Democratic Costs in Member-Controlled Organizations



In this study, we examine the costs of democratic control, an important factor affecting the competitiveness of traditional agricultural cooperatives. Although there has been some theoretical discussion about this issue, no empirical research has been done on these costs; the present study aims to bridge this gap. Following the literature, the main source of democratic costs in agricultural cooperatives is the level of member participation in cooperative governance. We have developed more specific theoretical insights about this special kind of decision-making cost by showing the effect of differences in the level of member participation on democratic costs, differences in terms of democratic and influence costs and in terms of agency costs, and differences between both direct and opportunity democratic costs. Members should take both the relative direct and opportunity costs within total democratic costs into account when determining the optimal size and composition of their board. [EconLit citations: Q130, D790, D230].