Bill Fitzwater Cooperative Chair
Maintaining confidentially is an important responsibility of the cooperative board of directors. Confidentiality is particularly important for information relating to personnel matters, purchase or disposal of assets and any action relating to on-going or potential litigation. The flip side of the coin is the cooperative members’ right and responsibility to be informed about the cooperative. Democratic member control is a fundamental cooperative principle. Most cooperatives want to do everything that is possible and prudent to promote transparency and encourage member participation.
Members have a legitimate need for information on how the board is safeguarding the cooperatives assets and setting the strategic direction. They need to assess whether the board is being too aggressive or too risk averse. Cooperative members, like stockholders in an investor owned corporation, have specific rights to inspect the companies records. This is generally limited to the articles of incorporation, bylaws, annual financial reports and minutes of the annual meeting. Most cooperatives are happy to provide members with that type of information. It is beyond this level of basic information that the balancing act between transparency and confidentially come into play. For example, what is the appropriate policy on access to the risk management plan or the system of internal controls? Members have a legitimate interest in knowing that these plans are in place, but should not have access to all of the confidential information in the plan. Another common situation is when the cooperative considers an acquisition, joint venture or major asset purchase. Regardless of the decision, some members will wonder “what was the board thinking?
Some rural electric cooperatives, which have more of a public utility background in their genetics, address members’ right to information on their websites. They may list describe the members rights and responsibilities which include attending the annual meeting, being knowledgeable about the articles of incorporation and bylaws, reviewing the annual report and voting for board members. Some go on to describe their policies and procedures for member request for additional information about their cooperative. They may even publish the request form on their website. Many agricultural cooperatives consider that to be too much effort for a situation that comes up only rarely. Still, every board should review their policy on member access to information and have a form for requesting information available.
Another useful step for boards is to begin to prepare executive summaries of reports where members could conceivable have a legitimate interest in reviewing. For example, the executive summary of the risk management report could describe the major risk areas facing the cooperative, the general types of controls used to control the risk and the criteria that the cooperative uses to determine that its risk exposure is appropriate. Those executive summaries would not be routinely distributed to the membership, but they could potentially be shared with a member pursuing an information request. Preparing and reviewing those executive summaries can lead to good discussion of the nuts and bolts of the balancing act between confidentially and member rights to information.
If you would like to an example of a member right to information policy and request form, drop me an email. Phil.email@example.com