COST 110: Fundamentals of Cooperatives PDF

COST 110: Fundamentals of Cooperatives MODULE 4. Lecture 8 Overview: In this session, we will discuss the six (6) cooperative values and seven (7) cooperative principles which act as the driving force and unique identity of cooperatives. Learning Outcomes: At the end of this session, students mus...

COST 110: Fundamentals of Cooperatives MODULE 4. Lecture 8 Overview: In this session, we will discuss the six (6) cooperative values and seven (7) cooperative principles which act as the driving force and unique identity of cooperatives. Learning Outcomes: At the end of this session, students must be able to: 1. differentiate values from principle; 2. contrast the cooperative values and principles; and 3. compare the 3 different user-principles of cooperatives. Topic: COOPERATIVE VALUES & PRINCIPLES1 What is the difference between values & principles? Value ü person's personal belief for or against something; ü It is neither inherently right nor inherently wrong. Principle ü acceptance of something as truth; ü belief that a certain standard or rule is not up for debate. What is the cornerstone of Cooperative Principles? Values - cornerstone of a cooperative Principles – lifeblood of Coop Movement (ICA) Possession of deeply felt values and ethics – set cooperatives apart from other types of business enterprises. Values & principles make Coops Truly Unique Traditionally, the cooperative movement has deep ties on world’s religions and ideologies. Conscious and continuous exploration of own belief system that shape the structures & attitude and provide the distinct perspective of Coop - ICA 1 This material is the consolidated work of Assistant Professors Liezel S. Cruz, Jan Danica S. Asma and Karen Q. Custodio of the Institute of Cooperatives and Bio-Enterprise Development and is prepared for educational purposes only. Use of this material must be limited for personal use of students of COST 110. No part of this material may be reproduced, distributed, exhibited in any form or manner, quoted or cited without the consent of the authors. Institute of Cooperatives and Bio-Enterprise Development College of Economics and Management COST 110. Fundamentals of Cooperatives 2 What are the Cooperative Values? 1. Self Help 2. Self-Responsibility 3. Democracy 4. Equality 5. Equity 6. Solidarity What is the Value of SELF HELP? Helping others to help themselves. A belief that all people can and should strive to control their own destiny. Full individual development can effectively take place in association with others through joint action and mutual responsibility. What is the Value of SELF-RESPONSIBILITY? Taking responsibility for their own actions. Members assume responsibility for the establishment and continuing vitality of the enterprise. Being responsible of their own duties and responsibilities as the owner, controller, and financier of their own cooperative. What is the Value of DEMOCRACY? right to participate right to be informed, right to be heard, right to choose leaders, right to make decisions. Members have a say in the way the cooperative is run. What is the Value of EQUALITY? Giving members equal rights; One member = one vote. Membership does not discriminate age, gender, social status, religious affiliations, race and national origin. What is the Value of EQUITY? Equality is treating everyone the same; fair; unbiased; Equity is giving everyone what they need. Equity appears unfair, but it actively moves everyone closer to success by “leveling the playing field.” Equitable distribution of dividends through patronage. What is the Value of SOLIDARITY? Unity / Oneness Collective strength and mutual responsibility. Sharing common interests and purposes with the members and other co-operatives. What are the common ETHICAL VALUES in cooperatives? Openness – nobody’s perfect, and we won’t hide it when we’re not. Free to share information. Honesty – we are honest about what we do and the way we do it. No to cheating. Social responsibility – we encourage people to take responsibility for their own community, and work together to improve it. Giving back to the community. Caring for others – we fund charities from the profits. Helping the community. Institute of Cooperatives and Bio-Enterprise Development College of Economics and Management COST 110. Fundamentals of Cooperatives 3 What are Cooperative Principles? Cooperative Principles – basic foundation of cooperatives These make cooperatives UNIQUE from other businesses. Adherence defines a real cooperative. Categories of Cooperatives based on Degree of Adherence to Cooperative Principles 1. Genuine Cooperative - adheres fully to coop principles 2. Para or Pre-Cooperative - partially adheres to the principles and usually performs NO business activities 3. Quasi Cooperative - partially adheres to the principles 4. Pseudo-Cooperative - does not adhere at all to coop principles but takes advantage of the benefits/privileges granted to coops. The Evolution of Cooperative Principles 1844 – Rochdale Principles: 9 1937 – Cooperative Principles: 7 1966 – Cooperative Principles: 6 1995 – Cooperative Identity: 7 Rochdale Principles in 1844 1. That capital should be of their own providing and bear a fixed rate of interest. 2. That only the purest provisions procurable should be supplied to members. 3. That full weight and measure should be given. 