During the 1990s following a number of high profile corporate governance failures of large companies, there was a recognition of the importance of good corporate governance. This led to The Cadbury Commission on Corporate Governance in 1992, followed by The Greenbury Commission in 1995 and the Hampel Report in 1998, all of which had a global impact on improving corporate governance best practice. Democratic member control is protected and enhanced by effective co-operative legislation. Where legislation is not effective it is important that co-operatives have bylaws in place designed to ensure good corporate governance practice. These will include regulations on such matters as conflict of interest rules for elected members and managers, registers of interests, registers of gifts and hospitality given and received, annual board appraisals and board skills audits.

The involvement of elected members in day-to-day business decision-making in co-operatives differentiates co-operatives from other forms of business enterprise. Members of co-operatives have a dual relationship with their co-operative: they are both beneficiaries of the enterprise and also democratically control it. Conflict of interest policy and procedures should not be used to debar elected members from participating in business decisions that affect all members. Elected representatives inevitably have an interest in any decision that affects them and other members. To debar members from participating in such decisions can become an insidious form of demutualisation which leaves key decisions in the hands of unelected executives or unelected appointed or co-opted board members. A member elected as a representative should only be debarred from participating in a decision by conflict of interest rules if their personal interest will lead to the grant of a benefit that is not granted equitably to other members.

A major issue that has been raised in corporate governance codes is the responsibility of boards to consult their members on major business decisions, such as acquisitions, disposals or receipts of transfers of engagements of other co-operatives, which may affect the very nature of a co-operative. Rules and regulations governing such decisions and the requirements for seeking approval or consulting members are best formulated in co-operative statutes or bylaws. If for practical or pragmatic reasons boards are enabled to make such business critical decisions it should be within the framework of a business and risk management strategy approved by members.

The complexity of procedures and governance codes will, of necessity, be determined by the scale and development of each co-operative. A small new co-operative enterprise in an emerging economy will need simpler procedures and less complex governance codes than a larger, more mature co-operative business with thousands or millions of members. A large co-operative business is likely to need a detailed governance handbook. Whether small or large, implementing the basics of good democratic governance codes and best practice will guarantee member sovereignty and members' democratic rights.

Multi-tiered democratic structures have emerged in larger co-operatives that require particular care to ensure that ordinary members retain the democratic opportunity to take strategic policy decisions, elect the board and hold elected representatives to account, even where there are other tiers in the democratic structure through which ordinary members can participate.

Elected members should take care to distinguish the governance responsibility of elected members and officers and the day-to-day business management responsibility of chief executives and senior managers. Elected members ought not to interfere with the day-to- day responsibility of executives to manage a co-operative business efficiently and put member-approved business strategies into effect. Equally chief executives and senior managers ought to respect the rights of members democratically to control their co-operative and take key strategic business decisions. Co-operatives may wish their chief executives and other senior managers to be members of the board, but not in a majority, to ensure that they fully share responsibility for the governance of their co-operative. However, even where senior managers are not full board members they have a duty to advise and guide the board on governance matters and key business decisions.