Co-operative Management | Cooperative | Board Of Directors

COCM 511- Management of Cooperatives and Legal Systems

Course Material

Dr.G.Veerakumaran Head of the Department

Department of Cooperatives Faculty of Dryland Agriculture and Natural Resources Mekelle University P.O.# 231 Mekelle, Ethiopia

March 2006

1) Course Title: Management of Cooperatives and Legal Systems 2) Course Code: COCM 531 3) Credit Hour: 3 4) Year & Semester: Year I/Semester I 5) Instructor: Dr.G.Veerakumaran 6) Methodology: Lecture sessions, case studies, role-play, seminars, assignments. 7) Course Objectives:  To enable students understand the importance of management and its function to promote the cooperative organization.  To improve students technical understanding of proclamation 147/1998, Rule No. 106 /2004 and FCC organizational regulations.   To acquaint students with cooperative laws in other countries To familiarize the students with other laws related to cooperatives

Course Content Part I Management Unit I Cooperative Management: Definition, Objectives, Relevance, and Uniqueness Unit II Cooperative Democracy: Structure of Cooperative Democracy, Measures to Make Democratic Control Effective, Board – Executive Relationship, Functions of the Board, Job Description of a Chief Executive, Member, Director, President, General manger. Unit III Decision Making in Cooperatives: Concept, Kinds, Process and Techniques Unit IV Criteria for Judging the Operational Efficiency of Cooperatives: Concept operational efficiency, Dimensions of operational efficiency, Criteria for measuring operational efficiency, Measurement Parameters of operational efficiency, Performance appraisal and Key Result Areas in Cooperatives Unit V Training Methods

Part II Cooperative Law Unit I Framework for Cooperative Law Unit II: ILO Recommendation 193 Unit III Salient Features of- Decree 44/1961-Proclamation No 241/1966- Proclamation No. 138/1978- Proclamation No. 85/1995- Proclamation No. 147/1998Proclamation no 402/2004. (Students’ Seminar topics- the source material would be given to them and they need to summarize in relation to the current acts) Unit IV Cooperative Societies Proclamation No. 147/98: Objectives -formation and registration- rights and duties of members- management bodies- special principles- assets and funds- audit and inspection- distribution of profitdissolution and liquidation- dispute settlement- miscellaneous; Elements of Cooperative Societies Proclamation Amendment No. 402/2004; Elements of Cooperative Societies Regulation No. 106/2004. Unit V Federal Cooperative Commission Regulations - Other laws issued by the federal and regional governments. Unit VI Cooperative Laws in other Countries- A comparison (Students’ Seminar topics- the source material would be given to them and they need to summarize in relation to Ethiopia) Unit VII Allied Laws: Important Provisions in the other laws related to cooperative marketing (Students’ Seminar topics- the source material would be given to them and they need to summarize in relation to the Cooperative proclamation) Selected References 1. Cooperative Management and Administration, ILO/COOP, ISBN 92-2-106319, 1988. 2. V.Kulandaiswamy, Text Book of Cooperative Management, Arudra Academy, Coimbatore, 2002. 3. Cooperative Management, http://www.rurdev.usda.gov/rbs/pub/cir4/cir4.htm 4. Appraising Mangers Performance, http://www.rurdev.usda.gov/rbs/pub/rr136.pdf 5. Hagen Henry, Framework for Cooperative Legislation, ILO, 1998

cornell. 1997.uk/downloads/Promoting%20Co-operatives.K.pdf 7. Method of Evaluation Sl. ILO. NewDelhi. Method 1 2 3 4 5 Mid term Examination Final Examination Assignment 2*10 Student's Seminar Group Discussion Total Maximum Marks 30 30 20 10 10 100 .coop. http://www. Ethiopian Commercial Code 1960. COOP TIMES. G. Cooperative Laws in Asia and the Pacific. Trainers Manual.6. www. http://ilo.Sharma.ac. Note: The student is expected to refer all the business relevant proclamations of Ethiopia. 9. Basic Training methodology-Materials for Training of Cooperative Trainers. Promoting Cooperatives-A guide to ILO Recommendation 193.No.law.coopnetaldia.org 8.edu/public/english/employment/ent/coop/laws/ 10.

K. Objectives.Part I Management Unit I Cooperative Management: Definition. “In fact they converge to make the cooperative society as an ideal instrument to promote the values which a democratic polity cherishes and at the same time they provide effective means to ameliorate the lot of the vulnerable and weaker sections of the community. If cooperative principles given a social content to the economic activities of an enterprise the principles of management make it possible to put the resources of the enterprise to the best use.V. and Uniqueness Cooperative Management The principles of management and the principles of cooperation as seen from the foregoing analysis have a complementary role. As aptly remarked by K. Relevance.” E. Mendoza: “Cooperative management may be defined as the efficient and effective utilization of the resources of a cooperative as a business organization for the purpose of serving the needs of its members within the context of the accepted cooperative principles. Taimni.” .” DEFINITION Watzlawick: “Cooperative management should be understood as a complex decision making process within the three levels of management pyramid which aims at achieving a proper balance of success of cooperative enterprise as a business unit as well as a social institution.

