Governance of democratic member-owned enterprises is complex and context-dependent. Members typically engage with the enterprise as contributors to its operations, while they also jointly own and democratically control it in order to enable such engagement. This sets the member-owned enterprise model apart from the investor-owned model, with implications for governance theory and practice.

While member-owned and democratically governed organizations span from cooperatives and mutuals to associations and other voluntary sector organizations, of particular interest for the advancement of the literature on this subject is the cooperative enterprise, given a common definition of its boundaries provided in the Statement on the Cooperative Identity of the International Cooperative Alliance (ICA, 1995). Governance in cooperatives as collective enterprises (MacPherson, 1996; Novkovic et al., 2022) is about promoting human dignity, democratic decision-making, and engagement (empowerment) of employees and other stakeholders. What is lacking is a better understanding of governance practices involved in implementing the humanistic paradigm and their implications. This book attempts to fill this gap. The aim of the project, then, is two-fold: one, to advance the theory of humanistic governance in democratic organizations and two, to showcase cooperative governance structures and processes that fit the humanistic paradigm perspective. While the first objective appeals to academic inquiry, the second goal aims to inform practice and assist in identifying systems and practices that curb degenerative isomorphic pressures on cooperative governance.

Starting from the premise that the humanistic paradigm and democratic governance in organizations go hand in hand, the book explores governance based on the intrinsic characteristics of cooperative enterprises, namely: being values-based; jointly owned and democratically controlled; and centred on peoples’ needs as producers, consumers, or workers (Novkovic & Miner, 2015). This allows us to establish the basic parameters of humanistic governance systems applicable to cooperatives, as well as to the context of economic democracy more broadly. Cooperative enterprise is a means of collective action through which members achieve their goals and aspirations, from decent work to access to markets and/or protection from market risks and speculative trading. We contend that the model therefore lends itself to the underlying assumptions of humanistic economics and management. In particular, behavioral assumptions behind a collective enterprise depart from the hyper-rational self-centred optimizer in neoclassical economics and align with bounded rationality (Simon, 1979), which considers human imperfections as well as empathy and solidarity in socio-economic/ecological affairs.

This volume also furthers the conceptualization of humanism in business through the inclusion of collectivist aspirations of the members of cooperative and social solidarity enterprises. We subscribe to “cooperativist humanism” (see McMahon, 2022), the more radical framing of humanism, in two important ways. First, it is partly aligning with post-humanist ideals in its attention to care and regeneration of all natural systems, i.e. it is humanistic, but not anthropocentric (see Braidotti, 2017). Secondly, our focus on economic democracy implies a collective (associationist) version of humanism rooted in solidarity and mutualism, thereby expanding the liberal individualistic understanding of the term often subscribed to in the business literature (Melé, 2003; Pirson, 2017). Our view lies in contrast to the philanthrocapitalist social business and social entrepreneurship approach, with individual entrepreneurs acting for a greater good; rather, it includes a form of enterprise involving mutual self-help and democratic control by its members—i.e. users of the enterprise in some operational capacity (producers, workers, consumers, supporters of its “mission”/purpose).

Cooperatives engage in market exchanges, but they also resort to reciprocity and relational exchanges among their members, as well as with like-minded organizations through inter-cooperation. This is reinforced by intergenerational stewardship since cooperative members are concerned about longevity of the enterprise, instead of short-term financial gain for the current generation of members (see Lund & Hancock, 2020). In order to maintain this vision of a cooperative enterprise as an intergenerational asset, governance structures evolve over time to protect the members’ and organization’s integrity from vulnerabilities created by external and internal pressures and dynamics. Well-governed co-ops also tend to evolve nested and networked governance structures when they develop and grow, as they strive to practice and uphold the values and principles that all co-ops subscribe to—e.g. member participation, democratic decision-making, solidarity, and cooperation among cooperatives, among other.

Besides an enhanced understanding of humanism in business through the lens of collective action, we challenge the prevailing approach to cooperative governance discourse as “one size fits all” democracy. A typical cooperative governance structure considered in the literature is a unitary board with elected representatives. Such a structure foresees the tension between member representativeness and the required expertise not guaranteed by the election process (Birchall, 2017; Cornforth, 2004). Turnbull (2002) argues against unitary boards more generally, deeming them inferior to multistakeholder network governance due to human cognitive limitations. Expanding on that thought, we advance the theory of governance of democratic member organizations (DMOs) to account for the co-op model’s associational and mutualist character, networked inter-cooperative structures, and a direct relationship through members’ use of the enterprise for a particular need-satisfying purpose (rather than as a purely financial investment).

