INSTRUCTIONAL MATERIALS

FOR

COOP 20013

PRINCIPLES AND PHILOSOPHIES OF COOPERATIVISM

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 MODULE 1

BIRTH OF COOPERATION, EARLY FORMATION AND GROWTH

Lesson 1. THE HISTORY OF COOPERATIVE

The Birth of a movement

The Rochdale Society of Equitable Pioneers is regarded as the prototype of the modern
cooperative society and is regarded as the founder of the cooperative movement as we know it
today. In 1844, a group of 28 artisans working in the cotton mills in the industrial town of Rochdale,
near Manchester, United Kingdom, founded the first modern cooperative enterprise.
The workers faced deplorable working conditions and low wages, could not afford the high
food prices and generally the high cost of living. In an effort to mitigate these conditions, they
decided to pool together their scarce resources in order to start a small grocery store in Toad Lane
that would afford them basic foods at lower prices.
The Pioneers decided that it was time shoppers were treated with honesty, openness and
respect, that they should be able to share in the profits that their custom contributed to and that
they should have a democratic right to have a say in the business. Every customer of the shop
became a member and so had a true stake in the business. It is important to note the Pioneers
started with an agreed set of values that guide their actions and later developed the appropriate
(cooperative) structure that embodied these values.

Evolution of the international cooperative principles

Worker cooperatives began in France about the same time and in the 1860’s credit
cooperatives were formed in Germany. Cooperatives were also organized in other countries and
by 1895 this movement had spread so widely that in that year a global apex organization of the
cooperative movement – the International Co-operative Alliance (ICA) was formed

Cooperatives in the modern marketplace

Cooperatives have unique advantages based on the special relationships they have with
their members as well as with the community they live in. They have the power to consolidate
demand and purchase supplies at cheaper prices than their competitors

The cooperative form of enterprise operates across many sectors of the economy
empowering members and building more sustainable and resilient communities.

Milestone in the History of Cooperatives

1761
The earliest cooperative for which there are full records traced to Fenwick, Scotland when
sixteen weavers and apprentice weavers came together to form the Fenwick Weaver Society to
set purchase prices for yarns, selling prices for cloth and to deal fairly and honestly in their work.
They also set up a fund that they lent back to members to purchase high-cost items, and from
which they gave charitable donations to the poor in the village. Some have seen this as a proto-
credit union.

1761
The Weavers set up a library in the village, together with the Free- masons and the Friendly
Society to fund the building of a school-house

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1844
The Rochdale Society of Equitable Pioneers is formed

1862
Hermann Schulze-Delitzsch and Friedrich Wilhelm Raiffeissen establish the first credit
cooperatives in Germany

1966
The 50th session of the ILC adopts Recommendation No. 127 concerning the Role of
Cooperatives in the Economic and Social Development of Developing Countries (later replaced
with Recommendation No. 193 in 2002).

1966
The final discussion of the report Promotion of Cooperatives is held at the 90 th Session of
the ILC. The 90th session of the ICL adopts the Recommendation (No.193) 1 concerning the
promotion of cooperatives. The new Recommendation replaces the Cooperatives (Developing
Countries) Recommendation (No. 127), 1966

2012
United Nations International Year of Cooperatives with the slogan “Cooperative Enterprises
Build a Better World”

2014
ILO Coop and the ICA jointly produce a publication on cooperatives and the sustainable
development goals

Filipino Traditional Forms of Cooperation

Man, as Social Being

There would have been no need for special beliefs if man were simply an individual with an
individual purpose; but man is also a member of society and as such, he has social aspect which
requires proper considerations. The social dimensions of man are founded on nature. Man needs
other human being survive, man to cooperate with society in order to live life comfortably and
safely. Against natural and other dangers, he needs protection only society.

The Social Obligation, however, is a general not an individual command. The species of
mankind has the obligation to socialize or to form social units, but the individual as individual is
exempted from this general obligation under normal conditions, however, man needs society and
not as a mere convention. In the Social contract claims that when man enters into a society, he
contracts his freedom because he has to live with other free beings.

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FORMS OF COOPERATION

Primitive Communism Era

In period of society, man is co-equal with other they gathering foods, hunting with others.
They need to cooperate with people to survive, people group together societies, also known as
primitive communist societies, were structured so that economic forces and political forces were
one and the same. Societies generally did not have a state, property, money, nor social classes.
Due to their limited means of production (hunting and gathering) each individual was only able to
produce enough to sustain themselves, thus without any surplus there is nothing to exploit. Forms
of Cooperation: People grouped together for survival

Master and Slave Era

Slave societies, the ancient mode of production, were formed as productive forces
advanced, namely due to agriculture and its ensuing abundance which led to the abandonment of
nomadic society. Slave societies were marked by their use of slavery and minor private property;
production for use was the primary form of production. Slave society is considered by historical
materialists to be the first-class society formed of citizens and slaves. Surplus from agriculture was
distributed to the citizens, which exploited the slaves who worked the fields. Form of
Cooperation: Trade system, Loan societies, Mutual Association

Feudal Era
The feudal mode of production emerged from slave society (e.g., in Europe after the
collapse of the Roman Empire), coinciding with the further advance of productive forces. Feudal
society’s class relations were marked by an entrenched nobility and serfdom. Simple commodity
production existed in the form of artisans and merchants. This merchant class would grow in size
and eventually form the bourgeoisie. Despite this, production was still largely for use.
Form of Cooperation: Artisan guilds, craftsman, traders, merchants, religious group.

Capitalist (Industrial Revolution) Era

The capitalist mode of production materialized when the rising bourgeois class grew large
enough to institute a shift in the productive forces. The bourgeoisie’s primary form of production
was in the form of commodities, i.e., they produced with the purpose of exchanging their products.
As this commodity production grew, the old feudal systems came into conflict with the new
capitalist ones; feudalism was then commodity production became fully generalized.

Industrial revolution there is significant inventions of technological advance in the 1700’s

and 1800’s. The invention of sources of energy and machines made possible
mechanized production. The mechanized process factories were totally different from production
of the feudal era.

The feudal system of industry, in which industrial production was monopolized by closed
guilds, now no longer sufficed for the growing wants of the new markets. The manufacturing
system took its place. The guild-masters were pushed on one side by the manufacturing middle
class; division of labor between the different corporate guilds vanished in the face of division of
labor in each single workshop.

The untold sufferings the people experienced during the industrial revolution led to the
emergence of many social thinkers, social theories and varied forms of collective actions to

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change the prevailing situation, the suffering people searched and actually to proposed
alternatives. Among the proposal were Cooperation (with the big C) and formation cooperative.
Forms of Cooperation: Voluntary association (friendly society, cooperative, trade unions)

LESSON 2
History and Development of cooperatives as Socio-economic System

Key Theorists
Robert Owen, William King. The Rochdale Pioneers, Charles Fourier, Charles Gide, Friedrich
Raiffeisen

Robert Owen (1771-1858)

OWEN first cooperative theorist and credited with inspiring the Rochdale Pioneers, who in
1844 began the cooperative movement at Rochdale, Lancashire. Owen believed in putting his
workers in a good environment with access to education for themselves and their children. These
ideas were put into effect successfully in the cotton mills of New Lanark, Scotland.