so that the organization is able to compete effectively. which will help the managers to avoid mistake and improve their practice. the improvement of the operational efficiency is the fore-most concern of cooperative management.  The creation of proper balance between efforts aiming at commercial success and those aimed at maintaining the institutional goals of the cooperative association.  Like any other management.The above definitions bring to fore the following features of cooperative management. viability. cooperative organization can achieve equilibrium.  The conduct of all the activities must be governed jointly by the two sets of principles namely. Thirdly. The efficiency and viability of a cooperative organization has no meaning unless it is able to coordinate the objectives of its members and translate the The organizational effectiveness is the direct result of the . Cooperative management aims at evolving methods and techniques on the basis of the principle of management. The soundness of its strength. and development member-loyalty and greater patronage. Secondly.  The overriding objective of cooperative management is to serve the needs of members. Objectives of Cooperative Management: Cooperative management has the following objectives: Firstly. cooperative management should constantly strive to achieve member satisfaction. By providing efficient service to the patron-members on economical terms. cooperative management aims at improving the viability of the cooperative society. growth potentials and the quality of the service depend on the viability. it seeks to achieve its aim by means of effective and efficient use of resources. It must acquire capacity to thrive as a business institution in its own right. and decisions are made at all the three levels of management pyramid. a) principles of management and b) principles of cooperation.  Cooperative management is a complex decision making process.

The object of cooperative organization is much more than improving the material standards of its members.  A full recognition of the socio-economic and political environment external to the cooperative system but having a bearing on the performance of the cooperatives. It draws resources and inputs from the environment. . Fourthly. and by taking up management development programme. The system concept of management is more relevant to cooperative management.  Identification of the different components of cooperative structure and their various attributes and  An inventory of the human and material resources available to the cooperative system. Ultimately it strives to lift them to higher social and moral standards and enable them to realize higher spiritual potential. Fifthly. cooperative management must also aim at ethical and moral development of the members. principles and techniques of management and systematically appraise their relevance in the context of their special goals and re conceptualize them so that training and development can be organized effectively. to understand the basic concepts. They are:  A clear enunciation of the goals.individual objectives into meaningful reality and make visible impact on the people who from the organization. Sixthly. which can be translated in terms of performance measures. cooperative organization must also strive for community acceptance by carrying out the social responsibilities expected of it. to fulfill the above objective it must develop organizational and management competence by professional sing management. There is constant interaction between the cooperative society and the larger system to which it is a part. The task of cooperative management is therefore. The system approach to cooperative management has four basic ingredients. transforms them into service and sends the gods and services into the systems. A cooperative society should be understood as a sub-system of the larger socio-economic system.

Relevance of Cooperative Management Both cooperative movement and the modern management movement emerged as by products of Industrial Revolution that took place in the middle of nineteenth century. They gained momentum in the beginning of the 20th century. Early cooperators and social reformers like Robert Owen and Charles Fourier had made significant contributions to the management thought. Outstanding management thinkers like P.F. Drucker, regarded them as great organizers and mangers. Both the management movement and the cooperative movement have spread rapidly and have universal relevance and coverage. The cooperative movement has spread to all fields of economic activities such as Banking, Marketing, Industrial Production and Distribution. Likewise, the modern management techniques are relevant to all type of organizations, irrespective of size and ownership. As has been stated by P.R. Dubhashi, “There is a kindred kinship between management and cooperation. If there is anything nearest to cooperation, it is Management because, is not the ultimate purpose of management promotion of cooperative effort?” In spite of this mutual compatibility there was very little meeting ground between these two movements. Each excluded the other in its development process and there was no interaction between them. The following were the significant factors, which created a chasm between the two. Firstly, cooperation originated as a labour movement, as a shield of the week and vulnerable; while the modern management had its origin in capitalism. Secondly, the cooperators, for a very long time believed in small society concept and stressed the honorary management. It was believed that the ideological supremacy will result in spontaneous and natural growth without any special effort for promoting efficiency. Thirdly, the management thinkers completely neglected the cooperative enterprise in the scheme of analysis of the management concepts, except some random references made by the authors like Chester Bernard and H.A. Simon and that too in a general sense rather than in a technical sense. The contemporary cooperative movement particularly in developing countries is at cross roads. They have to develop their organizational competence and operational efficiency,

