Who Governs Producer Controlled Research Organizations in the Agricultural sector, and Why?

Producer controlled research organizations (PCR)s) are charged with the task of investing hundreds of millions of dollars into research and development and promotion projects. In a series of interviews with the managers and directors of some of the key PCROs in Australia, the US, and Canada we observed that PCROs do not tend to separate management and oversight tasks. The producers elected directors of these organizations are involved in management decisions. This observed practice is in contrast with most of the theories and empirical studies focusing on the governance structure of non-profit (NP) and for-profit (FP) organizations (Brown & Guo, 2010; Fama & Jensen, 1983; LeRoux & Langer, 2016 ). Based on information gained from the interviews, observable characteristics of PCROs explained in the literature, and agency theory this paper develops a theoretical model to describe the unusual task assignment in the PCROs. The theoretical model suggests that because of the long investment horizons in the PCROs, the compensation of management teams based on their contributions to return on investments is not feasible. Therefore, the PCROs have to reward their executives on the basis of a measure of efforts exerted. Hence, the directors involvement reduces the volatility of managers compensation. Acknowledgement : we would like to thank Bill Kerr, Eric Micheels, Joel Bruneau, Murray Fulton and Brian Olsen for their comments and thoughts. We would also like to thank Saskatchewan Pulse Growers and Saskatchewan wheat development commission for their financial support.