Robert Owen (1771-1858) Fathered the cooperative movement. A Welshman who made
his fortune in the cotton trade. Owen had the idea of forming “villages of cooperation “where
workers would drag themselves out of poverty by growing their own food, making their own clothes
and ultimately becoming self-governing. He tried to form such communities in Orbiston in
Scotland.

It was here that the first co-operative store was opened. His efforts bore fruit in the
international cooperative movement, launched at Rochdale, England in 1844.
Owen died on November 17, 1858, in his home town in Newtown.

Dr. William King (1786-1865)

Although Owen inspired the cooperative movement, others- such as – Dr. William King took
his ideas and made them more workable and practical. King believed in starting small, and
realized that the working classes would need to set up cooperatives for themselves, so he saw his
role as one of instruction.

He founded a monthly periodical called The Cooperator, the first edition of which appeared
on May 1, 1828. This gave a mixture of cooperative philosophy and practical advice about running
a shop using cooperative principles.

King advised people not to cut themselves off from society, but rather to form a society
within a society, and to start with a shop because, “We must go to a shop every day to buy food
and necessaries-why then should we not go to our own shop?”

The author of The Co-operative Movement in Great Britain (1891).

Charles Fourier

His cooperative model also mentioned as an important influence. A voluntary organization

of worker and the families. To acquire huge apartment for living quarter, member is his worker in

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the farms and industries of their produce goods they needed. Goods distribution, pharmacy,
saving bank, security and insurance.

USA & CANADA

In the United States cooperatives are generally organized according to state law. They are
often organized as non-capital stock corporations under state-specific cooperatives laws, which
often restrict the use of the words; to such organizations. However, they may also be organized as
business corporations or unincorporated associations, such as Limited Liability Companies (LLCs)
or partnerships; such forms are useful when the members want to allow some members a greater
share of the control, which may not be allowed under the laws of cooperatives

Cooperatives does not generally pay dividends, but return savings or profits, sometimes
known as patronage, to their members. Cooperatives can have special income tax benefits in the
United States; however, because they are an unusual form of organization requiring specialized
knowledge, legal and accounting costs are often very high and many choose to be taxed under
less favorable corporate or partnership tax laws.

Switzerland

Migros, is the largest supermarket chain in Switzerland and keeps the cooperative society
as its form of organization. Nowadays, a large part of the Swiss population are members of the
Migros cooperative – around 2 million of Switzerland’s total population of 7.2 million, thus making
Migros a supermarket chain that is owned by its customers Supermarket Chain. Coop is another
Swiss cooperative which operates the second largest supermarket chain in Switzerland after
Migros. In 2001. Coop merged with 11 cooperative federations which had been its main suppliers
for over 100 years.

As of 2005, Coop operates 1437 shops and employs almost 45,000 people. According to
Bio Suisse, the Swiss organic producers’ association, Coop accounts for half of all the organic
food sold in Switzerland

Italy

Rome, Italy, the view from the Villa Medici shows the many domes and churches in the
ancient city of Rome. This gives totals of 7,200 social cooperatives, with 267,000 members,
223,000 paid employees, 31,000 volunteers and 24,000 disadvantaged people undergoing
integration. Combined turnover is around 5 billion euro. The cooperatives break into three types:
59% type A (social and health services). 33% type B (work integration) and 8% mixed. The
average size is 30 workers.

India

A Market Place in India. A vegetable seller checks the accounts at the Crawford Market in
the Mumbai (Bombay), the capital of the western Indian state of Maharashtra. Rice is the principal
crop grown in India and the country ranks second only to China in terms of world rice production.
Much of the crop is used to feed the domestic population, as rice is the dietary staple for many
Indians. Thrift & credit, oilseed Success Stories in Coop Sector

The most cherished expectation of members from their coops is NOT cash alone but timely
and advantageous marketing of their products, timely supply of credit, quality seeds, farm
chemicals, fertilizers and extension service.

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LESSON 3
History of Cooperative Development of the Philippines

Bayanihan, the Filipino word for cooperation, is as old as our Philippine culture. The
Banaue Rice Terraces is the most symbolic evidence of the cooperative movement in the
Philippines. (Abasolo, Ruiz & Bertol, 1996)

Pre-Spanish Period Subsistence Agriculture Spanish Period Philippine economy

transformation Feudal and Commercialized Economy GREMIOS (local crafts unions and guilds)
were the forerunners of cooperatives during the Spanish period.

1ST STAGE OF COOPERATIVE PHILIPPINES (1895-1941) MOVEMENT

Pre-Formation Period
Spanish-Period –Revolutionary illustrados like Jose Rizal, Emilio Jacinto and Isabelo delos
Reyes recognized cooperatives as instruments for social justice and economic development. —”
The initial germ of cooperativism during the Spanish colonial periods failed to take root due to the
intense revolutionary struggles of the Filipinos against the Spaniards.” (Muñoz & Battulayan, 1989)

Formation Period
The American Colonial Period. Raiffeisen-type of rural agricultural cooperatives implanted. In
1906, the Corporation Law (PA No. 1459) passed legal framework for all private organizations. In
1907, the Sandiko Bill disapproved – first attempt for state assistance to rural cooperatives via
legislation. In 1915, the Rural Credit Cooperative Association Act (PA No. 2508) passed –
appropriation of ₱1 million state assistance for farmers’ credit. In 1916, the first rural credit
cooperative association assisted by the government formed – By 1926, 541 credit cooperatives in
42 provinces.

Self- Administration Self- Help Self Responsibility Raiffeisen Cooperative Model Member’s
Promotion Voluntary Participation (Dr. Hans-Detlef Wulker, Member of the Board of Directors of
the German Cooperative and Raiffeisen Confederation (DGRV)

State-Initiated Cooperatives

In 1927, the Cooperative Law (PA No. 3425) passed – formation of state-initiated farmers’
marketing cooperatives

In 1940, Commonwealth Act No.565 created the National Trading Corporation (NTC). Replaced by
the National Cooperative Administration (NCA) in 1941 Assessment: -- The state-initiated
cooperatives introduced by American and Filipino missionaries and teachers in 1927 “eventually
failed due to corrupt and incompetent management” (Villasin, 1990).

Privately-Initiated Cooperatives

In 1938, the Vigan Credit Union, Inc. founded – a church-based credit union –

In 1938, the Consumers Cooperative League of the Philippines organized – the first cooperative
federation – By 1939, there were 570 credit cooperatives, 150 farmers’ cooperatives and 48
consumers’ cooperatives.

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By 1941, there were already 30 privately-initiated credit unions. Assessment: -- Privately-initiated
cooperatives of Raiffeisen types served as the stable foundation of the Philippines cooperative
movement (Prof. Jorge V. Sibal, UP, Diliman, Quezon City).