by adopting the modern management techniques, which are universal. The modern concept of cooperation does not accept the efficacy of the ‘small society’ concept. Giant size organizations are not uncommon in cooperatives. When the organization grows in size, the need for scientific management gets greater significance. Besides, the cooperative sector is facing stiff competition from other sectors of the economy. The survival and growth of cooperative sector largely depends on the quality of their management. The cooperative movement has been given increasingly greater role in the economic planning particularly in the developing countries. Greater efficiency is called for on the part of the cooperatives to achieve such national goals. As a result of all these developments there has been a growing awareness among cooperators regarding the need for the application of scientific management in cooperatives. Only by bridging the management gap the cooperative sector can fulfill the tasks assigned to it. Cooperative Business Compared with Investor Owned Business In order to have a better understanding of cooperative management, it is necessary to understand the distinct features of cooperative business. The cooperative business can be distinguished form investor owned business in the following respects: 1. A private investor owned business is essentially a union of capital; a cooperative is essentially a union of people. 2. The former is an organization of investors; the latter is an organization of users. 3. The former is organized by entrepreneurs to attract and serve customers; the latter by people to serve themselves. 4. The former is controlled by majority of shares; and the latter by a majority of persons who are members. 5. In the former control by proxy in common palace, whereas in the latter proxy voting is rare and found only in those organization where it is required by general legislation.

6. In the former surplus earnings or profits are distributed as decided by the board of directors; in the latter they belong to user members and are distributed by the membership in annual meeting, usually as recommended by the board. 7. In the former invested capital is employed in three ways: to earn interest, gain profit and exercise control. While in the latter capital is permitted only for the first function. 8. In the former parliamentary action and constant vigilance are needed to prevent foreign domination. The latter system guarantees native control of enterprise. 9. In the former equity shares are generally traded freely and are priced at whatever the market will bring; in the latter they can be redeemed only by the permission of the board and at par value. 10. The former is a closed system; and the latter has a long record of openness and freedom of access.

Uniqueness of Cooperative Management
While applying the principles of management of one should not ignore the fact that the cooperative as a form of business organization possesses very distinct characteristics. It differs fundamentally in various facets of its make up as compared to the investor owned business, in the objectives (in-put), transformation process and services rendered (output). The principles of scientific management and the efficiency criteria commonly adopted in judging the business enterprises such as the effective use of human and other resources, the quality and value of the products and services supplied, viability, surplus generated, the value added to the assets, per se have only a partial relevance to the cooperative enterprise. As Mr. Dubhashi has aptly remarked, “the principle of efficiency is vital in the cooperative sector also. But in so far as the market mechanism and private enterprise, turns the principle of maximum efficiency into maximum profit, it becomes incompatible with the cooperative movement and needs modification”. Pro. George Lasserre had made this distinction in very clear terms. Cooperative cannot slavishly imitate captialsit enterprises even the best of them. The concept of efficiency as applied to the whole management, cannot be the same, because the aim is not the same.

These are a set of standards and settled rules of action. the organization and the employees each having . Weerman: “The proper application of cooperative principle is essential for the success of the movement.A capitalist or family enterprise aims at producing maximum profit for the owners. and any rational action pursued should be compatible with the principles. and a set of successful cooperative business practices have to be evolved. organizational goals. particularly when the principles are translated into legal norm. Complex Aims System: In the cooperative organizational set up there are distinct interest groups such as individual members. for the cooperative principles are those which are essential. Such a normative character of cooperative institutions imposes severe constraints and rigidity on the cooperative management. as stated by P.E. The cooperative management should strive to achieve maximum efficiency only within the framework of the cooperative principle. that is absolutely indispensable to the achievement of cooperative movement’s role”. decision process. cooperative group. The principles of cooperation constitute the vital ingredients and imperative coordinates of the cooperative organization and management. which impede their competitive efficiency. Each of the unique elements is explained below: Normative Character: As a social science. which have universal application. There is an element of ‘ought ness’ or compulsion. the principles of cooperation have to be integrated with the principles of management. In order to overcome such constraints. than positive. its efficiency therefore is measured by the ratio: Satisfaction of all kind Total Cost The corporate objectives. cooperation is more normative. Value structure and the method of appraisal of cooperative management are in many respects unique. its efficiency is reckoned by the ratio: Profit Capital A cooperative is formed with the aim of providing services for its member economic as well as well as non-economic.

democracy.e. creation of more civilized society and the salvation of social sins.’ In such integrated cooperatives the individual membereconomies. thrift and morals. The aims system of such a complex cooperative combine includes the following diverse influence: a) Personal individual aim system of every member b) The corresponding individual operational objectives for the single member economy c) The system of aims and the operational objectives of the cooperative group d) The operational objectives of the cooperative enterprise as such e) Personal individual aims of the management f) The aims of employees and workers g) The influence of macro-policy on cooperative development h) The influence of managers from secondary and tertiary bodies i) Decision making process adopted within the cooperative enterprise The cooperative management has the onerous task of harmonizing the diverse influence and coordination the complex aims system. The cooperative ideology draws its moral and social content from the reformist doctrine of Robert Owen.a distinct aims system.” Thus a cooperative society is both an enterprise and an association. The aims system is still more complex in respect of the ‘integrated type of cooperatives. “it is an economic organization set in a social framework. are organically linked with the latter. Superior Value Structure: Apart from being an economic enterprise. the father of cooperation. independence and self-respect.” . which are quite distinct from the cooperative enterprise. competition and exploitation. “Besides promoting material prosperity the cooperative movement aims at educational betterment. i. brotherhood and religion. The Christian Socialists too gave an ethical orientation to cooperation so as to make it an instrument of social ethics. The aims of these distinct interest groups have to be welded together by formulating over all aims system and evolving operable criteria for business decision making. social and moral entity as well. honesty. a cooperative society is an ethical. who advocated a ‘new moral world’ free from profit. To use Roymond firth’s language. The several aims system linked together with one another makes the operational objective and decision making process highly complex.

