A Senior Thesis submitted for the partial fulfillment of requirements for completion of LL.M in Commercial and Investment Law

Abstract

This case study is devoted to assessing and identifying the challenges and constraints of effective corporate governance of cooperative societies in Jimma zone. In order to achieve the objective of the study qualitative research method is used. Focus group discussion (FGD) was done to solicit information on the challenges and constraints of effective corporate governance of the societies. Experts of cooperative promotion agencies (CPAs) of four districts of Jimma zone (Gomma, Gumay, Omo-Nadda and Manna) and Jimma zone CPA who serve as cooperative inspectors, auditors, legal officers and organizers were participated in the FGD by using purposive sampling method. The enforcement of internal and external governance system of the societies has been evaluated by the FGD in light of the law. The strictness of the cooperative proclamation in protecting the interest of members by providing governance and regulatory strategies to minimize agency problem has also been assessed. Additionally court cases have been collected from the above districts and Jimma zone high court and have been analyzed in comparison with the information obtained at the FGD. The study revealed that the corporate governance of cooperative societies in Jimma zone is very weak. The internal and external governance system is not strictly enforced due to poor participation of members in decision making and controlling their societies, as they do not have adequate awareness, knowledge and skill. The cooperative inspection and audit made by CPAs is also very weak, shallow and less frequent. The cooperative proclamation has also not provided strong regulatory strategies to protect the interest of members by addressing agency problem that is happening by management committee (MC) members. These are identified as the main causes of corruption, loss of properties and abuse of power in the societies. Legal actions being taken against these problems are also insufficient. Finally, the study has suggested that the governance system has to be strengt hened by building the capacity of the members to control their societies and that of CPAs to enforce the cooperative laws and regulations. The legal lacuna in the cooperative proclamation regarding agency problem has also been identified.