2ND STAGE OF COOPERATIVE MOVEMENT IN THE PHILIPPINES (1941-1986)

Japanese Occupation

Cooperatives increased tremendously – severe food shortages in Manila and other urban areas.
Around 5,000 consumers’ and producers’ cooperatives organized constituting 77% increase over
570 rural cooperatives in 1939.

The Rehabilitation Period after WWII

Many laws were passed to assist the organization and reorganization of cooperatives during the
rehabilitation period after WWII.

Resurgence Period of State-Initiated Cooperatives

To counter revolutionary activities- the state became very active in organizing farmers’
cooperatives.

In 1952, the Agricultural Credit Cooperative Financing Administration (ACCFA) established –

Farmers’ Cooperative Marketing Associations (FACOMAs) and Producers Marketing Associations
(PROCOMAs) provided collateral-free loans funded by the United States Agency for International
Development (US AID).

The introduction and Encouragement of Non-agricultural Cooperatives

In 1957, the Philippine Non-Agricultural Credit Act (RA No. 2023) implemented. In 1957, the
Roman Catholic Church called for the organization of credit cooperatives in all parishes

In 1960, the Agricultural Credit Cooperative Institute (ACCI) in the University of the Philippines Los
Baños established. In 1969, the National Electrification Administration (NEA) created- rural
electrification through rural electric cooperatives.

The Martial Law Period Before Martial Law

No cooperation among cooperatives, government disorganized in supervising and coordinating

cooperatives During Martial Law:

In 1972, the Bureau of Cooperative Development (BCOD) created – to rationalize the cooperative
movement of the Cooperative Union of the Philippines (CUP) formed – to centralize coordination
of all education and training programs of all cooperatives

The Martial Law Period Analysis

Cooperatives were politicized. Bureaucracy locked up coop capital. Majority of the cooperatives
were fake. In 1973, PD No. 175 passed to “strengthen the coop movement” through tie-up with the
Marcos Land Reform Program (PD No. 27) compulsory for a tenant farmer to join a cooperative or
Samahang Nayon (SN)

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The haphazard formation of SNs resulted in weak Area Marketing Coop (AMCs) and Coop Rural
Banks (CRBs). Intended government funds re-coursed to rural banks. However, rural banks
owned mostly by the elites- not necessarily pro-cooperatives and pro-land reform. Created a big
crack both in coop development and land reform program.

Successful story- the rural electrification program paved the development of electric cooperatives.
The success of the electric cooperatives is due to the fact that its rational for their organization
was not as politicized as the SNs (Muñoz & Battulayan, 1989)

3RD STAGE OF COOPERATIVE MOVEMENT IN THE PHILIPPINES (1941-1986)

Cooperative Movement as a Political Force

One cause of Marcos regime downfall- the failure of land reform and cooperative programs in
solving the widespread poverty

The 1987 Constitution under the Aquino administration cooperative-friendly and the mistake of the
past in organizing state-initiated cooperatives for political and anti-insurgency purposes avoided.

In 1990, the Constitution provision was operationalized with the enactment of RA. No. 6938, also
known as the Cooperative Code of the Philippines (which was later amended to RA No. 9520
known as the “Philippine Cooperative Code of 2008”), and RA No.6939 (Cooperative Development
Act Authority Act).

The CDA took over the functions of the BCOD and was tasked to coordinate the efforts of other
government branches, subdivisions, instrumentalities and agencies in providing technical
guidance, financial assistance and other services to cooperatives.

The Local Government Code of 1991 (RA No. 7160) gave the cooperatives, NGOs and Pos the
opportunity to actively participate in local governance. The coop movement, together with the
NGOs (Non-Governmental Organizations) and POs (People Organizations) emerged as the
country’s third sector (civil society)’ the government and the private enterprises being the first two.
The coop movement is the “largest socio-economic institution” in the country.

In the first party list elections in the country, five coop and coop-based parties won 6 out of 13
Sectoral representative seats for the marginalized and underrepresented sectors of society.

In the final analysis, the Cooperative Development Authority, in its banner article in its webpage,
states “Considering the experiences of similar societies in other countries, however, the
fundamental cause of failure in a cooperative enterprise is the lack of proper understanding of the
principles and true aims of cooperative associations, and the non-adherence to them in actual
operation of cooperative enterprises.”

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 MODULE 2
Concept, Nature, Principles and Practices of Cooperatives

Overview:

The ICA has made three formal statements of the cooperative principles: in 1937, in 1966,
and in September 1995. Each statement was carefully crafted to adopt and explain principles
which had relevance and value for the contemporary world.

In accordance with the International Co-operative Alliance (ICA), and later adopted by the
International Labor Organization (ILO) under the Promotion of Cooperatives Recommendation,
2001 (193), “a cooperative is an autonomous association of persons united voluntarily to meet
their common economic, social, and cultural needs and aspirations through a jointly-owned and
democratically controlled enterprise”

Lesson Objectives:
At the end of Module 2, the learner will be able to understand and explain:

 What a cooperative is, its principles and values;

 The difference between a cooperative organization and other types of organizations;
 Advantages and Challenges faced by cooperatives
 How cooperatives influence sustainable community and economic development.

Course Materials:

Lesson 1. Definition of Cooperative

Cooperative as “an autonomous association of persons united voluntarily to meet their common
economic, social and cultural needs and aspirations through a jointly-owned and democratically
controlled enterprise.” While intentionally crafted as a minimal statement which could embrace the
vast array of cooperative organizations throughout the world, the statement emphasizes some
important characteristics of cooperative enterprise. These include:

Autonomy: The cooperative is as independent of government and private enterprise as possible.

Association of The definition deliberately does not read “an association of individuals” and
embraces any legal definition of “person,” which includes companies as well as
individuals.
Persons :

Voluntary: Members are free to join and leave at will, within the purposes and resources of the
organization.

Meet needs: The central purpose of the cooperative is to meet member needs, which can be
purely economic or social and cultural.

Joint ownership and democratic control: The members own the cooperative on a mutual
basis. Decisions are made democratically by the members and are not
controlled by capital or by government.

Enterprise: The cooperative is an organized entity that typically functions in the

marketplace and engages in exchange of goods and services.
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 The word cooperative is derived from the word “cooperate” which means to work or act
together or jointly for a common purpose or benefit

Article 3 RA 9520 define cooperative as:

An autonomous and duly registered association of person, with a common bond of interest,
who voluntarily joined together to achieve their social, economic and cultural needs and
aspirations by making equitable contributions to the capital required, patronizing their products and
services, and accepting in accordance with universally accepted cooperative principles.

In this definition, the following points highlight the unique characteristics required for an
enterprise to be classified as a cooperative enterprise:

 Autonomous – Independence and organization base of the enterprise;

 Volunteerism – Open membership;
 Common needs – People come together to fulfil a mutual need;
 Ownership – Members are owners (not merely customers or workers) of the enterprise and
should invest wisely in its growth;
 Democratic control – Each member is given a single vote regardless of
Contribution/wealth;
 Enterprise – A cooperative is not only an association of people, but also a business
enterprise.

