The Pathologies of Governance: Abuse of Power and the Erosion of Member Rights
When governance deteriorates, members' rights are systematically eroded. The most common dysfunctions include:
Concentration of Power and Lack of Renewal
We are witnessing the formation of "inner circles" where Boards of Directors self-perpetuate by co-opting loyal figures, hindering generational renewal and diversity of viewpoints. This leads to a disconnect between the interests of the management and those of the membership base.Managerial Opacity and Obstacles to Oversight
Strategic decisions are made in informal settings, outside the Board and the general meeting. Balance sheets are presented in a non-transparent manner, and access to corporate records, a fundamental member's right, is hampered by bureaucratic pretexts.Obstruction and Pressure on Individual Members
When a member legitimately attempts to exercise their right of oversight, even on seemingly minor issues, they often hit a wall. Boards of Directors can create a smokescreen, hiding behind legal opinions, avoiding clear and prompt answers, or putting up bureaucratic obstacles to discourage the initiative. These obstructionist tactics, which can escalate into real psychological pressure, aim to isolate the critical member and wear down their determination, turning the exercise of a right into an obstacle course.Abuse of Majority and Conflicts of Interest
General meeting resolutions can be used instrumentally by a majority group to harm the minority, pursuing partisan interests rather than the collective interest of the cooperative. Similarly, directors may find themselves in a conflict of interest, favoring themselves or third parties to the detriment of the cooperative and its members.Instrumental Exclusion of a Member
The mechanism of exclusion, intended to sanction serious breaches by a member, sometimes misused as a weapon to eliminate critical voices and dissenting members, thereby consolidating the power of the ruling group.
These behaviors you are enduring are not inevitable. The law recognizes them as evidence of mismanagement, paving the way for legal action to protect your rights, obtain compensation for the economic losses caused by their management, and impose severe measures that can go as far as replacing the entire board of directors.
Scandals, Litigation, and Legal Identity Crisis
Governance dysfunctions can lead to major financial scandals and an increase in litigation. The phenomenon of "sham cooperatives" represents one of the most serious deviations. These are entities that use the cooperative legal form as a mere front to gain tax advantages and a less strict regulatory regime, but in reality operate as for-profit corporations. These structures, often characterized by authoritarian management and purely token member participation, engage in unfair competition, tax and social contribution evasion, and the exploitation of worker-members.
Investigations by the Italian Guardia di Finanza (Financial Police) and the Ministry of Labour have repeatedly uncovered fraudulent schemes, particularly in sectors such as logistics and services, where sham cooperatives are set up and quickly liquidated to evade legal obligations, leaving behind economic and social damage.
Cases of mismanagement, embezzlement, and fraud, although not the norm, periodically emerge in various countries, damaging the reputation of the entire movement. For the individual member, resorting to the courts to assert their rights—for example, through a liability action against the directors—is often a long, costly, and uncertain process.
To further complicate the picture, a recent and fundamental decision by the Court of Justice of the European Union (CJEU) has been added. Asked to rule on compatibility with the EU's public procurement directive, the Court ruled that a cooperative that distributes "patronage refunds" to its members cannot be classified as a "non-profit organization." Although the decision concerns a specific field, its implications are profound. It introduces a kind of "legal identity crisis" for the cooperative model.
This ruling risks providing a powerful ideological justification for Boards of Directors that already lean towards purely managerial, profit-oriented management. They could argue that if even European law equates the distribution of patronage refunds with the distribution of profits, then the cooperative must be managed as a for-profit enterprise to be competitive in the market. Such reasoning weakens the position of members who appeal to the principles of mutuality and solidarity, which risk being relegated to the status of "relics of the past" in the face of a supposed and inevitable managerial modernity. This legal ambiguity thus becomes an additional risk factor, potentially legitimizing the erosion of the mutualistic purpose in favor of a purely capitalist logic.
Risk Indicators and "Red Flags" in Cooperative Governance
| Risk Area | "Red Flag" (Warning Sign) | Member's Right at Risk |
|---|---|---|
| Financial Transparency | Complex, unclear, or last-minute balance sheets; high, unjustified Board fees; opaque criteria for calculating patronage refunds. | Right to economic participation (Principle 3); Right to information (Principle 5). |
| Decision-Making Process | Strategic decisions (investments, mergers) made without adequate discussion in the general meeting; excessive use of proxies in meetings. | Right to democratic control (Principle 2). |
| Access to Information | Formal or informal obstacles to exercising the right to inspect the cooperative's records; evasive answers to members' requests for clarification. | Right of inspection and oversight; Right to information (Principle 5). |
| Board Composition | Lack of director turnover across multiple terms; absence of diverse skills on the Board; presence of conflicts of interest. | Right to be elected; Principle of autonomy and independence (Principle 4). |
| Relations with Members | A climate of intimidation towards critical members; a high rate of withdrawals or expulsions of dissenting members; little or no training activity for members. | Right to free and voluntary membership (Principle 1); Right to training (Principle 5). |
From Knowledge to Action
Understanding cooperative dynamics is a fundamental first step for any member wishing to protect their rights and the value of their cooperative. But knowledge alone is not enough. It must be translated into action.
Here are five practical principles that every member should adopt as a guide for active and effective participation:
Always keep a copy of everything
Every communication (email, registered letter), every meeting minute, every document you request and receive is a piece of your history within the cooperative. Organized and complete documentation is your first and most powerful form of defense.
Don't let situations fester
If a doubt is legitimate or a response is delayed, act immediately. Do not postpone. Time often works in favor of management, not the isolated member who waits. A problem addressed without delay is a problem more easily solved.
Remember: the cooperative is you, not the Board of Directors.
The Board of Directors is a management body that serves the members, not the owner of the cooperative. You, along with the others, are the heart and capital of the cooperative. This awareness is the foundation of your legitimacy.
Use the principle of equality as a shield
In a cooperative, the principle of "one person, one vote" is sacred. Your voice and your vote count as much as anyone else's, including the President. Do not let anyone make you feel insignificant or in the minority.
Turn mismanagement into an opportunity for redress
Every error, negligence, or abuse by the Board of Directors is not just a harm, but also leverage. The law offers specific tools to challenge these actions. Whether through your lawyer, the OETC, or other entities, taking action is not an act of war, but the most effective means to restore everyone's rights and protect the very future of the cooperative.
