Cooperative Principles
1.1. International Cooperative Alliance (ICA) statement on the Cooperative Identity
Definition: A co-operative 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: Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility, and caring for others.
Principles: The Co-operative principles are guidelines by which Co-operatives put their values into practice.
1st Principle: Voluntary and open membership: Co-operatives are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination.
2nd Principle: Democratic member control: Co-operatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary co-operatives members have equal voting rights (one member, one vote), and co-operatives at other levels are also organised in a democratic manner.
3rd Principle: Member economic participation: Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.
4th Principle: Autonomy and independence: Co-operatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organisations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy.
5th Principle: Education, training and information: Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the general public - particularly young people and opinion leaders - about the nature and benefits of cooperation.
6th Principle: Co-operation among co-operatives: Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional, and international structures.
7th Principle: Concern for community: Co-operatives work for the sustainable development of their communities through policies approved by their members.
1.2. Explanation of ICA Statement on the Cooperative Identity
The International Co-operative Alliance, whose membership includes co-operatives from all parts of the world, has defined a co-operative as under:
“A co-operative 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.”
The main characteristics of a co-operative are:
Ø it is an autonomous association of persons.
Ø the persons unite/join at their own will.
Ø the members should unite to meet their common economic, social and cultural needs.
Ø it is jointly owned and democratically controlled enterprise.
“Autonomous” means an organisation or association that is free to take all business and governance decisions itself without any outside interference. “Jointly-owned” means those who have joined the co-operatives to use their services are, collectively, its owners. “Democratically-controlled” means the management of co-operatives is carried out by the members and by those persons who have been authorized to do so by the members. The ultimate control always remains with the members of the co-operative. Those authorised to manage the co-operatives are in turn accountable to the members.“Enterprise” highlights the nature of the organisation: an enterprise is constituted by its owners to carry out business to their benefit. Values: Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility, and caring for others.“Self-help” means that persons should help themselves by coming together and should not depend on others beyond the co-operative. Co-operators believe that the development of a person can best take place in association with others. “Self-responsibility” means that the members themselves assume responsibility for their co-operatives for its formation, continuation and future success. “Democracy” means that each member has an equal opportunity to decide how the co-operative should be run and to frame policies to achieve its objectives. This is the principle of one-member with one-vote. “Equality” means that everyone in a co-operative has an equal opportunity with respect to the right to participate, the right to information, the right to be heard and the right to be involved in decision-making. “Equity” means a member is rewarded for her/his participation in the co-operative. The more he uses the services of the co-operative, the higher the return he will get. “Solidarity” means that a co-operative is not merely an association of members. Members should be treated as fairly as possible. The each member of the co-operative is responsible for the collective interest of all its members. This value also means that co-operators and co-operatives stand together for the development of the co-operative movement.
The values of honesty, openness, social responsibility and caring for others are fundamental ethical values. These are values, which members of any community should practice. They have been practiced for ages and thus find a central place in the co-operative movement.
Co-operative Principles: The cooperative principles are guidelines by which cooperatives put their values into practice.
1. Voluntary and open membership:
Co-operatives are voluntary organizations Open to all persons who are:
- able to use their services
- willing to accept the responsibilities of membership
- without gender, social, racial, political or religious discrimination.
This is the first of the seven principles of co-operation. It is very important because it reaffirms the importance of members choosing voluntarily to make a commitment to their co-operative. It establishes the fact that co-operatives are open to all persons who are able to use their services and willing to accept the responsibilities of membership without gender, social, racial, political or religious discrimination. It also acknowledges the fact that membership should be limited to only those persons who are actively involved in that type of activity. It reminds members that they have obligations to their co-operatives. These obligations include exercising their voting rights, participating in the meetings and using the services of the society. This principle also clearly specifies that there should not be any gender bias when granting membership and women should be present as far as possible in equal numbers to men. Thus this principle itself provides the needed opportunity for women to join co-operatives and for them to be co-operators.
Co-operatives should not discriminate among members on the basis of class, religion or political affiliation. Co-operatives should not exploit non-members of their communities and they should accept the responsibility of fostering the development of the co-operative movement in their areas.
2. Democratic member control:
Ø Co-operatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions.
Ø Elected representatives are accountable to the membership.
Ø In primary co-operatives, members have equal voting rights (one member - one vote)
Ø Co-operatives at other levels are also organised in a democratic manner.