Nature and Characteristics of Cooperatives

Cooperatives are both associations of people and business enterprises. They

distinguished from other organization by their Philosophy, Nature, and Character.

1. Cooperatives are Service-oriented:

Cooperatives are organized to serve their members by providing goods and services
at reasonable cost. Members contribute the capital of the cooperatives so that goods
and services can be appropriately provided through its business activities and not to
maximize the profit or dividends their capitals contributions will earn from the
business.

In servicing the members, don’t act as charitable organizations. Members are aware
that the benefits come from their contributions, patronage refund, and mutual efforts
to help one another. The motto is “Cooperatives are not for profits and not for charity
but for service”.
2. Cooperatives are community-oriented:
Cooperatives work for the welfare of their members by integrating themselves into
the life of the community in particular and the nation in general. Cooperatives enhance the
people’s welfare through increased productivity both members and the communities where
they are located. By the very nature of their concerns, cooperatives strengthen the
economic, social, cultural and ecological base of the community where they operate.

3. Cooperatives are people-oriented:

Cooperatives are not merely economic instruments concerned with dividends and
related economic and financial returns. They are the mechanism of change for total human
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 development of man as human being in all the economic, political, cultural and spiritual
aspects. It makes the people with sense both individual and joint responsibility, so they may
rise individually to a full personal life and collectively to a full social life.

4. Cooperatives are owned, managed and patronized by members:

Cooperatives are member-owned, member-controlled and member-used. Ownership is a very
important factor in the success of any cooperatives. It is very important that members have fully
authority to manage and control their cooperatives. If a cooperative starts and operates solely from
borrowed capital, it violates the principle of self-help and loses much of its autonomous character.

5. Cooperatives are Business enterprises:

Cooperatives engage in business with social responsibility. They play a meaningful economic role
in the community life by serving and performing as efficiently and responsibly as the other financial
and business enterprises. Cooperatives have to generate surplus to be able to continually improve
and expand its services. They have to be viable, creative, enterprising, and efficient to continually
grow and serve the needs of their members. Increasing patronage cannot be maintain without
good quality service, management, and performance. The net surplus generated from the
business operations are allocated to the members at the end of each year.

6. Cooperatives develop best through self-help and mutual help:

Cooperatives is inspired by “If you want something done, do it yourself” this philosophy is
responsible for the success of many cooperatives all over the world and it is best alternative for
the poor in any country to unite and help themselves out of their depressed condition. This is not
to say they should not be assisted. But assistance from outside, whether technical or financial,
must not stifle but stimulate initiatives, self-help and self-reliance. The principle of subsidiarity also
applies that before asking or soliciting aid from outside, self-determination and self-capability,
should be considered. They should not interfere in the purely internal affairs of the cooperatives,
taking care that they preserve their autonomous and independent and self-help through mutual-
help characters.

7. Cooperative serve best when they answer the real felt needs of the members:
We do expect the members to participate in the activities and to patronize the
business if the services they do needs and felt are serve. It is important therefore that the
proper approaches and techniques are employed to ensure that the needs of the members
are identified and recognized before any cooperatives is organized. The assistance should
begin from the organization stage and sustain through the developmental stage up to the
point when the cooperative begins to operate on a self-sustaining basis.

8. Cooperatives develop best from bottom to top:

Organizationally, their development should be from the Primary level to the
secondary, tertiary and up to the Apex. Geographically, they should develop from
community to City, Regional, and National, to International. The Primary cooperatives are
the foundation stoned of the whole cooperatives structure, Organizing the Apex before the
base is like building the roof of the house before the foundation. Sooner or later, in such a
case, the roof topples down because the foundation is weak and unable to support its load.

9. Development of cooperatives is enhanced through a multi-sectorial approach:

Having in mind the specific roles of each sector, the government, non-government and the
cooperatives sector, must play a multi-sectoral approach can ensure that all aspect of
development process are considered. This enhances the smooth and continuous development
of the cooperatives. This approach involves the participation of all sectors from planning stage
to the implementation, evaluation and monitoring of all activities. Such approach enhances true

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 people power, enlightened, democratic, and participation in all levels, both organization and
geographical.

Lesson 2: PRINCIPLES OF COOPERATIVES

The Rochdale Principles (ICA, 1966)

1. Membership of a co-operative society should be voluntary and available without artificial

restriction or any social, political, religious or racial discrimination to all persons who can
make use of its services and are willing to accept the responsibilities of membership.

2. Co-operative societies are democratic organizations. Their affairs should be administered

by persons elected or appointed in a manner agreed by the members and accountable to
them. Members of primary societies should enjoy equal rights of voting (one member, one
vote) and participation in decisions affecting their societies. In other than primary societies
the administration should be conducted on a democratic basis in a suitable form.

3. Share capital should only receive a strictly limited rate of interest, if any.

4. Surplus or savings, if any, arising out of the operation of a society belongs to the members
of that society and should be distributed in such manner as would avoid one member
gaining at the expense of others. This may be done by decision of the members as follows:

a. by provision for development of the business of the co-operative;

b. by provision of common services; or
c. by distribution among the members in proportion to their transactions within the
society.

5. All co-operative societies should make provision for the education of their members,
officers, and employees, and the general public, in the principles and techniques of co-
operation, both economic and democratic.

6. All co-operative organizations, in order to best serve the interests of their members and
their communities, should actively co-operate in every practical way with other co-
operatives at local, national, and international levels.

Cooperative values
Traditionally, the cooperative movement has had deep ties to the world’s wide array of
religions and ideologies. It has continuously explored its own belief systems and attempted to
identify those personal ethics and social ideas, if any, that are shared by cooperators and motivate
our future actions. The 1995 Statement articulates the best in our belief system, the ideals of
personal and social conduct to which we aspire. In its background paper on the Statement of
Identity, the ICA explains, “Any discussion of values within cooperatives must inevitably involve
deeply-felt concerns about appropriate ethical behavior. Achieving a consensus on the essential
cooperative values [within a rich array of belief system among ICA members] is a complex but
rewarding task.”

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 Basic cooperative values are general norms that cooperatives, cooperative leaders and
cooperative staff should share, and which should determine their way of thinking and acting. They
are our statement of what we think is the right thing to do. Based on a book written by Sven Ake
Book for the 1992 ICA conference. Cooperative Values in a Changing World, the discussion
assumes every generation recreates and refines its basic values so that they are inspirational to
contemporary society. It is in our statement of values that we engage the hearts, conscience and
loyalty of cooperative members.

The first sentence of the values statement addresses our convictions about how to achieve
a better society and what form that society should take. The values include:

Self-help: People have the will and the capability to improve their destiny peacefully through joint
action which can be more powerful than individual effort, particularly through collective action in
the market.

Democracy: Members have the right to participate, to be informed, to be heard and to be involved
in making decisions. Members are the source of all authority in the cooperative. “The basic unit of
the cooperative is the member. This basis in human personality is one of the main features
distinguishing a cooperative from firms controlled primarily in the interests of capital.”

Equality: Equal rights and opportunities for people to participate democratically will improve the
use of society’s resources and foster mutuality, understanding and solidarity.

