1. 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, or religious discrimination.
2. Democratic Member Control
Cooperatives are democratic organizations controlled by their members, who
actively participate in setting policies and making decisions. The elected
representatives are accountable to the membership. In primary cooperatives,
members have equal voting rights (one member, one vote) and cooperatives at
other levels are organized in a democratic manner.
3. Members’ Economic Participation
Members contribute equitably to, and democratically control, the capital of
their cooperative. At least part of that capital is usually the common property
of the cooperative. 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 the cooperative, possibly by
setting up reserves, part of which at least would be indivisible; benefiting
members in proportion to their transactions with the cooperative; and
supporting other activities approved by the membership.
4. 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.
5. 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.
6. Cooperation Among
Cooperatives
Cooperatives serve their members most effectively and strengthen the
cooperative movement by working together through local, national, regional, and
international structures.
7. Concern for Community
While focusing on member needs, cooperatives work for the sustainable
development of their communities through policies accepted by their members.
Property Rights and Cooperatives: 5 Property Rights Issues
- Free Rider Problem: untradeable, insecure,
unassigned. Non-members benefit; new members join; dilution of benefits.
Clubs with no dues
Solution: High degree patronage business - Horizon Problem: asset outlives the member’s
physical life. There is a disincentive to invest in long-term assets and
maximize current member interests
Big investments beyond those at day one
Solution: Have members in multi-generational farming families or family-owned businesses who think long term - Portfolio Problem: equity is not liquid; patient
capital; members may have more risk than they want.
Issue of risk – strategy
Solution: Members want patronage when farm profits are declining –co-op wants to make investments. Need to seek a balance and avoid risky investments. - Control Problem: Boards are principals and
managers are agents. They lack information.
Sometimes bad decisions are made
Solution: Build a board structure that yields the best board possible - Influence Costs Problem: Diverse objectives in a co-op based on type of farm, commodity, etc. Solution: Make sure you have high degree of patronage business and transparency