it is beset with practical limitation. directing and control in such a way that a fair balance between these two is achieved. Furthermore the production process also distinctly differs in cooperative enterprise from other forms of business. Distinct Economic Process: The economic process of transforming organizational objectives into product and service specifications significantly differs in cooperatives as compared with other forms of business. It is the responsibility of cooperative management to aim at success in both fields and to perform the management functions of planning. It follows that the successful cooperative management must involve both these aspects. “It is a business organization in which the components of ownership. the second type has certain uniqueness. “In one members are workers and shareholders simultaneously.This dual nature of cooperative system being at the same time an enterprise and an association calls for entirely a different approach to the management process.” In such societies the cooperative management’s tasks becomes complex. For. Of the two basic pattern of organization of producer’s cooperative viz. In the other case. The cooperative mangers need to involve more group of people . control and use are integrated by being all vested in one body of people. cooperative production society and cooperative service society. Integration of member economies with the cooperative enterprise objectives. In cooperatives there is close linkage between the ownership. control and use. organizing. The management decisions have to be made not only for member economies also. planning and pursuing a common operative policy and appraisal of the achievement by an appropriate feedback system thus becomes the crux of the cooperative management. the services rendered by cooperative organization is on the anvil of constant review and any lapse is prone to harsh and sensitive criticism. the members.” This sort of ownership-use-control vested with one group of persons who collectively are the members renders the managerial task of fulfilling the aspirations of such a group stupendous. Democratic Control: The democracy is the corner stone of cooperative management. Though it is an ideally suited form of management for ensuring member participation and motivation. the members possess individual enterprises and delegate one or more functions to the cooperative establishment which thus becomes auxiliary in character.

In such situations the role of the Board becomes . and making the decision process dynamic by a clear demarcation of the powers and functions of the Chief-Executive. Therefore cooperative manager has to develop methods and techniques to involve large number of people without decreasing efficiency. Another handicap in the cooperative management is that the Board of Directors of the Cooperative quite often lacks proper perception of their precise role. The foregoing analysis highlights the need for developing a management system appropriate to cooperatives by adjusting the management system to the cooperative organizational situation rather than adjusting the cooperatives to sophisticated modern management. Conflict between the objectives of member groups and the macro-objectives and the sacrifice of the former for the sake of latter is not uncommon in cooperatives. Harmony with Macro-Policy of State: Cooperation is an instrument of state policy and planning in most of the developing countries. As a result the Board either interferes with the executive management. wherever the Board is pliable it becomes a handmaid of the chief executive leading to quagmire of control. Such integration imposes certain severe constraints on the management of cooperatives. this mutual process requires the harmonization of the macro-policy of the cooperative groups. nebulous and counter-productive. Aside this. The success of cooperative management thus lies in making the democratic control coincide with efficiency by synthesizing the principles of management of corporate business and the goals of economic democracy and social ownership. The cooperative managers have the onerous responsibility of educating the leaders in the management decision making process and evolving methods to combine democratic control with managerial efficiency. As a result the decision making process tends to become wasteful and vexatious.in the decision process. Perforce. or performs only the watchdog function of voicing the member’s grievances or fritters away the time and energy in trivialities. where the state forges a symbiotic relationship with cooperatives by extending financial and administrative assistance and at the same time utilizing cooperative infrastructure for achieving development targets.

President. Member. Equality and Fraternity. Economic democracy when it is pure.Unit II Cooperative Democracy: Structure of Cooperative Democracy. decisions are taken by persons concerned or the representatives that they have designated. which sowed the seed of political reforms. Thus the cooperative democracy is essentially an economic democracy. Job Description of a Chief Executive. Democracy is a product of modern civilization. Functions of the Board. As such the concept of democracy is central to cooperative philosophy. Cooperative Democracy has two aspects i) Structural and ii) Operational. The demand for the people’s charter came from the working class people who believed that the working class condition could be improved only by a parliament elected by universal adult franchise. equality within the organization and participation in the organization process are the foundation of cooperative democracy. The Rochdale Pioneers took up the principle of universal suffrage from Chartist Movement and applied to our economic situation. all having the same right. Almost at the same time the French Revolution brought about far-reaching social reforms and extended the democratic concept to social fields by propounding the principles of Liberty. . It first emerged in the political field in the form of Chartist movement in England around 836. The principles of freedom of association. According to Paul Lambert: In the broadest sense economic democracy is partaking of persons concerned in the deliberations and decisions in the economic spheres. Board – Executive Relationship. Director. General manger Cooperative Democracy Cooperation is a people centered organization. completely excludes capital as a source of authority. Measures to Make Democratic Control Effective.

