When I first started learning about cooperatives in the 1990s, I thought the fact that they were governed only by members was among their greatest strengths. It's the embodiment of what we represent, and it sets us fully apart from investor-owned corporations, with their hand-picked, highly paid directors.

These days, I still see member governance as a key asset, but my view has become nuanced. With the increasing complexity of the utility industry, some electric co-op leaders around the country are asking: Is it time to at least consider bringing in an outside advisory director?

I realize many will cringe at this idea, but I'll ask you to hear me out.

Such positions would be non-voting and not legally directors, but they could come from outside the co-op's service territory. They would be appointed, not elected; would sign appropriate confidentiality agreements; and would have the right to attend board meetings and have access to all the same information and resources as voting directors.

Over the course of my career, I've had the opportunity to work closely with co-ops in all sectors: consumer, producer, purchasing/shared services, and worker. This experience has given me unique insights into the ways various co-ops operate, and it's encouraged me to challenge my assumptions about our governance.

I can tell you, co-ops in all of these sectors have outside directors, both advisory as well as voting, and this structure can work well under the right circumstances.

The Center for the Study of Cooperatives at the University of Wisconsin summed it up in a white paper back in 2005: "It is becoming increasingly difficult for boards to capture all the expertise required to manage and control the cooperative. Outside directors, whether in an advisory capacity or as voting members, may help fill this gap."

I understand many states' electric cooperative acts require directors to be members and that they be elected by members. Again, the outside advisory directors I'm proposing would not legally be "directors." Nevertheless, as with any legal issue, co-ops should consult their attorneys before making such a move.

A couple of things I'd recommend if you decide to go forward:

  • Keep it limited. One or possibly two non-member advisory directors is plenty.
  • Allow the board to appoint an outside director at will and based on the expertise it needs. If a co-op is considering a broadband project, the board could appoint someone with knowledge in this area. When priorities change down the road, they could bring in a different advisory director with other applicable skills.

Some of you reading this may see it as antithetical. I get it. But as I've said before in this space, in times of change, sometimes the best way to adapt is to be willing to question our long-held beliefs. The consulting co-op that I co-own has an outside director, and I can attest to the value this individual brings to our discussions.

We know our oversight is only as good as our understanding of the issues. A board that lacks the expertise needed to thrive in today's utility industry could ultimately have a negative impact on the co-op.

Adam Schwartz is the founder of The Cooperative Way, a consulting firm helping co-ops succeed. He is an author, consultant, educator, speaker, and member-owner of the CDS Consulting Co-op. You can follow him on Twitter @adamcooperative or email him at aschwartz@thecooperativeway.coop.

Editor's Note: The ideas expressed in #gocoop are those of the author and do not necessarily reflect the beliefs of NRECA or RE Magazine.

ADVERTISEMENTS