Governance systems, comprising of structures, processes, and the dynamic interplay between them, are diverse and context dependent in such democratic organizations, but this diversity does not sacrifice adherence to cooperative enterprise characteristics. The key variable differentiating governance among cooperatives is members’ relationship with the organization. Members can be consumers or users of services; producers selling their products or purchasing supplies through the enterprise; workers as insiders to the enterprise; or supporting members who provide resources and advance a cooperative’s mission and purpose. Depending on the relationship and the extent of a member’s engagement, governance challenges will be different, as will be the solutions.

Further to the type of members, governance structures and processes will be affected by the purpose of the organization (e.g. providing quality jobs; access to goods/services; or pooling risk); the stage in its lifecycle; the type of industry; the regulatory and legal frameworks; the historic and cultural environment; the strategic stakeholders; and the numerous evolving external pressures. We approach governance from that context-dependent humanistic lens. The book is replete with cases and examples illustrating this diversity in the practice of economic democracy and member and stakeholder participation.

1.1 The Contents of the Book

The book is structured into three parts. The first part develops the theoretical foundations of cooperative humanistic governance; the second illustrates context-dependent issues facing different types of cooperatives and highlights some practical solutions; while the third part explores the dynamics of change in cooperative governance under the force of internal and external pressures.

The theory part lays out the foundational assumptions of democratic governance in cooperatives (Chapter 2 by Sonja Novković and Cian McMahon) based on the literature in humanistic economics and management. It highlights the characteristics of the cooperative model and, in particular, the use-aspect which grants control rights to the members. Since investment of capital is only instrumental as a means to a different end, its ownership bears no impact on governance structures and democratic processes. The hallmark of cooperation is its associational character demonstrated through collective ownership, contributions, and benefit (Novkovic et al., 2022), with implications for governance of collective assets and income distribution decisions. The chapter contrasts the humanistic theory of democratic member-owned organizations with the traditional approach in neoclassical and new institutional economics, outlining the behavioral foundations, the purpose of the enterprise, the nature of its ownership and control, and the subsequent governance systems.

Ryszard Stocki in Chapter 3 examines various conceptualizations of dignity and theorizes the promotion of human dignity as an inherent feature of cooperative organizing. The chapter elaborates on diverse sources of reflection about dignity and its meaning—from scientific knowledge to personal experience, artistic expression to practical knowledge. Several approaches to dignity in the business literature are also discussed, extracting ten ingredients defining dignity in organizations. These key elements are used to analyse various enterprise forms and assess their alignment with the promotion of dignity as the key tenet of humanism in organizations.

The first part concludes with Chapter 4 by Sonja Novković, Karen Miner, and Cian McMahon sketching out the framework and variables impacting context-based and diverse cooperative governance systems. Governance structures include ownership and control, governance bodies, and formal rules and policies. Governance processes, on the other hand, are about democracy and participation, channels of communication, and monitoring and control. Dynamics of governance as the third component of governance systems includes the interplay between structures and processes and externally and internally induced changes. This chapter contextualizes governance systems for worker, consumer, producer, and multistakeholder cooperative types and discusses common practices by membership type. The chapter also sets the stage for the next part of the book where diverse systems are further highlighted and explored through specific case studies.

The second part of the book presents a select set of issues and participatory solutions in different types of cooperatives. The part opens with John McNamara’s account of worker cooperative governance in Chapter 5. Worker cooperatives use different types of structures, from traditional hierarchical managerial model, to flat structures with collective decision-making, or sociocratic double-linked circles. What ties these models together, while separating them from other types of cooperatives, is that members are insiders who engage both in operations and in governance. The lines are often blurred between the types of decisions made by the members. The tensions in worker cooperatives are unique due to member proximity, but they also have an advantage in terms of member participation and engagement. The chapter outlines examples of three types of governance in worker cooperatives in the United States and explores the potential benefits of unionized worker cooperatives as an added complexity.