Structure of Cooperative Democracy Democratic control in cooperatives is exercised at three levels namely: the General Body. accompanied by financial statements. supervision and control of cooperatives. The structure of cooperative management may be pictured like a hour glass as shown in the diagram. 2) to decide on how any surplus of the year’s work can be used. Board of Directors and Chief Executive. division and amalgamation etc. The Board of Directors derives substantial powers for direction. being the executive head is responsible for guiding the operations and leading the organization to success. The Board of Directors derives powers and authority from general body on the one hand and delegates powers to a large extent to the chief-executive. other major changes like amendment of by-laws. They can leave the day-to-day administration to the Chief Executive and his assistants and refrain from interfering in their work.. The two-stages control machinery is created to exercise effective control. while at the same time keeping the organization at all times in the hands of member-patrons. The general body meeting concentrates on three main items of business: 1) to receive an approve a report of the year’s work. and 3) to elect a committee to direct the affairs of the society. The Board of Directors at the same time need not take detailed operating decisions. Besides the above routine matters. There must be greater scope for discussion and criticism. It is convened at least once in a year. For administrative convenience and effective control the general body elects a Board of Directors. The reports and statements presented in the general body should be broad and simple. They should not contain technical details and full facts. In order to ensure sound functioning the Board can review the progress periodically. . so that even the ordinary members understand them. The general body of members is the ultimate and supreme authority and supreme authority in the matters concerning the society. The chief-executive. must be approved by the general body.

Management Structure of Cooperatives Authority Members Board of Directors Accountability Chief Executive Middle-Level Employees .

fixes salaries within ranges established by the board.Structure of the Organization Responsibilities Functions Sets the society’s objectives: decides bylaws: exercises ownership control over the society’s growth. Manager of department General body Membership elects Uses the services of the cooperative. Elects president and appoints manager. provides capital for operation and expansion. the general departmental Board of directors Appoints General manager Manger of department Staff staff Responsible to the manger of the department. establishes operating procedures. provides the link between board and management. supervises and trains staff. provides factual information so that the board can make policy decisions. engages. Has the responsibility of enforcing board policies and providing guidance to the general manger between board meetings. Interprets objectives in specific details: formulates specific policies to achieve objectives: studies management reports and evaluates progress: provides leadership to management and membership: approves salary ranges for jobs at all levels. operates within the bylaws of the society and abides by its own policies. enforces operating procedures for the department. Provides services to the cooperative in the line with established policies and operating practices. provides specialized technical know-how for the department. has to acquire understanding of the society and technical know-how in the department. Manages the department. Responsible to the president between board meetings. supervises and trains staff. Responsible to manager for operations. . is responsible to membership for results of operation. studies board’s and auditor’s reports. reports to the board at meetings. elects capable directors. is responsible to the board for all actions. sets out jobs to be done. As chairperson of the board and ex officio member of all committees. Manages the business in line with board policies.

ineffective leadership. extending continuous support and showing genuine interest in the affairs of cooperatives. Members actual participation in the control of cooperatives include attending and participating in membership meetings. It is . In order to improve the member participation and involvement and to strength then the democracy following measures have been suggested by Herman Lam. 1. These meetings should in principle discuss all the important subjects meant for the final general assembly. Local Advisory Committee in the Sub-Region: When the cooperative society has several branches.Measures to Make Democratic Control Effective The democratic control will be effective only when there is active participation of members. formation of local committees will help to make democratic control more effective. members apathy and domination of vested interests. careful study of the reports presented. Several studies conducted in India and abroad reveal that the members’ participation has declined to a great extent particularly in large cooperatives. serving in one or more committees. In order to make the democratic control workable it becomes necessary to organize separate membership meetings in the sub-regions of the society. The active participation of member – patrons in the control and management is very essential for efficient functioning of cooperatives. inappropriate system of communication. The Committee should meet regularly and summarise the results of the society from the local membership point of view. Local Sub-Regional Members Meetings: When the organization is too large the membership meetings tend to become unwieldy. 2. contesting in election. The sub-regional meeting should not pass or reject reports and proposals but only convey to the General meeting the opinion of the local members. taking part in voting. In the sub-regional meetings the members should elect representatives to the general assembly and also the local advisory committee who interlink the members and the central Board. lack of loyalty. The factors responsible for poor participation of members include: illiteracy and ignorance.

