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 .
– 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  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. –