The challenges of co-ops’ internal governance. Case studies of innovative process in South of France

Context and problem statement: The agricultural cooperative pact is singular and is based on a double commitment of the members: economic, in terms of activity, and financial, in terms of capital subscription. This user-owner principle constitutes the central point of the cooperative governance. Facing frequent crisis, globalisation and market volatility, agricultural cooperatives must adapt to new contexts without denying their principles. In this context, different and various types of agricultural co-ops emerged and it is thus impossible to deal with a single cooperative model (Iliopoulos, 2015). Co-ops members as well as staff or employees became more and more vertical organisation averse. Aspiring to a more collaborative economy, they look forward flat hierarchies, involvement and horizontal way of management and governance. These internal stakeholders search for a social and participative approach of cooperative governance in order to give greater meanings to their action. These innovative ways of governance imply significant changes and represent important challenges for Co-ops' internal governance. Objective: We had the main research objective to carry out an exploratory analysis to identify the process dynamics of innovative governance in agricultural Co-ops, leading to key lessons in new ways of governance. One of our key question is to know if Co-op governance is deeply rooted in its values, history and complex bylaws or if it can be innovative, in response to members' requirements. Theoretical Framework: Stakeholders theory (Freeman, 1984), including partnership inside Co-ops governance, seems to be very interesting and fits with cooperative reality. Internal stakeholders appear as essential and having active relationships at firm level: shareholders (members), employees, customers and suppliers. More distant and external stakeholders have also an indirect influence on the firm. In this context, firm is managed from all its stakeholders' vision, leading to corporate social responsibilities, far beyond single profit objective. Financial researches increasingly include this theory in their models due to society and firm's management evolution (Freeman et al., 2010). However, this conceptual framework was particularly developed by Charreaux and Desbrières (1998) who pointed out that value creation model must be enlarged to partnership value creation. This approach is based on managerial and human capital, giving a more systemic dimension to value creation towards all stakeholders (employees, customers and suppliers). As far as Co-ops are concerned, Koulitchizky (1999) analysed and rebuild the "Desroche Quadrangle" (1976), that stressed tensions between Managers, Directors, Members and Employees showing the crucial importance of connivances networks all around the cooperative firm. Filippi (2013) underlined the importance of cooperative members shareholders who support the collective project and make it grow. She stressed that quality level of farmers' governance is at the origin of agricultural Co-ops performance and value sharing between cooperative-firm and farmer's firms. These partnership practices are really innovative and are often based on the concept of responsible innovation (Von Shomberg, 2013), paving the way for sustainable cooperative governance. Joffre and Simon (2011) pointed out this phenomenon and dealt with Co-ops governance and social responsibility. The innovative process of governance changes is very related to stakeholders' implication and particularly members. Alkrich et al. (1988) stressed the rotating concept of innovation in which actors are essential and tend to modify the initial project by successive ways with erratic variations. Methodology: Rooted in a specific conceptual framework, our survey is designed as a strict research work, based on action-research and participant observation. Our exploratory analysis of three different Co-ops in South of France is based on case-study methodology and so qualitative approach. This methodology follows Yin's research (2013). We made semi-structured interviews with executive management, managers, chairmen and directors of those Co-ops. We also collected internal data as well as external information. All these qualitative data led us to describe and understand innovative process linked to changes in governance practices. Key findings: We found that challenges in internal governance are very linked to significant and strategic changes due to restructuration, mergers or linked to important tensions between members and leaders/managers (opposition, misunderstanding, lack of democracy). Thanks to our study we can underline that process are non-linear and come from numerous interactions between internal stakeholders, frequently members. Little or great agricultural Co- ops can be concerned and can have same preoccupations. But in view of Co-op size, solutions will be different from one cooperative to another. Finally, we must point out that territorial animation and governance are essential for agricultural Co-ops. They are source of innovations, strong evolutions and cohesion inside Co-ops. Conclusions: Our research allows us to better know the complexity of agricultural Co-ops' governance and particularly to show the crucial importance of process. It also points out the great role of the unformal aspects of internal governance. In fact, agricultural Co-ops can be seen as a mixed of horizontal and vertical way of governance, with more and more decentralised decision-making process. Partnership governance is a reality in this type of organization and lead to managerial innovations, particularly in relation to Co-ops members. Contribution to the academic debate/to solving a practical problem: Our paper clearly shows that managerial innovations also exist in Co-ops and can lead to more horizontal governance. Stakeholders' theory is thus well suited for agricultural Co-ops where collective decisions are very complex. Moreover, this research work demonstrates that one of the great challenges of agricultural Co- ops is to strengthen the link between members (farm level) and their Co-op (firm level) in order to reach a balanced governance , source of value creation.