The Evolution of Cooperative Principles

Rockdale Pioneers

14 Principles

1844

4 Principles

1937

ICA ICA 6

Principles 1966

7 Principles

1995

ICA

Lecture presentation for Cooperative Basic Course By: Jo B. Bitonio June 2012

Cooperatives were borne out of the free market economy and the many failures and injustices it has generated. The very first documented cooperative was in fact a reaction to the abuses of capitalism and it can be traced back to 1844 in Rochdale, England where a group of 28 weavers (27 males and 1 female) formed the Rochdale Society of Equitable Pioneers October 24,1844.

Source: http://en.wikipedia.org/wiki/Rochdale_Society_of_Equitable_Pioneers

As the mechanization of the industrial Revolution was forcing more and more skilled workers into poverty, these tradesmen decided to band together to open their own store selling food items they could not otherwise afford. With lessons from prior failed attempts at co-operation in mind, they designed the now famous Rockdale Principles, and over a period of four months they struggled to pool one pound sterling per person for a total of 28 pounds of capital.

As the mechanization of the industrial Revolution was forcing more and more skilled workers into poverty, these tradesmen decided to band together to open their own store selling food items they could not otherwise afford. With lessons from prior failed attempts at co-operation in mind, they designed the now famous Rockdale Principles, and over a period of four months they struggled to pool one pound sterling per person for a total of 28 pounds of capital.

Source: http://en.wikipedia.org/wiki/Rochdale_Society_of_Equitable_Pioneers

On 21 December 1844, they opened their store with a very meager selection of butter, sugar, flour, oatmeal and a few candles. Within three months, they expanded their selection to include tea and tobacco, and they were soon known for providing high quality, unadulterated goods.

On 21 December 1844, they opened their store with a very meager selection of butter, sugar, flour, oatmeal and a few candles. Within three months, they expanded their selection to include tea and tobacco, and they were soon known for providing high quality, unadulterated goods.

Little did the Rochdale Pioneers know in 1844 that their humble efforts to help themselves would have such impact. From the little shop which still stands on Toad Lane, the modern cooperative began its journey.

One of the lessons learned from the Rochdale Pioneers is that "helping people help themselves" is a strong and most enduring form of economic development. The world has certainly changed a great deal in 150 years, but the need for cooperation among people remains.

http://www.cooperativegrocer.coop/articles/2004-01-09/co-op-principles-then-and-now-part-2

In 1844,1845, and 1854 the Society published a series of "practices," which were the basis for what became known decades later as the Rochdale Principles:

Open membership. Democratic control (one man, one vote).Distribution of surplus in proportion to trade. Payment of limited interest on capital. Political and religious neutrality. Cash trading Promotion of education

Cooperative societies had existed before Rochdale has failed. It was to the credit of Rochdale Pioneers that they formulated a method that was capable of being standardized and became a “code of conduct” for succeeding cooperatives. The principles which they codified were as timely as ever and are still the standards with which present cooperative principles are based:

1. Voting is by members on a democratic (one member, one vote) basis.

2. Membership is open. 3. Equity is provided by

members. 4. Equity ownership share of

individual members is limited.

5. Net income is distributed to members as patronage refund on a cost basis.

6. Dividends on equity capital are limited.7. Exchange of goods and services at market prices. 8. Duty to educate. 9. Cash trading only.10. No unusual risk assumption.11. Political and religious neutrality.12. Equity in membership (no discrimination by

gender)

When the International Cooperative Alliance (ICA) was founded in 1895 it took upon itself that task of refining the cooperative principles and the further consolidation and expansion of the Cooperative Movement. The Alliance periodically reviewed the cooperative principles laid down in Rochdale and made two formal declarations of principles, the first in 1937

The 1937 review affirmed four vital principles: 1.open membership; 2.democratic control; 3.dividend paid according to business done; and 4.limited interest on capital

The 1966 review declared six essential principles:

1. voluntary membership;2. democracy; 3. limited interest on share capital; 4. distribution of surplus;5. provision for education; and 6. cooperation among cooperatives.

The third and final review was done in September 1995, at ICA’s 100th anniversary meeting produced the most comprehensive statement to date on the cooperative identity. The statement defines cooperatives, identifies shared values of cooperators worldwide and refines, restates and expands the 1966 principles. These principles are intended to guide cooperative organizations at the beginning of the 21st century.

The Statement of identity defines:

A cooperative as “an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically- controlled enterprise.”

The statement emphasizes important characteristics of cooperative enterprise which are:

a) Autonomy: the cooperative is as independent of government and private enterprise as possible; b) Association of persons: the definition deliberately does read an association of individuals. The term person embraces any legal definition of “person” which includes companies as well as individuals; c) Voluntary: members are free to join and leave at will, within the purposes and resources of the cooperative;.

d) Meet needs: the central purpose of the cooperative is to meet member needs, which can be purely economic, social and cultural;

e) Joint ownership and democratic control: f) The members own the cooperative on a mutual basis.

Decisions are made democratically by the members and are not controlled by capital or by government; and

g) Enterprise: the cooperative is an organized entity that typically functions in the marketplace and engages in the exchange of goods and services.

Seven Principles are listed in the 1995 ICA Statement as shown in Figure 9 on page 54. They are: Voluntary and Open Membership; Democratic Member Control; Member Economic Participation; Autonomy and Independence; Education and Training and Information; Co-operation Among Cooperatives and Concern for Community. The first three principles essentially address the internal dynamics typical of any co-operative; the last four affect both the internal operation and external relationships of co-operative principles.

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 their policies and making decisions. Men and women serving as 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 also organized in a democratic manner.

3. Member Economic ParticipationCooperatives 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 allocate surpluses for any of the following purposes; developing their cooperative, possibly by setting up reserves, part of which would at least be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.

4. Education, Training and InformationCooperatives 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.

5. Autonomy and IndependenceCooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, they do so on terms to ensure democratic control by their members and maintain their cooperative autonomy.

6. Cooperative among CooperativesCooperatives service their members most efficiently and strengthen the cooperative movement by working together through local, national and international structures.

7. Concern for CommunityCooperatives have a special responsibility to ensure that the development of communities- economically, socially and culturally- is sustained. They have a responsibility to work steadily for the environmental protection of their communities.

International Cooperative Alliance. Cooperatives Principles Alive: The ICA’s Seven Principles of Cooperative Identity in the Experience of Cooperatives in Metro Manila. Union of Metro Manila Cooperatives, Manila, Philippines, 2003.

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