Cooperative Governance and the Legitimacy Dilemma: A Case Study in a Credit Cooperative

Abstract

Objective: Our goal was to analyze whether governance practices implemented by credit cooperatives, according to the guidelines of the Central Bank of Brazil (BACEN), contribute to an increase in participation by cooperative members and an increase in the legitimacy of decisions.

Method: This research was developed around a case study. Data collection was conducted through interviews, non-participant observations, and documentary analysis in a credit cooperative of free admission.

Originality / Relevance: We detected the need to advance the academic literature on governance issues. There is currently a lack of research that analyzes the institutional mechanisms of cooperatives that reinforce their legitimacy, such as the participation of the cooperative in decision-making processes.

Results: The social programs implemented aim to increase the representativeness of the members in the cooperative. The new assembly process promoted a significant change in the participation of the members, resulting in an increase in the number of voters in the assemblies. This strengthened their involvement and increased the legitimacy of the cooperative vis-à-vis regulatory institution.

Theoretical contributions: The theoretical contribution of this study is related to the advancement of issues of cooperative governance. We noticed that the demand for increased participation of members is linked to the search for legitimacy, both in relation to the market, and to the members and the BACEN.  Furthermore, the latter induces normative isomorphism through good governance practices.

Management contributions: The main managerial contribution of this study is to provide credit cooperatives with awareness of the fact that governance directly influences the participation of members, which, in turn, affects the legitimacy of the institutional and social environments.