Explain 'ECONOMICAL FUNCTIONING' in Cooperative Organization
Answers
Definition
A cooperative is a private business organization that is owned and controlled by the people who use its products, supplies or services. Although cooperatives vary in type and membership size, all were formed to meet the specific objectives of members, and are structured to adapt to member's changing needs. Cooperatives are formed by individuals who coordinate among themselves (horizontal coordination) to achieve vertical integration in their business activities.
Although people have been working together for their mutual benefit throughout human history, the cooperative form of business organization began during the Industrial Revolution. Cooperatives were useful for promoting the interests of the less powerful members of society. Farmers, producers, workers, and consumers found that they could accomplish more collectively than they could individually.
Cooperative Principles
The US Department of Agriculture listed three principles that uniquely characterize a cooperative organization:
The User-Owned Principle: The people who own and finance the cooperative are those who use the cooperative.
The User-Control Principle: The people who control the cooperative are those who use the cooperative. They democratically elect a board of directors. The board sets the overall operating policies, approves the annual budget, oversees its operation, and distributes the benefits derived from use of the cooperative to members. The board also hires professional management to handle the day-to-day operations.
The User-Benefit Principle: The cooperative's sole purpose is to provide and distribute benefits to its users on the basis of their use. While the goal of agricultural cooperatives is not to generate a return on investment, they, like all businesses, must cover costs and generate capital to cover expansion and unforeseen emergencies.
Other Principles
The International Cooperative Alliance is a world-wide association of cooperatives. The Statement of Cooperative Identity which it adopted in 1995 contains seven cooperative principles that are more socially-minded:
Voluntary and Open Membership
Democratic Member Control
Member Economic Participation
Autonomy and Independence
Education, Training and Information
Cooperation Among Cooperatives
Concern for Community
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