4. That market prices should be charged and no credit given nor asked. 5. That profits should be divided pro rata upon the amount of purchases made by each member. 6. That the principle of ‘one member one vote’ should obtain in government and the equality of the sexes in membership. 7. That the management should be in the hands of officers and committee elected periodically. 8. That a definite percentage of profits should be allotted to education. 9. That frequent statements and balance sheets should be presented to members. Cooperative Principles based on ICA reformulation in 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. Cooperative Principles based on ICA reformulation in 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. Cooperative Principles based on ICA reformulation in 1995 1. Open and voluntary membership 2. Democratic member control Institute of Cooperatives and Bio-Enterprise Development College of Economics and Management COST 110. Fundamentals of Cooperatives 4 3. Member economic participation 4. Autonomy and independence 5. Education, training and information 6. Cooperation among cooperatives 7. Concern for the community Putting Values into Action: Principle 1: Voluntary and Open Membership Voluntary – Free to join, free to leave; Open to all who are able to use the services and willing to accept the responsibilities of membership without gender, social, racial, political or religious discrimination. Principle 2: Democratic member control Coop is a member-controlled democratic organization ü In coop, there is an active member participation in setting policies and making decisions. Elected representatives are accountable to the members. One member, One vote. Proxies are not practiced and allowed in coops. Principle 3: Member Economic Participation Equitable contribution and democratic control of the capital & net surplus. Members should raise the fund among themselves. Each member is required to contributed to the cooperative. Part of that capital – become reserves & other priorities. Principle 4: Autonomy and Independence Coop is an autonomous, self-help organization controlled by their members. Do they enter into agreements with other organizations, including governments? Yes, but cooperatives maintain their independence. Principle 5: Education, Training and Information Trainings are conducted to address mismanagement of resources. Members, Board of Directors (BOD), Managers, Staff should be trained to help them perform their functions. Even the general public (young people and opinion leaders) must be informed about the nature and benefits of cooperation. Principle 6: Cooperation among Cooperatives Cooperatives serve their members most efficiently and strengthen the cooperative movement by working together through local, national and international structures. The more cooperatives collaborate among each other, the stronger the federation of cooperatives will be. Principle 7: Concern for Community Coops have the special responsibility to ensure the sustainable development of communities. They have the responsibility to work for the environmental protection of their communities. Principles 1, 2 & 3 - Internal working methods of the cooperatives Principles 3,4,5 & 6 - External relationship of the cooperatives Institute of Cooperatives and Bio-Enterprise Development College of Economics and Management COST 110. Fundamentals of Cooperatives 5 What are the 3 user-principles of Cooperative? User-Benefits User-Owner User-Control What is the User-Benefits Principle? Members are able to avail of various services that could otherwise be unavailable in the market. IOFs or traditional firms would not be enticed to open businesses that have no market value. Members get quality supplies at the right time and place; Members gain access to markets; They can take advantage of economies of scale; They can have improved bargaining power; They have higher and stable earnings. What is the User-Owner Principle? Members own the coop. As owners, members have the obligation to provide financing/funding. In return they receive a patronage refund which increases depending on usage. Aiming to have an adequate equity build-up is a major challenge facing many cooperatives in the past and now. What is the User-Control Principle? Control is exercised by voting and through holding positions in the cooperative. Equitable voting is assured; thus, no proxy of votes is permitted. Member-users select leaders and have the power to choose the direction of the enterprise. Focus on serving the members is preserved. Reference Materials: ICA. 2016. The Guidance Notes on the Cooperative Principles. Retrieved from: https://www.ica.coop/sites/default/files/publication-files/ica-guidance-notes-en-310629900.pdf Wadsworth, J.J. & E.E. Eversull (Eds.) (2012). Co-ops 101: An Introduction to Cooperatives. USDA Rural Development Cooperative Information Report 55. Chapter 2, pp 8 – 11. Washington DC: USDA. Retrieved from: http://calagteachers.org/CCode/2018- 2019/CooperativeMarketingReport55.pdf Videos: Cruz, L.S. 2020, Mar. 15. COST 110 Coop Values [Video]. YouTube: https://www.youtube.com/watch?v=Ap4Wg-H0-Yg&feature=youtu.be. Cruz, L.S. 2020, Mar. 15. COST 110 Coop Principles [Video]. YouTube: https://www.youtube.com/watch?v=acSMTzXrEt8&feature=youtu.be. Institute of Cooperatives and Bio-Enterprise Development College of Economics and Management