Michael Lafleur, DBA
IMPLEMENTATION OF COOPERATIVE PRINCIPLES: CHALLENGES
AND FINANCIAL MANAGEMENT ISSUES
Principles are major
leading concepts, on which the internal legal institution of the cooperative is
based according to the specific historical and social conditions of the
cooperation development; the principles have changed, corrected and improved.
The cooperative principles
have a dual function, they:
–determine the value of the
cooperative;
– contribute to the
implementation of cooperative activity in the framework of specific
organizational forms;
Cooperative principles
represent a set of organizational, economic, ethical and other fundamentals of
the cooperative activity, it is inherent in sustainability, and their
immutability is not absolute but relative, theyare not
stable, inherent in all types and forms of the standard cooperative principles.
The main cooperative
principles are the following:
– Open and voluntary
membership;
– Democratic control using
the principle “one member of the cooperative – one vote”;
– Share capital of the
cooperative is created only by its members;
– Dividends on capital, if
any, should be limited;
– Cooperative profits are
distributed among its members in proportion to the volume of work carried out
by the cooperative;
– Care for the education of
the cooperative members etc.
Few studies have
attempted to boot from the point of view of the cooperative identity and offer
approaches and analytical tools for the cooperative reality. The model of
cooperative challenges summarizes and includes eight unique characteristics of
cooperative identity. This model includes four concepts: cooperative challenge,
strategic outcome, strategic action and the environment [1].
– A cooperative challenge concept in strategic terms
reveals a characteristic of the cooperative identity in showing the
interconnection between the particular features and how the cooperative’s
management is ruled in a competitive market environment.
– A strategic action concept is an activity conducted
by the particular cooperative in order to put the cooperative identity in
practice.
– The concept of the environment elements includes
contextual variables that significantly influence the choice of strategic
actions, but are beyond the immediate control of cooperation. A strategic
outcome, which is the result of a series of strategic decisions, should occur
on two levels of cooperation: for members and for the cooperative.
Each cooperative challenge, we presented above, is a
summary based on the interrelated values and principles, which follow the “good
practice”. That will effectively help to meet the challenges of cooperation.
The main strategic practices of the cooperatives (challenges) are presented
below:
1. The governance cooperation challenge.
2. The inter-cooperation challenge.
3. The challenge of cooperative values.
4. The challenge of the value of use.
5. The challenge of community development.
6. The challenge of cooperative education.
7. The challenge of products and services.
8. The challenge of capitalization and investment.
We intentionally would like to highlight the challenge
engaged in the financial management: the capitalization and investment
challenge. That particular cooperative principle deals with such obstacles:
return on invested capital is limited, the requirement of being a member in
order to take a position on the board, investment process and capitalization is
a challenge, especially as regards sourcing.
The practices listed on this challenge are the
practices of the excess return and levels of action. In general, most often a
cooperative does not usually return the full amount of funding excess, and most
important of its various means of funding, the results of the cooperation strategy
in terms of this particular challenge. Another practice identified is the
popularization of information, so that cooperative managers can develop tools
that explain more clearly the operation of the finance to members whose
understanding of the subject is not clear. Regarding the treatment of surplus,
the cooperative financial diagnostic practices are noted, so that cooperatives
set their own goals of financial ratios. Finally, the investment practices
aimed at the annual yield and various members’ actions complement the
cooperative capitalization activities.
When the cooperative develop
sound practices for investment and the challenge of capitalization, they get
strategic outcomes that affect the autonomy of management, such as the ability
to make decisions taking into account members’ interests. This further
strengthens their ability to ensure their own development, by providing the
necessary means to do so. It was further observed that instills members with a
greater sense of belonging and responsibility of the cooperative.
It
shall be recognized that an improvement in governance practices of a
cooperative brings not only individual benefits but favors the whole
cooperative segment [2] by improving security, reducing costs, furthering the
image and strengthening the cooperative spirit of participation, collective
action and belonging.
List
of references:
1. Lafleur
M. A model for cooperative challenges: evaluating
strategy based on eight features of cooperative identity [Electronic
resource] / M. Lafleur // Cooperative Grocer. – 2005. – ¹ 116.
– Available online at: www. cooperativegrocer.coop/articles/index.php?id=572.
2. Cooperative governance:
guidelines for good practices of financial cooperative governance. – Banco central do Brasil. –