A new survey of how agricultural co-ops reward their directors has highlighted a set of important recommendations around good governance for farmer-owned businesses.
The analysis was conducted by SAOS and Co-operatives UK to establish current practice around director fees and expenses.
It is intended to help with decision-making around the remuneration of non-executive directors in agricultural co-ops.
Director recruitment is critical to a business’s success and a remuneration package can play an important role in attracting directors with the right mix of skills and experience.
The report says that director remuneration and the amount of time spent by directors on their roles varies widely, even among those with similar levels of turnover and employee numbers.
It states that boards need to make sure that they have a formal process in place that monitors director remuneration to ensure it reflects the business’s needs and its ability to recruit directors of an appropriate quality.
With only 12% of the co-ops surveyed having a formal process to review board performance, more agricultural co-operatives need to build regular director and board performance reviews into their governance planning.
As only 37% of those co-ops surveyed have a director development programme in place and only 36% are confident that the co-op is recruiting enough directors of the necessary calibre, more co-ops need to implement processes around recruitment and remuneration.
Finally, the report recommended that many co-ops need to establish a strategy to increase gender diversity on their boards, with only 13% of respondents having women on boards.
'Drive forward'
Jim Booth, SAOS’ Head of Co-op Development, commented: “Whether through performance reviews, board development, or ensuring there are appropriate levels of diversity and the right mix of skills, there is a clear need for more co-operatives to put systematic processes in place to ensure boards are best placed to drive the business forward.”
“The quality and calibre of directors is arguably one of the most important factors in ensuring the future success of a co-op.
“Farmer directors don’t expect to make lots of money while serving on their co-op board, but equally they should not subsidise the rest of the membership. The remuneration level for directors needs to be appropriate to attract and retain the right calibre of people.”
Richard Self, Agricultural Manager at Co-operatives UK, added: “The board is the engine powering your co-operative. It is vital to regularly service your board just as you would your car.
“What the figures in this survey show is that, alongside some best practice, many agricultural co-operatives are not taking the time to time to ‘tune’ their boards.
