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Evolution of Cooperative Principles


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A Lecture for Basic Cooperative Course
Cooperative Development Authority
Dagipan Extension Office, Region I
Philippines June 2012

Published in: Business, News & Politics

Evolution of Cooperative Principles

  1. 1. The Evolution of Cooperative Principles Rockdale Pioneers ICA ICA ICA 14 4 6 7Principles Principles Principles Principles 1844 1937 1966 1995Lecture presentation forCooperative Basic Course By: Jo B. Bitonio June 2012
  2. 2. Cooperatives were borne out ofthe free market economy and the manyfailures and injustices it has generated.The very first documented cooperativewas in fact a reaction to the abuses ofcapitalism and it can be traced back to1844 in Rochdale, England where agroup of 28 weavers (27 males and 1female) formed the Rochdale Societyof Equitable Pioneers October24,1844. Source:
  3. 3. As the mechanization of the industrial Revolution was forcing more andmore skilled workers into poverty, these tradesmen decided to bandtogether to open their own store selling food items they could nototherwise afford. With lessons from prior failed attempts at co-operation in mind, they designed the now famous Rockdale Principles,and over a period of four months they struggled to pool one poundsterling per person for a total of 28 pounds of capital.On 21 December 1844, they opened their store with a very meagerselection of butter, sugar, flour, oatmeal and a few candles. Withinthree months, they expanded their selection to include tea and tobacco,and they were soon known for providing high quality, unadulteratedgoods. Source:
  4. 4. Little did the Rochdale Pioneers know in 1844 that theirhumble efforts to help themselves would have suchimpact. From the little shop which still stands on ToadLane, the modern cooperative began its journey.One of the lessons learned from the Rochdale Pioneers isthat "helping people help themselves" is a strong and mostenduring form of economic development. The world hascertainly changed a great deal in 150 years, but the need forcooperation among people remains.
  5. 5. In 1844,1845, and 1854 the Society published aseries of "practices," which were the basis forwhat became known decades later as theRochdale Principles:  Open membership.  Democratic control (one man, one vote). Distribution of surplus in proportion to trade.  Payment of limited interest on capital.  Political and religious neutrality.  Cash trading  Promotion of education
  6. 6. Cooperative societies had 1. Voting is by members onexisted before Rochdale has failed. a democratic (one It was to the credit of Rochdale member, one vote) basis.Pioneers that they formulated a 2. Membership is open.method that was capable of being 3. Equity is provided bystandardized and became a “code members.of conduct” for succeeding 4. Equity ownership share ofcooperatives. The principles which individual members isthey codified were as timely as limited.ever and are still the standards 5. Net income is distributedwith which present cooperative to members as patronageprinciples are based: refund on a cost basis.
  7. 7. 6. Dividends on equity capital are limited.7. Exchange of goods and services at market prices. 8. Duty to educate. 9. Cash trading only.10. No unusual risk assumption.11. Political and religious neutrality.12. Equity in membership (no discrimination by gender)
  8. 8. When the InternationalCooperative Alliance (ICA) was The 1937 reviewfounded in 1895 it took upon itself affirmed four vitalthat task of refining the principles:cooperative principles and the membership;further consolidation andexpansion of the Cooperative 3.democratic control;Movement. The Alliance 4.dividend paidperiodically reviewed the according to businesscooperative principles laid down in done; andRochdale and made two formal interest ondeclarations of principles, the first capitalin 1937
  9. 9. The 1966 review declared six essential principles: • voluntary membership; • democracy; • limited interest on share capital; • distribution of surplus; • provision for education; and • cooperation among cooperatives.
  10. 10. The third and final review was done inSeptember 1995, at ICA’s 100th anniversary meetingproduced the most comprehensive statement to dateon the cooperative identity. The statement definescooperatives, identifies shared values of cooperatorsworldwide and refines, restates and expands the1966 principles. These principles are intended toguide cooperative organizations at the beginning ofthe 21st century.
  11. 11. The Statement of identity defines: A cooperative as “an autonomousassociation of persons united voluntarily to meettheir common economic, social and cultural needsand aspirations through a jointly owned anddemocratically- controlled enterprise.”
  12. 12. The statement emphasizes important characteristics ofcooperative enterprise which are: a) Autonomy: the cooperative is as independent ofgovernment and private enterprise as possible; b) Association of persons: the definition deliberately does readan association of individuals. The term person embraces anylegal definition of “person” which includes companies as wellas individuals;c) Voluntary: members are free to join and leave at will, withinthe purposes and resources of the cooperative;.
  13. 13. d) Meet needs: the central purpose of the cooperative is to meet member needs, which can be purely economic, social and cultural;e) Joint ownership and democratic control:f) 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; andg) Enterprise: the cooperative is an organized entity that typically functions in the marketplace and engages in the exchange of goods and services.
  14. 14. Seven Principles are listed in the1995 ICA Statement as shown inFigure 9 on page 54. They are:Voluntary and Open Membership;Democratic Member Control;Member Economic Participation;Autonomy and Independence;Education and Training andInformation; Co-operation AmongCooperatives and Concern forCommunity. The first threeprinciples essentially address theinternal dynamics typical of anyco-operative; the last four affectboth the internal operation andexternal relationships of co-operative principles.
  15. 15. 1. Voluntary and Open MembershipCooperatives are voluntary organizations, open to all persons able to usetheir services and willing to accept the responsibilities of membershipwithout gender, social, racial, political or religious discrimination.2. Democratic Member Control Cooperatives are democratic organizations controlled by theirmembers, who actively participate in setting their policies and makingdecisions. Men and women serving as elected representatives areaccountable to the membership. In primary cooperatives, members haveequal voting rights (one member, one vote) and cooperatives at other levelsare also organized in a democratic manner.
  16. 16. 3. Member Economic ParticipationCooperatives contribute equitably to, and democratically control, the capitalof their cooperative. At least part of that capital is usually the commonproperty of the cooperative. Members allocate surpluses for any of thefollowing purposes; developing their cooperative, possibly by setting upreserves, part of which would at least be indivisible; benefiting members inproportion to their transactions with the cooperative; and supporting otheractivities approved by the membership.4. Education, Training and InformationCooperatives provide education and training for their members, electedrepresentatives, managers and employees so they can contribute effectively tothe development of their cooperatives. They inform the general public –particularly young people and opinion leaders-about the nature andbenefits of cooperation.
  17. 17. 5. Autonomy and IndependenceCooperatives are autonomous, self-help organizations controlled by theirmembers. If they enter into agreements with other organizations, includinggovernments, they do so on terms to ensure democratic control by theirmembers and maintain their cooperative autonomy.6. Cooperative among CooperativesCooperatives service their members most efficiently and strengthen thecooperative movement by working together through local, national andinternational structures.7. Concern for CommunityCooperatives have a special responsibility to ensure that the development ofcommunities- economically, socially and culturally- is sustained. They have aresponsibility to work steadily for the environmental protection of theircommunities.
  18. 18. Reference: International Cooperative Alliance. Cooperatives Principles Alive: The ICA’s Seven Principles of Cooperative Identity in the Experience of Cooperatives in Metro Manila. Union of Metro Manila Cooperatives, Manila, Philippines, 2003.