Impact of the relationship between managers and the board of directors on financial performance of agricultural cooperatives
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Cooperatives are unique type of businesses because of linked and close roles performed by three main groups of stakeholders: members-owners, directors and managers. Cooperatives differ from other corporations because the producers-members-owners and directors who control the cooperative are composed of the same set of people, thus the members of the board are shareholders themselves. This special dynamic creates a unique situation in terms of the relationship between the board which exerts ownership control and the manager who exerts manager control. Success of a cooperative mainly depends on good board - manager relationships. This study focused on evaluation of impact of the relationship between the board of directors and managers on financial performance of agricultural cooperatives. Data were gathered by administering a survey to the general managers and the chairmen of agricultural cooperatives in Texas. The results showed that cohesion between the board and the managers would enhance their productivity and effectiveness by creating higher returns for shareholders, which would further translate into higher financial performance of a cooperative.