Equity: Fair distribution of income and power in society and its economic life should be based on
labor not ownership of capital. Within the cooperative, rewards for active membership in the
cooperative will be distributed equitably, be it through patronage dividends, allocations to capital
reserves, increases in services or reduction charges.

Solidarity: Cooperatives are based on the assumption that there is strength in mutual self-help
and that the cooperative has a collective responsibility for the well-being of its members. Further,
individual cooperatives strive to create a united cooperative movement by working with other
cooperatives to improve collective well-being.

The value statement also articulates values of personal and ethical behavior that
cooperators actualize in their enterprises. They describe the kind of people we strive to be and the
traits we hope to encourage—honesty, openness, social responsibility and caring for others—
through cooperation.

For the earliest days of the Rochdale Pioneers, cooperatives have emphasized the
importance of honest dealings in the marketplace: accurate measurements, reliable quality and
fair prices. Members have insisted that their enterprises have honest dealings with them. This in
turn has led to honest dealings with non-members and a unique level of openness throughout the
organization. And many cooperatives have manifested the values of social responsibility and
caring for others, reflecting concern for the health and well-being of individuals within communities
and a commitment to help them help themselves.

THE 1995 COOPERATIVE PRINCIPLES

Principles are guidelines for how to put ideals and values into practice. They rest on a
distinct philosophy and view of society that helps us judge our accomplishments and make
decisions. If successful, principles are incorporated into the organizational culture of the
cooperative; they are the broad vision statement for cooperatives and cooperators individually and
collectively. Shared and actualized principles allow cooperatives to be distinguished from other

13
forms of organization. As the ICA puts it, “Principles are not a stale list to be reviewed periodically
and ritualistically; they are empowering frameworks through which cooperatives can grasp the
future.”

Given that the ICA has adopted a new set of principles and implicitly all of the world’s
cooperatives have agreed to uphold them, there is no more important visioning work for your
cooperative to do than to become familiar with the new principles, discuss them and understand
what impact they may have on your business and your members. They give each of our
businesses an opportunity to re-energize and recommit itself to the general goals of cooperation
and to attract new people to the cooperative movement.

Voluntary and open membership

This principle has changed little from the 1966 version. It implies that individuals must not
be coerced into cooperative membership. Rather, their participation as active and responsible
members should be based on a clear understanding of the values for which cooperatives stand
and support for those values. At the same time, while membership is open, the principle assumes
the member is able to use the services provided and is willing to take on the responsibilities of
membership.

This language recognizes that some cooperatives may restrict membership based on ability
to use the cooperative or on a limit to the number of members the cooperative can effectively
serve. The important idea here, however, is that cooperatives do not discriminate against potential
members based on their inherent characteristics (social, racial, political, religious, or gender).
Particularly important is the addition of gender as a category in the 1995 principles. The ICA
Women’s Committee worked long and hard to have gender added to the list and ensure that the
organization’s expectations for cooperative enterprises are clearly expressed.

Democratic member control

Building on the principle of open and voluntary membership, the principle of democratic
member control defines the way in which members will make decisions. It assumes that members
will participate in setting policy and giving broad direction to cooperative activities in a way in
which no member has a greater “voice” than any other member.

This principle is closely related to the “one member, one vote” principle of the 1966
version. The new principle, however, gives specific attention to the potentially different voting
structures that may be put in place in secondary cooperatives. When cooperatives are members of
secondary cooperatives, the one member, one vote rule may result in substantial inequities for the
individual members of member cooperatives. For example, if a cooperative of 1,000 members and
a cooperative of 25 members each has one vote in the affairs of their cooperative distributor, the
25 members of the smaller cooperative clearly have a much stronger proportional voice than do
the 1,000 members. The principle addresses the possible need for different voting procedures at
the distributor level in order for voting to be democratic.

Member economic participation

This principle deals directly with the very difficult problem of capital acquisition by
cooperatives in amounts large enough to compete effectively with vast global industries.
Throughout their history, cooperatives have been built on the premise that capital is a servant of

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the enterprise, rather than the master. Cooperative activities are organized to meet member
needs, not to accumulate capital in the hands of investors. In the past, the principle of capital as
servant led to a belief that resources generated by profitable cooperative enterprises should be
retained by the cooperative, rather than being concentrated in the hands of owners of capital, by
strictly limiting returns top invested funds.

It has not always been clear what role, if any, is played by non-member capital investment,
or investment by members beyond the “fair share” required. Although members own millions of
dollars that they might invest in cooperatives, the previous restrictions on dividends to be paid on
capital did not encourage them to invest beyond the required amounts. Consequently,
cooperatives have repeatedly been unable to generate equity for capital intensive project; and
they have been unable to maintain the value of invested capital during inflationary times. The strict
limitation on dividends to capital has been lifted in the 1995 principles, which now imply that
cooperatives compensate capital and labor fairly.

In order to retain the democratic nature of the enterprise, members of cooperatives are
expected to contribute capital equitably and to democratically control the capital of the business.
To retain the community centered nature of the enterprise and the belief that strength comes from
pooling resources to engage in mutual self-help, there is an underlying expectation that a portion
of the cooperative’s capital should be owned collectively by all members. Finally, the principle also
gives guidance to members on possible uses for surpluses generated by the enterprise,
specifically mentioning cooperative reinvestment and reserves, patronage rebates, and other
activities approved by the members.

Autonomy and independence

In the thirty years since the passage of the 1966 Cooperative Principles, numerous third
world countries have used cooperatives as an intentional part of their social and economic
development strategies. While there are many instances of successful development through
cooperatives, government initiation and support were necessary to begin the cooperative
ventures. Unfortunately, many of the governments, especially in centrally planned economies,
were unable to withdraw from the cooperatives. Instead, cooperatives, closely controlled by
government functionaries, became inefficient and poorly managed, a haven for government
bureaucrats. Independence and autonomy was often never realized.

The new principles emphasize that cooperatives must be free of intervention from
governments or other sources, so that members are able to control their own destiny.

Education, training, and information

Education continues to be a priority of the cooperative movement in the new Statement of

Identity. The background paper on the principles emphasizes that cooperative education is more
than advertising product or distributing information. It is critical to the effective and informed
participation of members which lies at the core of the cooperative definition. “It means engaging
the minds of members, elected leaders, managers and employees to comprehend fully the
complexity and richness of cooperative thought and action.” The written principle also highlights
the importance of educating the young and opinion leaders about the nature and benefits of
cooperation. If cooperatives are to be part of the solution to many of the world’s problems, people
must be not only aware of the concept, they must appreciate it and be willing to participate in it.
Such active involvement will not occur if people do not understand cooperative enterprise.

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Cooperation among cooperatives

This principle is virtually unchanged from the 1966 Principles.

Concern for community

Grounded in the values of social responsibility and caring for others, this new principle
articulates the cooperative interest in making contributions to a better society at large. By taking
ownership of portions of the economy, cooperative members are saying, in effect, “We can meet
our needs of others better than they are currently being met.” Because the effort is a mutual one,
cooperative members understand that to provide for all members.