This principle emphasizes that the members, who are the owners, ultimately must control their co-operatives. This control must be exercised in a democratic manner. It reaffirms the right of members to be actively involved in setting policies and in making decisions. This active involvement leads in many cases to policy issues being discussed, major decisions being made and important actions being approved in the general body meetings of the co-operative.
This principle also reminds the men and women serving as elected representatives that are accountable to their members.
The democratic basis of this principle is that every member of a primary society has equal voting rights (one member - one vote) and that co-operatives at other levels are also organised and run in a democratic manner.
3. Member economic participation:
Ø Members contribute to the capital through equity and democratically control
Ø Limited compensation to equity.
Ø Surpluses may be allocated:
o as reserves to develop their Co-operative
o to distribute Patronage
o to any other activity approved by the members that benefits the members.
This principle describes the reasons why and the ways in which members should invest in their co-operatives as well as how they should decide to allocate surpluses. As the co-operative grows they may create reserves for further development of their co-operatives. Members also control the capital of their co-operatives. They should decide how capital should be raised and how surpluses should be distributed. When these surpluses are distributed to the members as a patronage bonus, it must be in proportion to their transactions with the co-operative.
4. Autonomy and independence:
Ø Co-operatives are autonomous, self-help organisations controlled by their members.
Ø If co-operatives enter into agreements with other organisations, including governments, or raise capital from external sources, they should do so on terms that ensure democratic control by members and maintain their autonomy.
Co-operatives should be autonomous and free from control by Government or any other external body. In most countries of the world governments decide the legislative framework under which co-operatives must function. These laws enable co-operatives to operate as legal entities and broadly protect the members and public interest. However, good laws ensure that co-operatives remain autonomous in the same way, as are private enterprises.
In the case of co-operatives entering into agreements with other organisations including the Government, such agreements should be on mutually agreeable terms and conditions.
5. Educations, training and information:
Ø Co-operatives provide education and training for their members, elected representatives, managers and employees so that, they contribute effectively to the development of their Co-operatives.
Ø Inform the general public - particularly the young people and opinion leaders - about the nature and benefit of Co-operation.
This principle emphasises the importance of educating and training co-operative members, elected representatives, managers and employees of a co-operative. It does not mean just distributing reading materials and correspondence but includes in educating and informing the members, elected representatives, managers and employees the values of the co-operative thought and action.
Education, training and information should be imparted by co-operatives on a regular basis. More emphasis should be given to training youngsters, potential leaders, politicians, public servants, reporters and educators about the advantages of the co-operative form of business. It is very important that if education, training and information are imparted regularly, it will go a long way in making co-operatives viable and sustaining it.
6. Cooperation among co-operatives:
Ø Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through
Ø Local.
Ø National.
Ø Regional and
Ø International structures.
This principle highlights the importance of co-operation among co-operatives. If co-operatives are to grow and achieve their maximum potential, they should do so by collaborating with other co-operatives, not only at the local level but also nationally, regionally and internationally levels. This principle is even more important as we enter the next century and the competition with other forms of business organizations increases.
7. Concern for community:Co-operatives work for the sustainable development of their community through policies approved by their members.
Co-operatives exist primarily for the benefit of their members. Since these members live together in communities, it is important that they play a role in developing those communities. This principle clearly emphasizes that co-operatives have a social responsibility in ensuring that the communities to which their members belong develop economically, socially and culturally. As in many parts of the world the environment is at risk, it is important that co-operatives also accept a responsibility of working together to keep their environment clean and free from pollution.
Conclusion: According to the cooperative principles, Cooperatives are formed to satisfy the needs of their members. They are voluntary, autonomous, self-help democratic organizations owned and controlled by their members. Membership in cooperatives is open and voluntary. Any person who is able to use the services and accepts the responsibility of membership may become a member without any discrimination. The whole system is controlled in a democratic manner. The members elect their representatives to manage the affairs of their cooperatives. The managers and the staff are appointed and removed by the cooperatives. They are accountable to the elected leaders/Board of Directors and in turn Board of Directors are accountable to the members (General Body Meeting). Every matter is decided democratically by majority of votes. There is limited interest on share capital and members share profit and loss based on their participation as users of the services provided by the cooperatives. Cooperatives also provide education and training for their members, elected representatives, managers and employees so that they can contribute effectively to the development of their cooperatives. They serve their members most effectively and strengthen the movement by working together through local, national, regional and international structures. They also work for the sustainable development of their communities in which they operate.
TheCo-operative Principles are the foundation for understanding co-operatives and their functioning. These principles make co-operatives distinct from other organizations. They provide standards to help decide whether an organization can be called a co-operative or not.
