Transcript Document

UNDERSTANDING COOPERATIVES
UNIT 2 - Cooperative Business Principles
Slides for Unit 2
Cooperative Definition Reviewed
A cooperative is a business owned and
controlled by persons who use its services.
Benefits are derived and distributed
equitably on the basis of use
• It is mainly distinguished from other
business forms by three contemporary
principles
S 2.1
Definition of a Principle
A basic idea defining special characteristics
S 2.2
Contemporary Cooperative Principles
• The User-Owner Principle
People who own and finance the
cooperative are those that use it
S 2.3
Contemporary Cooperative Principles
(Continued)
• The User-Control Principle
People who control the cooperative are
those who use it
S 2.4
Contemporary Cooperative Principles
(Continued)
• The User-Benefit Principle
The cooperative’s sole purpose is to provide
and distribute benefits to users on the basis
of their use
S 2.5
Rochdale Principles
Control
Ownership
1. Members vote on democratic
(one-member, one-vote) basis
2. Membership is open
3. Patrons provide equity
4. Equity ownership share of
patrons is limited
S 2.6
Rochdale Principles/Practices
Benefits
Other
5. Net income is distributed to
patrons as refunds on a cost basis
6. Limited return on equity capital
7. Exchange of goods and services
at market prices
8. Duty to educate
9. Cash trading only
10. Assume no unusual risk
11. Political and religious neutrality
12. Equality of sexes in membership
S 2.7
Traditional Cooperative Principles
Service at Cost
The cooperative’s operations are reduced to
an at-cost basis at the end of the fiscal year
when surpluses are returned to members
Obligations/Benefits Proportional to Use
Benefits are received in proportion to use of
co-op. Members also share responsibility
for providing financing (or losses) in
proportion to use
S 2.8
Traditional Cooperative Principles
Limited Return on Equity Capital
Members finance the cooperative in proportion to use.
Returns to their financial investment are secondary to
value of services.
Democratic Control
Member control recognizes that members can control
either through one vote per member or a voting system that
relates to the extent each member patronizes the
cooperative
S 2.9
Quote
“Important principles may and must be flexible.”
--Abraham Lincoln
S 2.10
Contemporary Principles Explained
User-Control
User-Owner
User-Benefit
1. Members vote on a democratic
or proportional basis and govern
their cooperative
2. Members provide capital to
finance their cooperative and
returns are limited
3. Cooperative provides needed
services and net income is
distributed to members as
refunds on a cost basis
S 2.11
International Cooperative Alliance
The International Cooperative Alliance is an
independent, non-governmental association which
unites, represents and serves cooperatives
worldwide.
The ICA was founded in London in 1895. Its members are national
and international co-operative organizations in all sectors of activity
including agriculture, banking, energy, industry, insurance,
fisheries, housing, tourism and consumer co-operatives. ICA has
more than 250 member organizations from over 100 countries,
representing more than 760 million individuals worldwide.
S 2.12