Interestingly, much of the writing and debate that evolved into this principle was centered
on environmental protection as well as sustainable development. Much of the development of the
Statement of Identity was presented to the 1992 ICA Congress by Sven Books’ report Cooperative
Values in a Changing World, which emphasized the tie between cooperatives and the
environment, saying, “The next century needs the contributions of cooperative organizations as a
people-based international countervailing power for economizing the natural resources of the
world and hence protecting the fundamental needs of coming generations.” The background paper
articulates the responsibility of cooperatives to participate in the environmental protection of their
communities.

The beginning

The ICA has concluded a nearly fifteen-year process of exploring the fundamental values
and principles of the international cooperative movement. In spite of the vast differences in
national circumstances, industry practices, cultures and ideologies, cooperators were able to
identify those characteristics that describe their unique form of human enterprise. These are the
values and principles which give voice to the enduring soul of the cooperative movement. The ICA
sees them as “inherently practical principles, fashioned as much by generations of experience as
by philosophical thought.” As we join millions of other cooperators throughout the world in adopting
them, we cannot but reflect on the nature of democracy, the use and control of capital, and the
critical roles of members, directors, management, staff and the community in our cooperatives.

As part of an international commentary on the new Statement of Identity, M. Pax

summarized the critical importance of this effort: “Our values and principles are our self-definition,
our distinctive contribution to society and the basis for our practical activities. The test of our
values and principles is not only in their intrinsic morality, the logic and social justice which they
embody, but in our ability to translate them concretely and realistically from social theory into
social fact and to make them effective in our daily lives. It is only a courageous social movement
which would dare to probe so deeply and so openly into the foundations on which it rests.”

The 1995 Statement of Identity represents a remarkable worldwide consensus on basic

values. Monumental as that achievement is, it is only the beginning. The profound challenge is to
articulate, activate and actualize the values in our own communities. The path is clear. Now is the
time to set forth.

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The International Cooperative Alliance Statement of Cooperative Identity

DEFINITION:

A cooperative is an autonomous association of persons united voluntarily to meet their

common economic, social, and cultural needs and aspirations through a jointly-owned and
democratically controlled enterprise.

VALUES:

Cooperatives are based on the values of self-help, self-responsibility, democracy, equality,

equity, and solidarity. In the tradition of their founders, cooperative members believe in the ethical
values of honesty, openness, social responsibility, and caring for others.

International cooperative values and principles

Cooperative enterprises are governed by universally accepted guidelines or principles that

are among the features that distinguish them from other types of enterprises, such as partnerships
and limited liability companies.

1st Principle: Voluntary and Open Membership

Cooperatives are voluntary organizations, open to all persons able to use their services and
willing to accept the responsibilities of membership, without gender, social, racial, political,
religious or other forms of discrimination.

2nd Principle: Democratic Member Control

Cooperatives 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 member-ship. All members have an equal say at
cooperative general meetings and in elections for the committee that appoints the manager and
oversees the running of the cooperative. Members also have the ability to let their name stand to
serve as an elected official of the cooperative, unlike a customer of a traditional business
enterprise.

Voting rights go with membership, not with the amount of money invested (as would happen in a
shareholder-owned company). The rule is “one member, one vote.” To become a member, one
must usually buy at least one share, but extra shares do not give a person more votes.

3rd Principle: Member Economic Participation

Members are both users and owners who contribute equitably to, and democratically
control the capital of their cooperative. Each member is required to purchase a share, which
provides access to goods and services. Unlike a conventional company where profits are
distributed in proportion to the number of shares a person owns, cooperatives

Distribute surpluses to members to in proportion to their transactions with the cooperative

thus, members who have done more business with the cooperative will receive a correspondingly
larger share of the profits.

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 Surpluses are also reinvested back into the cooperative to expand and grow operations, a
decision made by members at the annual general meeting. Members usually receive limited
compensation, if any, on capital subscribed as a condition of membership.

4th Principle: Autonomy and Independence

Cooperatives are autonomous, self-help organizations controlled by their members. If they

enter into agreements with other organizations, including governments, or raise capital from
external sources, they do so on terms that ensure democratic control by their members and
maintain their cooperative autonomy.

5th Principle: Education, Training and Information

Cooperatives provide education and training for their members, elected representatives,
managers, and employees so they can contribute effectively to the development of their
cooperatives. They inform the general public—particularly young people and opinion leaders –
about the nature and benefits of cooperation.

6th Principle: Cooperation among Cooperatives

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

7th Principle: Concern for Community

Cooperatives work for the sustainable development of their communities through policies
approved by their members. Cooperatives are founded on strong human values; they do not just
selfishly pursue their own interests at all costs. Even where not all the members of the local
community are members of the cooperative, the cooperative should consider the needs of the
non-members when they can. The cooperative can play a constructive role in the social and
economic life of its local community.

Lesson 3: Cooperatives Identity

How a cooperative differs from other forms of business

It is recommended that a review of the local business and taxation laws and regulations be
done when comparing cooperatives with other forms of business structures

1. Sole proprietorship
With this type of business organization, a person is the sole owner and fully responsible for
all debts and obligations related to that person’s business. All profits are the owners to keep.

Advantages
 Easy and inexpensive to register;
 Regulatory burden is generally light;
 Owner has direct control of decision making;
 Minimal working capital required for start-up;

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  Subject to local tax laws, there may be tax advantages if the business is not doing well (for
example, deducting losses from the owner’s personal income, and a lower tax bracket
when profits are low);
 All profits go to the owner directly.
Disadvantages
 Unlimited liability (if the owner has business debts, claims can be made against their
personal assets to pay them off);
 Income is taxable at the owner’s personal rate and, if the business is profitable, this could
put the owner in a higher tax bracket;
 Lack of continuity for the business if the owner is unavailable;
 Can be difficult to raise capital as an individual owner.

2. Partnership
A partnership is a non-incorporated business that is created between two or more people.
In a partnership, the financial resources of the business partners are combined and put into the
business. The partners would then share in the profits of the business according to any legal
agreement that has been drawn up.

Advantages
 Fairly easy and inexpensive to form a partnership;
 Start-up costs are shared equally between partners;
 Equal share in the management, profits and assets;
 Tax advantage- if income from the partnership is low or loss money (the partners include
their shares of the partnership in their individual tax returns)
Disadvantages
 There is no legal difference between the owner and their business;
 Unlimited liability (if the owner has business debts, personal assets can be used to pay off
the debt);
 Can be difficult to find a suitable partner(s);
 Possible development of conflict between partners;
 Each partner is held financially responsible for business decisions made by the other
partner(s); for example, contracts that are broken.

3. Corporations
Another type of business structure is a corporation. Incorporation can be done at the
national or territorial level. When a business is incorporated, it is considered to be a legal entity
that is separate from its shareholders. As a shareholder of a corporation, the owner will not be
personally liable for the debts, obligations or acts of the corporation. It is always wise to seek legal
advice before incorporating.

