Indiana State University Newsroom



Business professor cultivates leadership principles for co-op businesses

November 13, 2013

An Indiana State University business professor recently studied the work of a renowned Noble Prize winner to extend her life's work to the kind of businesses he consults across the country.

Sherwood, associate professor of management in Indiana State's Scott College of Business, created guidelines for co-operatively owned businesses, or co-ops. He incorporated the work of Elinor Ostrom, who won the 2009 Nobel Prize in economics, along with various other scholars' work into his analysis of boards of directors' operations for co-ops and investor-owned companies from January to August while he was a visiting scholar at The Vincent and Elinor Ostrom Workshop in Political Theory and Policy Analysis at Indiana University Bloomington. He then was among a team of professionals presenting their findings on cooperative governance at the International Co-operative Governance Symposium at St. Mary's University in Nova Scotia.

"Having never really dove deeply into an area that‘s research in a completely different field, I learned an incredible amount about my field of business, and that was really cool," Sherwood said. "By mixing with political scientists, I learned a lot about these democratically controlled businesses."

Sherwood found that successful co-ops need to advocate for democratic ideals and principles, hold people accountable, properly develop the basic principles of teaming and show strategic leadership for the organization.

"The model not only turned out to be useful for directors," Sherwood said. "It's going to end up being useful for all those involved in these organizations."

People running co-ops need to make sure that they do not make business decisions that violate their principles, he said. They also need to ensure that they take into account all of their customers, rather than simply a majority of their most ardent supporters. Likewise, they need to ensure that when people are empowered to make business decisions, there is a solid system of accountability

"What were some of the areas that they have to pay attention to is to ensure that they have a healthy, democratically-controlled business," Sherwood said.

At the conference in Canada, Sherwood and several other researchers presented their research, including his guidelines that business owners attending the conference could implement in daily practice.

"We translated it into something that was consumable by practitioners," he said. "One of the things I've worked hard to do with a lot of my work is take these findings ... and translate them into principles and guidelines that boards and people can use to improve their operations."

Co-ops have a much different business model than traditional investor-owned businesses. Shareholders of a co-op buy a stake in the company, then receive money back based on the amount of money they spend at the business, Sherwood said, while stockholders of an investor-owned company receive funding based on the number of shares of stock they own.

More than one billion people worldwide own a stake in co-operatively owned businesses, Sherwood said. More than 29,000 co-ops exist in the U.S.

"The idea of research came up because one of the problems is, unlike conventional businesses that have really supportive business schools and places where study of traditionally-owned business is done, co-operatively owned businesses have not done this as extensively," Sherwood said. "Hopefully, as more people understand the importance of co-operatively owned businesses, this will become more of a priority."

Photo: http://isuphoto.smugmug.com/Events/Events-by-Year/2012/Ethics-Conferance/i-NKXrGDP/0/L/03_36_12_ethics%20conference-1637-L.jpg Art Sherwood, associate professor of management at Indiana State University, speaks during the annual ethics and social responsibility conference at Indiana State in 2012. Sherwood earlier this year was a visiting scholar at The Vincent and Elinor Ostrom Workshop in Political Theory and Policy Analysis at Indiana University Bloomington. He then was among a team of professionals presenting their findings on cooperative governance at the International Co-operative Governance Symposium at St. Mary's University in Nova Scotia.

Contact: Art Sherwood, associate professor of management, Scott College of Business, Indiana State University, 812-237-2094 or art.sherwood@indstate.edu

Writer: Austin Arceo, assistant director of media relations, Office of Communications and Marketing, Indiana State University, 812-237-3790 or austin.arceo-negrich@indstate.edu

Story Highlights

Art Sherwood served earlier this year as a visiting scholar at The Vincent and Elinor Ostrom Workshop in Political Theory and Policy Analysis at Indiana University before sharing some of his research at a conference in Canada.

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