ (date)


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