Advantages
 Limited liability;
 Ownership is transferable;
 Continuous existence;
 Separate legal entity;
 Easier to raise capital than it might be with others business structures;
 Possible tax advantage as taxes may be lower for an incorporated business.
Disadvantages
 A corporation is closely regulated;
 More expensive to set up a corporation than other business forms;

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  Extensive corporate records required, including documentation filed annually with the
government;
 Possible conflict between shareholders and directors;
 Proof of residency or citizenship of directors may be required.

4. Cooperative enterprise
A cooperative is owned and controlled by an association of members. It can be set up as a
for-profit or as a not-for-profit organization. This is the least common form of business, but can be
appropriate in situations where a group of individuals or businesses decide to pool their resources
and provide access to common needs, such as the delivery of products or services, the sale of
products or services, employment and more.

Advantages
 Owned and controlled by its members;
 Democratic control (one member, one vote);
 Limited liability;
 Profit distribution.

Comparison of Business Ownership Models

COOPERATIVE PRIVATELY INCORPORATED COMPANY

Its main purpose is to provide service and Its main purpose is to make profit for
savings to member investor.
It is essentially a union of person It is essentially a union of capital.
Its control is democratic, each member has Control is not equal; it is based on the
one share and therefore one vote regardless number of voting shares held. As the volume
of their patronage level of shares purchased is generally unlimited,
individual investors can acquire substantial
or complete control.
Ownership is in the hands of its members in Ownership is in the hands of investors who
the community who use the service may be located in another community
province or country.
Surplus (“profits”) refunded to members in Surplus allocated in proportion to voting
proportion to patronage shares owned.
Shares are held in name of members only Shares may be freely traded and fluctuate in
are not traded for speculations. value

A cooperative is different from other business in some very important areas:

 PURPOSE- service and savings to members.

 CONTROL- one member, one vote.
 OWNERSHIP- members who use the services.
 SURPLUS- is proportionally distributed to members according to patronage.

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 MODULE 3
The Cooperative Code and the Cooperative Development Authority

Lesson 1. The types and categories of cooperatives

1. Credit Cooperative is one that promotes and undertakes savings and lending services
among its members. It generates a common pool of funds in order to provide financial
assistance and other related financial services to its members for productive and provident
purposes;
2. Consumer Cooperative is one of the primary purpose of which is to procure and distribute
commodities to members and non- members;
3. Producers Cooperative is one that undertakes joint production whether agricultural or
industrial. It is formed and operated by its members to undertake the production and
processing of raw materials or goods produced by its members into finished or processed
products for sale by the cooperative to its members and non-members. Any end product or
its derivative arising from the raw materials produced by its members, sold in the name of
and for the account of the cooperative, shall be deemed a product of the cooperative and its
members;
4. Marketing Cooperative is one which engages in the supply of production inputs to
members and markets their products;
5. Service Cooperative is one which engages in medical and dental care, hospitalization,
transportation, insurance, housing, labor, electric light and power, communication,
professional and other services;
6. Multi-Purpose Cooperative combines two (2) or more of the business activities of these
different types of cooperatives;
7. Advocacy Cooperative is a primary cooperative which promotes and advocates
cooperativism among its members and the public through socially-oriented projects,
education and training, research and communication, and other similar activities to reach
out to its intended beneficiaries;
8. Agrarian Reform Cooperative is one organized by marginal farmers majority of which are
agrarian reform beneficiaries for the purpose of developing an appropriate system of land
tenure, land development, land consolidation or land management in areas covered by
agrarian reform;
9. Cooperative Bank is one organized for the primary purpose of providing a wide range of
financial services to cooperatives and their members;
10. Dairy Cooperative is one whose members are engaged in the production of fresh milk
which may be processed and/or marketed as dairy products.
11. Education Cooperative is one organized for the primary purpose of owning and operating
licensed educational institutions, notwithstanding the provisions of Republic Act No. 9155,
otherwise known as the Governance of Basic Education Act of 2001;
12. Electric Cooperative is one organized for the primary purposes of undertaking power
generation, utilizing renewable sources, including hybrid systems, acquisition and operation
of sub transmission or distribution to its household members;
13. Financial Service Cooperative is one organized for the primary purpose of engaging in
savings and credit services and other financial services;
14. Fishermen Cooperative is one organized by marginalized fishermen in localities whose
products are marketed either as fresh or processed products;
15. Health Services Cooperative is one organized for the primary purpose of providing
medical, dental, and other health services;
16. Housing Cooperative is one organized to assist or provide access to housing for the
benefit of its regular members who actively participate in the savings program for housing. It
is co-owned and controlled by its members;

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 17. Insurance Cooperative is one engaged in the business of insuring life and property of
cooperatives and their members;
18. Transport Cooperative is one which includes land and sea transportation, limited to small
vessels, as defined or classified under the Philippine maritime laws, organized under the
provisions of RA 9520;
19. Water Service Cooperative is one organized to own, operate and manage waters systems
for the provision and distribution of potable water for its members and their households;
20. Workers Cooperative is one organized by workers, including the self-employed, who are
at the same time the members and owners of the enterprise. Its principal purpose is to
provide employment and business opportunities to its members and manage it in
accordance with cooperative principles; and
21. Other types of Cooperatives as may be determined by the Authority

Categories

In terms of membership

1. Primary- the members of which are natural persons

2. Secondary- the members of which are primary cooperatives
3. Tertiary- the members of which are secondary coops upward to one or more apex
organizations
4. Laboratory- the members of which are minors and must be affiliated with a registered
cooperative

In terms of area of operation

1. Barangay
2. Municipal
3. District
4. Provincial
5. Regional

How to organize a primary cooperative

Organizing a cooperative can be complex and simple. It requires an understanding of members. It

demands patience from the organizer who must the cooperative’s long-term goal and objectives
and its visions as a real part of the members’ lives.

But it can be too easy because the Cooperative Development Authority has devised very clear-cut
steps for the cooperative organizer and members.

General steps in forming a Cooperative

1. Get organized. You must have at least 15 members to do that at once determine the
common problems you would want to solved and the basic needs you would want provide
for though a cooperative. You may want to include increasing your production, marketing
your product, credit assistance, power generation, banking or insurance and other similar
needs. Determining your problems and needs will also help you classify the kind of
cooperative you will be organizing. Even before a cooperative is set up, a dedicated core
group of people who will do all the organizational and property works is a must. From this
core group, working committees may be formed to set things moving. These committees
may include membership, finance, executive, secretariat to name a few.

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 2. Prepare a general statement called an economic survey. This statement will help you
measure your cooperative’s chances of success.

3. Draft the cooperative’s by-law. The by-laws contain the rules and regulations governing the
operation of the cooperative.

4. Draft the article of cooperation. Here you indicate the name of the cooperative, its member,
term of existence and other pertinent description about your cooperative.

5. Secure bond from your accountable officer(s), normally the treasurer, or the treasurer and
the manager. The amount of the bond is to be decided upon by the Board of Directors,
based on the initial net worth of the cooperative which includes the paid-up capital,
membership fees and other assets of the cooperative the time registration

6. Register you Cooperative Development Authority (CDA) you must submit four copies each
of the economic survey, by-laws and articles of cooperation, and Bond of Accountable
Officer(s).