Chapters 6 and 7 by Anu Puusa and Sanna Saastamoinen, and Roger Spear, respectively, look at consumer cooperatives. Chapter 6 examines the governance structure of a large Finnish consumer cooperative. The authors point to issues when co-op membership is large, less engaged, and members are outsiders. Typical issues in consumer cooperatives concern low member engagement and board expertise. The authors describe the multiple board structure in Finnish consumer co-ops, involving a membership council, a board of directors, and a supervisory board. These structures align with Birchall’s (2017) proposal for more effective consumer co-op governance; however, the authors point out that well-designed structures are not enough on their own. They have to be accompanied by education of directors and other members engaged in decision-making, so that healthy interpersonal processes can reinforce the nested structures of distributed control.

Spear likewise highlights governance challenges in consumer cooperatives, particularly the typically low membership participation in basic member ownership responsibilities (e.g. annual general meetings and elections). He points to solutions through a humanistic theory lens, in particular, as it relates to broadening the understanding of cooperative governance to include networked and polycentric systems linking institutions and organizations in the “cooperative ecosystem”. Through the examples of Lincoln Cooperative Society, other consumer cooperatives in the UK, and stories of demutualization, he argues in favor of this approach when compared to traditional, more narrow understandings of governance in consumer cooperatives.

Camila Piñeiro Harnecker examines the governance of Cuban producer and worker cooperatives in Chapter 8. Developed in the unique socialist context under the combined forces of external pressure and internal system change, Cuban cooperatives span from small farmer producer cooperatives introduced in the 1960s, to collective agricultural cooperatives in the 1970s, to 1990s–early 2000s agro-industrial complexes turned into agricultural worker co-ops, ending with the post-2011 development of worker cooperatives in the wave of de-nationalization of state enterprises. In a socialist economy whose policies are designed to promote human development, cooperatives express features of humanistic governance systems in the design of structures and processes of decision-making, also consistent with the humanistic and participatory ethos of the Cuban Revolution. Furthermore, network governance structures, frequent processes for member participation, and decentralized decision-making are regular features of governance systems in Cuban cooperatives.

Stefanie Friedel and Frédéric Dufays in Chapter 9 use three dimensions of social capital—trust, networks, and rules and norms—to differentiate between large, small, and multistakeholder agricultural producer cooperatives in Belgium. The authors make connections between the principles of humanistic management and governance and patterns of social capital in these diverse sub-types of producer cooperatives, contributing further to one of the main arguments of this volume: that cooperative governance is diverse, and context dependent. Key findings confirm the hypothesis that identity-aligned cooperatives are people-centric in their governance design, and focussed on active engagement of their members in daily practices. The authors note the difference in leadership styles, correlated to social capital, spanning from traditional corporate governance rooted in the principal-agent model, all the way to ethical/humanistic practices, using deep democracy methods to engage diverse members.

Chapter 10 by Oier Imaz, Fred Freundlich, and Aritz Kanpandegi takes a closer look at the Mondragon Corporation, to highlight the large and longstanding presence of multistakeholder cooperatives (MSC) across all areas of the co-op network: retail, industrial, finance, and education. The number and size of the MSCs make them significant for the Mondragon group, and they are an interesting development both from the governance perspective, and the adherence to cooperative principles, in particular democracy and inter-cooperation. Based on primary data, the authors describe and classify MSCs, illustrating the diversity of the model’s application across Mondragon. They outline the extent, nature, and purpose of MSCs; discuss the relationship among different stakeholders and the resulting governance structures; and explore the evolution of purpose, structure, and processes in response to internal and external dynamic pressures. The authors highlight the heterogeneous nature of MSCs in the Mondragon system, but, as a common thread and not surprisingly, they find that all are labor inclusive, with worker-members as a central figure for Mondragon MSCs. The authors point out that networked inter-cooperation is at the root of multistakeholder governance development in the Mondragon system, with evolving dynamics under internal and external pressures.

Chapter 11 concludes the part, with Ermanno Tortia and Silvia Sacchetti’s exploration of network governance in cooperative banks. The authors analyse three cases of financial cooperative networks in three different countries and find some elements and evolutionary trends in common. In particular, cooperative financial institutions are firmly locally embedded and an integral actor in local development. They are also coordinated horizontally in complex, multilateral, and decentralized networks, with trust as the key ingredient in the network relationships. Further, they resort to cooperation, rather than competition, via horizontal coordination with other institutions with shared goals and values. Cooperative banks become more integrated and formalized over time, partly due to regulatory pressures, and partly due to growth. Over time, they come to rely on a central institution which functions as a hub for risk pooling and making strategic decisions.