Such reports are crucial in exercising effective administrative control. Sub-Committee: When the Board is large.also the responsibility of the local committee to canvass for more membership. 4. The by-laws must be formulated so as to avoid unnecessary political interference and vested interests. 3. 5. Control Committees: In each society it is necessary to form a control committee from among the members of the Board. Member Education: Democratic control can work well only when members are enlightened. Monthly Reports The monthly report presented by the manager to the Board meeting held periodically is the principal tool of democratic control. organize member education programmes and represent the problems of members to the Board. education programmes must be implemented effectively. The control committee will have to control the accounts and safeguard the assets of the society and to see that the Board is working efficiently in the interests of members. they have the right to control such aspects of the working of the society over which they have authority. Representation must be given to all sections and regions in the Board. it is convenient to divide the Board into different subcommittees for effective control. Though the subcommittee should not take decision on its own. Those who have served in the local committees and those who have taken part in educational and training programmes should be given greater opportunity in the elections. This gives a sort of specialization as each committee deals with one subject. They make the task of the Board easy. 6. They have the right to question the actions of the Board and they should also collaborate with the external or government auditors in their audit work. Election of Board Members: Elections to the Board must be conducted regularly. The significance of the figures presented in the reports must be Member .

operating expenses etc. These ought to be compared with the previous month’s performance and with the corresponding month of the previous year. It gives a total picture and it enables the manger and the Board of Directors to keep the business well under control. Receipts and Disbursement Statement: The Receipts and Disbursement statement prepared monthly gives a broad outline of the operations of the organization during a particular month. 1. 4. The manager must also report each month how much account receivable has been reduced or increased during the month and what efforts have been made to collect the accounts due for long.discussed and various measure to be taken for improving the business may be suggested on the basis of such reports. Operations for the month: A monthly statement of sale. estimating gross margin. production or other key operations of the cooperatives is necessary control device. The Board can exercise control through the following statements and reports. b) above three month and less than 6 month old. board members will get an idea of how the management is taking care of current obligations. which serves as the basis for preparing the balance sheet. 2. Accounts Receivable: The manager must be required to prepare the whole list of accounts receivable once in a month and present it to the Board. it may be for the following reasons: 1) the accounts receivable may be increasing 2) the business may be operated at loss or and take steps to curb this tendency. and c) accounts more than 6 month old. 3. If the performance is lower than the previous month the Board should take steps to remedy the situation. If the current payable show a tendency to increase. from month to month. The manager should also be required to classify the accounts receivable into three or more groups on the basis of their durations: for instance a) accounts receivable of less than three month old. Accounts Payable: By keeping an eye on this item. 3) the business may be expanded. It is an accurate and reliable statement. The Board should identify the reasons for increase in the account receivable .

they are seldom trained in business matters. amount of overdue and the period for which they are overdue. They are responsible for safeguarding the interests of members. Following are the respective powers and functions of the Board of Directors and ChiefExecutives. They derive powers from members and are accountable to them. Statement of overdue accounts should indicate the number of accounts overdue.5. the former as policymarking body and the later as executive head. appraising rather than controlling. Board of Directors – Their Functions They are a group of persons. the ultimate responsibility rests with them. professionally qualified managers. setting objectives rather than planning how they should be achieved. There is constant interaction between Board of Directors and Chief-Executive. Similarly overdue loans must be carefully watched. Clear demarcation of their functions and responsibilities is a pre-requisite for smooth functioning of cooperative democracy. They constitute a bridge between members and the mangers. establishing policy rather than administering.” . democratically elected. representing the general membership. Therefore. The Board is empowered to delegate the managerial responsibility to competent. “It is often characterized as exercising broad supervision rather than executing details. The Board of Directors in Cooperatives are representatives of member-users rather than big financial investors. maintaining the assets and exercising overall authority in the organization. Board – Executive Relationship The relationship between Board of Directors and Chief-Executive of cooperatives is a vital issue in the cooperative management. Though they delegate the powers. Fostering a healthy and constructive relationship is essential for the success of cooperative democracy. Control Committees: A statement of bad debts and overdue accounts will give a general idea about how much of the account receivable have become bad debts and how much of the doubtful debts have been colleted and what steps have been taken to collect.

2. 5.1. It should also provide a frame-work within which these policies and programmes could be carried out by managers and decide on the mainlines of activities. The Board always represents members’ interest as well as the organization to the public. 4. Setting up of organizational Goals: The Board is responsible for setting up organizational goals meant for achieving specific objectives. and interpreting the objectives. It should call for periodical reports and statements which would reveal them the results of the operations and the extent to which the organizational goals have been achieved. by means of good public relation. Systematic Appraisal of Operations: Systematic appraisal of the operations of the organization is another responsibility of the Board. 3. It is also responsible for making required change in the long term objectives. Maintain Public/Member Relation: It is the responsibility of Board of build a bridge between general membership and paid staff. Delegation of Authority and Responsibility: The Board should be careful in choosing managers with required knowledge and expertise since the Board members are lacking in knowledge about business and corporate affairs. One cannot be held responsible without being armed with adequate powers to make one’s own decision. The Board should realize the necessity of delegating responsibilities as well as authority to the managers. With such appraisals the Board will be able to exercise overall control over the management. . Establishing Policies and Programmes: The Board in its meeting should consider important policies and long-term programmes involving vital matters and approve them.