In every step, you may consult CDA, CDA emphasizes education as a key to the success of
cooperatives.

Lesson 2:

Basic Organizational Chart of a Cooperative

Core bodies of a cooperative: General Assembly, Board of Directors, Manager, and

Employees

General Assembly: Owners of the cooperative

 Support the cooperative through patronage and capital investment.
 The highest body of the cooperative and the final authority in the management and
administration of the affairs of the cooperative

Board of Directors: Elected from and by the members

 Make the operating policies of the cooperative
 Recruit and hire the manager
 Oversee budgeting and financial processes
 Direct the cooperative towards the overall objectives

Manager: Hired by the Board of Directors

 Responsible for daily operations of the cooperative
 Hires and supervises employees

Employees: Hired by the Manager

 Do the production and marketing of product or services of the cooperative

To help the Board of Directors and the officers in managing the cooperative, it is important to
form various committees to handle the various affairs of the organization such as elections,
audit, credit and collection, membership, finance, and education and training. Each committee
will have a board member assigned to them as a liaison. You will learn more about how to form

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 committees and their tasks if you participate in the Management. COOP training after you have
set up your cooperative.

Rights of Members

Rights are acquired on admission to membership. Rights of members refer to fundamental

rules of what is allowed or due to members based on the bylaws of the cooperative. The rights
are defined by members themselves and are also based on existing cooperative legislation in
the country. In this activity, you will look into the basic rights of members so as to get some
ideas on what you should include in your bylaws.

Some of the Rights of Members

1) Right to propose matters for discussions/participate in meetings

2) Right to be informed/access to information on affairs of cooperative
3) Right to vote
4) Right to voluntarily withdraw from the cooperative
5) Right to be elected to serve on the Board of Directors
6) Right to make use of facilities and services of the cooperative
7) Right to amend bylaws
8) Right to receive a patronage refund

Duties of Members

Along with the rights, members also have duties and responsibilities. These duties and
responsibilities are also outlined in the bylaws of the cooperative. In this activity, you will identify
the main duties of members. This is a group activity.

Some of the duties of members

1) Patronize the services or products of the cooperative

2) Pay agreed share of capital and other dues
3) Attend required coop training
4) Participate in evaluating and selecting members of the Board of Directors/Exercise the right
to vote
5) Comply with production requirements and agreements (both quantity and quality)

BOARD OF DIRECTORS

The Board of Directors governs the operations of the cooperative on behalf of its members.
They are the leaders of the cooperative. Members place their trust, their needs, and authority in a
Board of Directors of their own choice. The members of the Board of Directors are elected from
any by the members.

Responsibilities of the Board of Directors

Responsibilities are the specific tasks or duties that the Board of Directors is expected to do
as a function of their role. The power to act on behalf of the cooperative is given to the Board of
Directors as a body, not to individual directors. They are required to act in the best interest of the
members.

Clear definition of responsibilities is essential to the successful performance of the Board of

Directors.

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Core Responsibilities of the Board of Directors
1) Oversee preservation and management of cooperative assets
2) Inform members
3) Preserve the cooperative character of the organization
4) Establish cooperative policies
5) Hire and supervise manager/management team
6) Represent members
7) Assess the cooperative’s performance

Officers of the Board of Directors

Depending on the cooperative laws of the country and the cooperative’s bylaws, officers of
the Board may include a chairperson, vice chairperson are usually elected from and by the
members of the Board. The secretary, treasurer, and other positions that may be needed by the
cooperative may be appointed or elected by the Board. Each officer has specific duties as detailed
in the cooperative’s bylaws.

To develop a clear understanding of the duties of each of the core officers of the
cooperative, answer the question below. As each question is read, mark your answer individually
and then share with the group. The groups should come to a consensus on the answer before
moving to the next question.

Qualifications of the Board of Directors

The number of directors depends on the cooperative and incorporation laws of the country
as well as the nature and scope of operations of the cooperative. As a general rule, an effective
Board needs a minimum of five directors. It is advisable to have an odd number (such as 5, 7, 11,
13, 15) of directors to avoid tie votes. Election of directors usually involves the following process:

 Another member must nominate the person for the position.

 The person nominated must say he/she is willing to vie for the position.
 The General Assembly must elect the person to the position.

The success of a cooperative depends, to a significant extent, on the quality of its leaders. It is,
therefore, very important that you carefully choose the members of the Board of Directors.

Qualifications of Board Candidates qualifications of Board Candidates

 Honest and fair

 Accepted by the members for having good judgment and business sense
 Loyal to the cooperative
 Community leader, capable of working with people
 Successful in his/her own business operation
 No conflict of interest
 Knowledgeable about cooperatives and the job of a director, including listening to
members
 Willingness to attend regularly scheduled and special meetings of the board of directors,
as well as any director training seminars
 Experience in the business of the cooperative
 Active participation in cooperative affairs as a member
 Experience on other boards, working with community-based organizations
 Knowledge and understanding of finance and ability to read financial statements

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THE MANAGER
The manager of the cooperative is selected by and accountable to the Board of Directors.
The manager implements the policy set by the Board of Directors. He/she is in-charge of the
overall operation of the cooperative as delegated by the Board. In many cases, the manager also
participates in board meetings as an active, non-voting participant.

The manager is hired to operate the business and ensure that members and customers are
well-served. Often the manager is a non-member with sufficient qualifications.

Task of Managers
 Organizes the work
 Approves deliveries from suppliers
 Supervises quality and output
 Prepares quotations
 Receives order
 Prepares invoices
 Receives payment
 Selects and hires workers
 Monitors inventory of stocks
 Ensures that all equipment is in good and safe condition
 Conducts training on workers’ safety and
 Monitors adoption of safety procedures
 Participates in all board meetings
 Helps in recruitment of new members

How may become members of cooperative

If you are a Filipino, of legal age, you can be a cooperative member if you meet the
qualifications prescribed by the cooperative’s by-laws.

The Board of Directors act on application for membership.

A member may exercise his/her rights only after having paid the fees for membership and
acquired shares in the cooperative

What are the types of membership in a cooperative?

A cooperative has two kinds members: regular members and associate members.

A regular member is entitled to all the rights and privileges of membership as stated in the
cooperative code and the cooperative’s by-laws.

An associate member has no right to vote or to be voted upon and is entitled only to such
rights and privileges provided by the cooperative’s by-laws.

What is the minimum number of members in a cooperative?

15 persons, natural person of legal age who are citizen of the Philippines

Can Government officers and employees join a cooperative?

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 Yes, provided that: any officer or employee of CDA shall be disqualified to be elected or
appointed to any position in a cooperative;

Elected officials of the government, except barangay officials, shall be eligible to become
officers, directors of the cooperatives;

Any government employee may in the discharges of his/her duties as a member in the
cooperative, use official time provided that the operations of the office where he/she works are not
adversely affected.

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