Diamond Walnut Growers - A Larger Role for Academics with Finance Expertise

Professor Shermain Hardesty has the best interests of co-op members in mind when she writes that the principal-agent problem is an issue that needs to be addressed in co-op conversions. Professor Hardesty is really saying that co-op members may not be knowledgeable enough to assess whether their co-op should convert to a corporation. Professor Hardesty says that . . . [c]lose working relationships with university academics knowledgeable about cooperatives, marketing, and finance, would be beneficial to fostering such innovations.  http://www.agecon.ucdavis.edu/people/faculty/facultydocs/hardesty/the-conversion-of-diamond-walnut-growers.pdf

Professor Hardesty is carving out a role for her and others like her in the next conversion. Fair enough. We can never have too much good analysis for co-op conversions. To halt the next conversion, however, I hope that Professor Hardesty brings along some of her finance guru colleagues from the business school. The issue for Professor Hardesty will not be just to stop the next conversion.

The issue for Hardesty and other ag economics professors is not just to defend the co-op business model in its purest form. Rather, the role that Professor Hardesty must embrace is simultaneously to defend the co-op business model in its purest form IF IT IS DEFENSIBLE, but also to facilitate further evolution of the co-op business model to enable the creation of appreciating equity interests for co-ops.

For the latter task, we need finance gurus from business schools to assist co-ops and their boards of directors to strike a balance for the board and co-op members. Boards must be permitted to discharge their fiduciary obligations to the cooperative and to members. Members must be enabled to enjoy their co-op's success through appreciation of their equity in the co-op, and to sell that interest when they need capital. An appreciating equity interest is one of the bridges between those two opposing interests.