The governance issues in agricultural cooperatives in Thailand | |
| Author | Wit Pratuckchai |
| Call Number | AIT Diss. no.DBA-SOM-14-04 |
| Subject(s) | Agricultural cooperative--Thailand Corporate governance--Thailand |
| Note | A dissertation submitted in partial fulfilment of the requirements for the Degree of Doctor of Business Administration |
| Publisher | Asian Institute of Technology |
| Series Statement | Dissertation; no.DBA-SOM-14-04 |
| Abstract | This research is objectively to investigate the governance issues, created by the traditional cooperative characteristics, based on the property right and agency theory perspective proposed by Borgen (2004) and Nilsson (2001). The problems resulting from the aspects of the governance issues and the consequences caused by the problems are also investigated. The recommendations for alleviating the problems and improving the cooperative governance are investigated and presented. The relationship among the research factors studied is developed to identify the cause and effect of the governance issues and related factors. A multiple case study is a qualitative approach used as a research methodology for this research. Three agricultural cooperatives in Thailand are selected to be the cases to study. These agricultural cooperatives are considered a traditional cooperative model creating governance issues. The data are collected from related documents and research participants. An interview questionnaire and guideline are developed for collecting the data from the research participants. The research participants are including the cooperative managements, regulators, and researchers. The data analyses are to identify the traditional cooperative characteristic aspects which cause the governance issue factors and to develop the relationship between the characteristic aspects and the problems resulting from the governance issues, the consequences deriving from the problems, and the recommendations proposed to alleviate the problems and improve the cooperative governance. The governance issues are defined as the incentive problems based on the property rights and agency theory perspective. The incentive problems are classified into two categories: (1) the investment-related incentive problems – the common property (free rider) problem, the horizon problem, and the portfolio problem; and (2) the decision-related incentive problems – the monitoring (control) problem, the follow-up problem, the influence cost problem, and the decision problem (Borgen, 2004 and Nilsson. 2001). According to Nilsson (2001), these incentive problems are creating the economic inefficiency problems which are defined as: (1) technical inefficiency; (2) allocative inefficiency; and (3) scale inefficiency. This research found various traditional cooperative characteristic aspects which create the governance issues and cause cooperative economic inefficiency problems. These aspects are identified and presented in relation to the governance issues existing in the cooperatives. The agricultural cooperatives are a traditional cooperative model, and a member-owned enterprise in which the members are acting as an owner and a customer. The ownership aspects are found that the assets are collectively owned, common property, and the cooperative is owned by the cooperative society. The equity share and residual rights cannot be traded and transferred to non-members. In terms of control, the agricultural cooperatives are control by the members in which the decisions are made by democratic decision making system on the one member one vote basis. The control right is based on the membership rights regardless the capitals invested in the cooperatives. The economic inefficiency problems resulting from the incentive problems are concluded that the technical inefficiency problems are such as many members of the cooperative lead to many principal-agent problems, and resulting in high costs of the member’s participation and control. The members are inability to concentrate ownership as they are equal rights to access to the cooperative assets and social benefits provided, regardless of the amount of capital contributed, which are creating the members ignorance and free rider problem. The allocative inefficiency problems are such as: the members’ ability to diversify to avoid investment risks is limited. These aspects are indicated as the residual claims are limited to the time horizon of patronage and the equity shares cannot be traded and transferred to other non-members. The scale inefficiency problems resulting from the incentive problems are defined such as many members are creating high costs of control and legal constraints are affecting the business expansion conducting with non-members and the areas of business provided. The governance model of the agricultural cooperatives is suggested to be more flexible regarding the ownership and control system. The capital shares can be able to trade and transfer to others who are qualified to be the member of the cooperative. However, limitation on the amount of share held is suggested remaining on one-fifth of the total shares, protecting the dominance of the majority of the member-owner roles. The decision making principles are proposed based on the combination of voting rights of the members and the amount of capitals contributed. The distribution of benefits is suggested returning to the members in the forms of both dividend and social benefits return based on the member rights. A subsidiary company and new generation cooperative model is recommended for those agricultural cooperatives dealing with complicated processing and manufacturing products, high technology, competitive markets, and conducting business with non-members. An effective model of new generation cooperative is needed to be further studied and developed an appropriate form suitable for the capacity and resources of the members, farmers, and the agricultural cooperatives. The future research is recommended to further study such as the influences of the governance issues to the cooperative performances, a comparison on the effectiveness of the traditional cooperative model, new generation cooperative model, and the investor-owned model, the effective model of new generation cooperative, and the governance issues in relation to the management control system and organizational strategy effectiveness of traditional cooperative. |
| Year | 2014 |
| Corresponding Series Added Entry | Asian Institute of Technology.Dissertation;no.DBA-SOM-14-04 |
| Type | Dissertation |
| School | School of Management |
| Department | Other Field of Studies (No Department) |
| Academic Program/FoS | Doctor of Philosophy in Business Administration (Publication code = DBA-SM, SM) |
| Chairperson(s) | Winai Wongsurawat (Co-Chairperson);Islam, Nazrul (Co-Chairperson); |
| Examination Committee(s) | Soparth Pongquan; |
| Degree | Thesis (Ph.D.) - Asian Institute of Technology, 2014 |