Principles of Cooperatives

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The Rochdale Principles are a set of ideals for the operation of cooperatives. They were first set out by the Rochdale Society of Equitable Pioneers in Rochdale, United Kingdom, in 1844, and have formed the basis for the principles on which co-operatives around the world operate to this day. The implications of the Rochdale Principles are a focus of study in co-operative economics. The original Rochdale Principles were officially adopted by the International Co-operative Alliance (ICA) in 1937 as the Rochdale Principles of Co-operation.

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Updated versions of the principles were adopted by the ICA in 1966 as the Co-operative Principles and in 1995 as part of the Statement on the Co-operative Identity.

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Voluntary and open membership

The first of the Rochdale Principles states that co-operative societies must have an open and voluntary membership. According to the ICA's Statement on the Co-operative Identity, "Co-operatives are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination."

Democratic member control

The second of the Rochdale Principles states that co-operative societies must have democratic member control.

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According to the ICA's Statement on the Co-operative Identity, “Co-operatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary co-operatives members have equal voting rights (one member, one vote) and co-operatives at other levels are also organised in a democratic manner.”

Member economic participation

Member economic participation is one of the defining features of co-operative societies, and constitutes the third Rochdale Principle in the ICA's Statement on the Co-operative Identity. According to the ICA, co-operatives are enterprises in which “Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.” This principle, in turn, can be broken down into a number of constituent parts.

Democratic control

The first part of this principle states that “Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative.” This enshrines democratic control over the co-operative, and how its capital is used.

Autonomy and Independence

Cooperatives are autonomous, self-help organizations controlled by their members. If the co-op enters into agreements with other organizations or raises capital from external sources, it is done so based on terms that ensure democratic control by the members and maintains the cooperative’s autonomy.

Education, Training and Information

Cooperatives provide education and training for members, elected representatives, managers and employees so they can contribute effectively to the development of their cooperative. Members also inform the general public about the nature and benefits of cooperatives.

Cooperation among Cooperatives

Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.

Concern for Community

While focusing on member needs, cooperatives work for the sustainable development of communities through policies and programs accepted by the members. Original version (adopted 1937)

1.Open membership.
2.Democratic control (one person, one vote).
3.Distribution of surplus in proportion to trade.
4.Payment of limited interest on capital.
5.Political and religious neutrality.
6.Cash trading (no credit extended).
7.Promotion of education.

ICA revision (1966)

1.Open, voluntary membership.
2.Democratic governance.
3.Limited return on equity.
4.Surplus belongs to members.
5.Education of members and public in cooperative principles.
6.Cooperation between cooperatives.
7.Concern for community

How and Why Cooperatives Fail?

poor selection of directors, especially those who fail to support their cooperative
members who join but never use their cooperative and bypass it for a small gain elsewhere
members who use cooperatives but fail to take responsibility – each member must be ready to accept responsibility when asked, or as the need arises, and every member should have an equal opportunity to be chairperson of the cooperative
members who never ask questions and who let a few persons make policy
members who don’t attend annual meetings and directors who fail to attend board meetings
lack of consistent membership education about the problems cooperatives face and the challenges they must meet
not supporting the cooperative with enough money (risk capital) to get the job done
low-cost management – it’s the most expensive item for a cooperative, while high-priced management is usually the least expensive item
not closely watching the formation of cliques and special interest groups within the cooperative
concealing facts about a cooperative; all facts, both good and bad, should be placed on and not under the table
errors in financial policy, such as over-extension of credit, too little capital, poor accounting records, lack of a financially sound, systematic programme for reimbursement of equity
errors in educational and social work – this begins by failing to teach cooperative ideals to members unfamiliar with how cooperatives function, neglecting general educational programs, failure to develop member loyalty or countering the development of factions within the co-op
management errors, such as inadequate inventory, poor location, improper equipment, neglected appearance of physical facilities, employee dishonesty, ineffective management, incompetent directors, nepotism, poorly conducted meetings, admittance of disloyal and dissatisfied members.

Why did early Cooperatives fail in the Philippines?

Reason #1. Lack of Education

The so-called experts in the Philippines are well-versed on western type of cooperatives but know little of the homegrown types. They tried to implant this idea to Philippine soil but the rural people are so illiterate to understand modern ideas because they have their own homegrown coops. However, as years pass by, many colleges and universities offered cooperative management but they failed to introduce cooperativism the Philippine style. With the emergence of some coop advocates, cooperative development are being taught but to only few specialized schools.

Reason #2. Lack of Management Expertise

The only way a person could learn how to run a coop is to do so using a trial and error approach. Belina pointed out that at the moment he masters all of the skills needed to run a coop, he will get offer from giant companies which are willing to pay three or four times his pay.

Reason #3. Most Coops Don’t Really Serve Their Members

The most important measures of success of any cooperative is the service it gives to its members. Evidence shows that coops that serve their members well grow to become highly viable.

Reason #4. Government Meddling

Overnight experts from the government sector have gone on organizing without taking into consideration that coops are voluntary associations. Government meddling is not only confined to organizing. Bilena stressed that government official’s limited the activities of privately initiated coops hovering above the economic enterprise of the coop leaving big business alone. But those who have tried to hurdle the barriers swear that coops do work.

References

http://businessdiary.com.ph/234/why-cooperatives-fail/#ixzz2LZBuH2Js http://www.nz.coop/how-cooperatives-fail/
http://pinoycoops.blogspot.com/2011/01/cooperative-principles-and-practices.html
http://jlp-law.com/blog/cooperatives-in-the-philippines-an-introduction/ http://www.willystreet.coop/seven-cooperative-principles
http://usa2012.coop/about-co-ops/7-cooperative-principles
http://www.nreca.coop/MEMBERS/SEVENCOOPPRINCIPLES/Pages/default.aspx