The third part of the book opens with Chapter 12 by Aurélie Soetens, Benjamin Huybrechts, and Ignacio Bretos, describing the dynamics of governance processes and structures that change under pressures. The case in question is an illustration of innovations in governance in an attempt to preserve the original purpose of the organization. The authors present the example of Cecosesola, a longstanding second-tier cooperative in Venezuela, staying true to its normative values and managing to maintain its participatory culture, thereby defying the dominant institutional patterns in the broader neoliberal economic policy environment. The chapter describes how alternative organizations resist non-congruent institutional isomorphic pressures and shield their “institutional distinctiveness”. Democratic (participatory) organizations face numerous pressures to cave to the mainstream institutional paradigms; this chapter suggests that creating a strong (radical) ideology can be the foundation for preservation of institutional distinctiveness and the prevention of organizational degeneration.

Chapters 13 and 14 by Karen Miner and Sonja Novković and Dražen Šimleša, respectively, relate to the governance dynamics under external pressures. They examine the transformational nature of cooperative organizing in the context of societal crises. While Miner considers resilience from a complex social-ecological perspective and places it in the ability of cooperatives to be transformative, the final chapter talks about the use of key performance indicators to drive transformation.

Miner’s use of a resilience framework moves beyond the focus of most cooperative resilience research, which concerns the resilience of the enterprise model under economic stress (e.g. economic slow-down, shock, recession). Instead, resilience is framed more broadly, in recognition of the interrelated and integrated nature of economic, social, and environmental systems. Resilience as a holistic concept is then compared to the cooperative enterprise model and governance system to demonstrate the model’s strength in key areas such as engagement of multiple stakeholders and polycentric governance. Miner suggests that as we navigate an era of turbulence and difficult system change, a resilience mindset in governance is imperative to ensure cooperative survival over the long term. The co-op model is designed particularly well to accommodate this mindset, and cooperatives need to use this to their advantage.

Novković and Šimleša extend the discourse on the transformative potential of the cooperative model by establishing the role of key performance indicators in driving the transformation to sustainable socio-ecological-economic systems. Given the purpose and identity of cooperatives, and a different institutional logic compared to investor-owned businesses, the chapter discusses their contributions to the requisite radical imagination needed for a transformative change in the system. The intersection between the cooperative model and the Economy for the Common Good (ECG) approach to measures of performance is examined as an example of values-based indicators. The chapter points out the need to use context-based indicators with thresholds and allocations (McElroy, 2015) in order to appropriately assess sustainability and proposes that cooperative goals and purpose can set the sustainability benchmarks for social indicators.

1.2 Concluding Remarks

The theoretical and philosophical contributions to this volume propose moving beyond the disembedded and hyper-rational individual/organization of the dominant economics and management paradigms. They also imply that democratic control by people involved in the operations of an enterprise introduces complexity, but it also enables innovative governance practices. Cooperatives presented in this volume belong to a class of collective member-owned enterprises guided by organizational values and principles.

How members engage with the enterprise matters: democratic governance practices are diverse and context dependent. Participatory democratic governance structures, processes, and dynamics are manifest throughout the volume in a diverse array of representative co-ops operating within their unique contexts. These experiences demonstrate in practice that not only can co-ops govern in accordance with the model’s stated values and principles, but that doing so can deliver both a competitive and an ethical advantage. This holds increasingly true in the current environment characterized by multiple overlapping systems crises—most readily visible in the intersecting economic and earth systems crises, and the underlying disintegration of systems of care and social/ecological reproduction (Lynch, 2022). We believe the time is ripe to present the cooperative model of economic democracy in its diversity, and for its strengths and advantages in the pursuit of a post-neoliberal global order.

The volume’s contributions also illustrate that governance in cooperatives is not necessarily about separation of ownership and control, reflected in a hierarchical monitoring function. Rather, governance in collective enterprises needs to strengthen the synergies between an association of member-users and the enterprise by transposing values into practice.