He is employed by the Board and is accountable to it. and not all sundry and insignificant details. 3. Assisting the Board: The Manager helps the Board in setting up realistic goals for the organization. D. He also provides information and assistance in formulation of policies and programmes. drive and effectiveness of the manager. Executing Policies: Manager is responsible for executing policies and accomplishing goals and objectives set up by the Board.Chief Executive – His Functions The Chief Executive is a key figure in the management structure of cooperatives. Furnishing Information to the Board: The manager should report periodically and should furnish information needed by the Board for controlling and appraising the operations of the organization and reviewing of progress. He is responsible for planning. He defines their functions and responsibilities and delegates powers that are necessary for the execution of the responsibilities assigned to his subordinates. G. He is expected to give only broad factors about over-all results. Employing Personnel and Delegating Powers: Selection of suitable personnel for different cadres is the responsibility of the manger. M. He is utmost important for cooperatives. coordination and control. He is in . He therefore should consider Board as his employer and recognize this fact in making all dealings with it. He coordinates the diverse influences exerted by members. 4. The success of the cooperative institution very much depends on the initiative. public and Government. In general he has to take all steps necessary for carrying out the programmes of the organization. 1. 2. employees. organizing. in different institutions. Following are the functions of Chief Executive.. M. The manager guides the affairs of the organization in its day-to-day works. He is variously called as : Secretary. customers.. direction.

if adhered to k will go a long way in establishing healthy management traditions and meaningful relationship between Board and the Executives. The manager and other personnel should keep themselves away from the group rivalries among Board and they should not take part in elections. . Sound Board Executive relationship will be destroyed if the board members individually dictate terms to manager or other personnel. is also a factor which promoted healthy relationship between Board and Executives. There should be a perfect understanding between board and executives. 1. Individual member can have no power unless such powers are delegated to him.a position to guide and advice the Board since he has first hand knowledge about the affairs of the organization. Following are the measures suggested. 5. 4. For smooth functioning of the cooperatives. The Board members should realize that they acquire power only when they are assembled is a formal meeting. From the foregoing. The board members should realize their responsibility and they should not use the cooperative society for their personnel progress or for any political gains. These guidelines or the codes of conduct. That means the board should confine itself to broad policy making function leaving the implementation to the managers. Board meeting conducted at periodic intervals. who should be given sufficient freedom to complete the task. 2. the Board members should work as a team and they should not allow the groupism to develop among themselves. The presence of ChiefExecutive is essential in all such meetings and discussions relating to business. analysis certain conclusions can be drawn and on the basis of which guide-line can be given to the Board of Directors and Executives. 3. 6. They should also understand their respective roles and refrain from interfering in the spheres of activities which fall outside one’s scope of authority.

 Help finance the cooperative. .  Participate in the activities of the cooperative.  Approve overall objectives and policies of the cooperative.  Assist in amending the by-laws. control and patronage of the cooperative to the end that it effectively fulfils its purposes (i.  Participate in electing and appraising the performance of the directors. for the cooperative to function effectively as a cooperative. Job Description of a Director Title Accountable to Core function Director Members of the cooperative To participate with the other directors in directing the affairs of the cooperative.Job Description of a Member Title Core function Member To participate in the ownership.  Explain or discuss the cooperative with other members and potential members. comments and needs to the cooperative.  Communicate complaints. each member should carry out the majority of the following responsibilities:  Patronize the cooperative.e. guided by the Cooperative Societies Act. meets the needs of the members) Responsibilities Different members will have a variety of interests in their cooperative.  Assess the performance of the organization – examine audits. by-laws and board policies. suggestions. However. so that it effectively moves to wards achieving the objectives of the organization.  Appoint auditors.

To participate jointly (and not to act individually) with the other members of the board of directors in carrying out the following responsibilities of the board:  Responsibilities  Establish the overall goals and policies.Relationships to  Members – leadership role. including the appointment of committees.  Approve major plans and programmes and capital and operating budgets.  General manager – at board meetings the general manager is a key resource and part of the overall management team.  Determine the job description.  Authorize changes in the assets of the organization. . providing an example and interpreting views and needs of members. and clearly define the responsibilities and the authority assigned.  Establish the organization of the board.  Recommend any by-law amendments.  Deal with applications for membership.  Recommend schedule of patronage refunds in accordance with the by-law. between board meetings the relationship is the same as for other members.  Staff – no special status beyond that of an informed member.  Approve the organization structure and salary schedules for all levels of the structure. establish the salary range and appoint the general manager. for example on committees.  Directors – acts as a team with the other directors.  Analyze and appraise progress in achieving objectives and goals. has authority as a director only in board meetings and as delegated by the board. and personnel policies and programmes for the organization. set the salary and appraise the performance of the general manager. for the direction of the cooperative.

give leadership in planning the year’s agenda of special items. and membership and public relations for the organization.  Be ex officio member of all board committee – receive reports and minutes. but not necessarily attend.  Establish and administer controls and regulations for the protection of members and creditors. other cooperatives.  Provide policies and programmes for the maintenance of a well-informed.  Support the cooperative.  Interpret and clarify policies and decisions of the board. Responsibilities  Act as chairperson of meetings of the board and of the executive committee. coordinating the activities of and giving leadership to the board of directors. .  Provide for effective communications.  Provide for effective relations and coordination with other cooperatives serving the area. Authorize repayment of member equities.  Perform the task of signing officer for the cooperative along with other appointed by the board.  Assist in the preparation of the agenda for board and executive committee meetings and ensure that adequate information is available for study by the board. liaising with the general manager and board of directors. local organizations and government. also. Job Description of the President Title Accountable to Core function President The board of directors To serve as the senior office-bearer of the cooperative. and engaging in communication with the members. effective board of directors.

facilities and other property of the society are properly safeguarded.  Maintain an effective organization structure. policies and programmes.  Play a leadership role with other cooperatives and in the community on behalf of the cooperative. with adequate staffing and provision for staff development. Maintain effective liaison with the general manager and the board of directors.  Interpret and administer policies established by the board and issue procedures to ensure uniform interpretation. .  Report to the members on behalf of the board of directors.  Take direct action to achieve goals in all aspects of the operation. Job Description of the General Manager Title Accountable to Core function General manager The board of directors To manage the operations of the cooperative in accordance with the guidelines established by the board Responsibilities  Advise and assist the board in establishing objectives.  Appoint and supervise immediate subordinates. seek approval of the board of directors for top management appointments.  Give leadership to the board including encouragement for board training. when this has not been otherwise delegated by the board.  Develop short.  Orient new board members for effective participation.and long-term plans and programmes with supporting budget estimates and other goals for submission to the board for decision. policies and goals for the cooperative.  Ensure that the finances.  continuously study trends and provide the board with information required for planning. insured and administered.  Represent the cooperative and explain plans.

Decision-making is a vital task to give the activities of the members and employees a goal and direction and to determine how best to use the material resources of the cooperative. and cooperate and coordinate effectively with.  Provide leadership and direction to all staff members.  Plan for personnel development as required to manage the society. other cooperatives in the community. According to George Terry: "Decision making is selection of one behaviour alternative from two or more possible alternatives". Kinds. Unit III Decision Making in Cooperatives: Concept. The managerial decisions may vary greatly according to the nature. where one is continuously engaged in choosing between alternatives. The board informed of progress and of results in comparison with goals in all areas. In the words of P. direction. Decisionmaking is a universal function of all the managers in every part of the organization." In the management of cooperative organization decision-making is the bounden duty of directors and managers both in the developmental sphere and in the functional sphere.F. Process and Techniques Decision-making is the essence of management so much so the management itself is understood as a decision-making science. The decision-making in a cooperative set up is a complicated task. The decision making should not only conform to rational choice and objective requirements under various decision situations. Drucker: "A decision is a judgment. significance and the . organization.  Maintain effective relations with members and general public. but it must also ensure that uniform action is achieved.  Participate in. It is a choice between alternatives. Management is identified with perpetual choice making. The decision-making is an integral part of the management process such as planning. control etc. there is proper participation and collaboration between members and employees in carrying out the decision. Keep.  Maintain liaison with the president.

The tactical decisions are the task of middle and lower level management. They are directed and coordinated at the higher levels of the enterprise.term importance and a complex character. They are based on strategic decisions and aim at their implementation. Strategic decisions have long . E. Tactical decisions are routine decision. Dulfer has classified the decision making in cooperative on the basis of the levels. Upper Management Level Middle Management Level Lower Management Level Extent of Decisions . which are directed at the regulation of limited fields of activity or shorter periods. They are goal decisions and bring about fundamental changes. Level Authorized to Make Decision Upper management level Kind of Managerial Decision Goal Decision (What is to be reached?) Means decisions (By what means?) Action decision (How?) Middle management level Lower management level Managerial decisions may also be sub-divided into strategic decision and tactical decisions.levels of decision.

analysing the problem. power and the expertise enjoyed by the individuals who make decision are the factors. The prestige. Process of Decision Making The decision-making involves logical and sequential steps. The technical service of experts may also be made available. direction issued by Board of Directors. deciding upon the best solutions. Drucker. The common . may be classified as programmed and unprogrammed decisions. The members of the group get a chance to voice their opinion. which contribute to individual decision-making. the decision-making may be classified as individual decision and group decision. developing alternative solutions. suggestions from members and employees or by analyzing the system of operation and accounting. It involves less risk and may be delegated easily.F.Strategic Decision Tactical Decision On the basis of the method." 1. Unprogrammed decisions are nonrepetitive. They cannot be assessed in quantitative terms and involve greater risk. "the decision making have five distinct stages: defining the problem. the decision making. converting the decision into effective action. which have to be followed in any scientific decision-making process. Individual decision-making is used in small organizations at times of emergency and in circumstances where the group has little knowledge. In a cooperative organization a manager can get new problems from the orders of superiors. Based on the person making the decision. Group decisionmaking is participative decision making. The quantitative nature of these decisions facilitates computer programming of these decision. It makes use of collective wisdom of several individuals. According to P. Developing the Problem A manager must continuously scan the environment to identify and perceive the problems of development. The group decision may take either of the two forms: Group advisory or Group deterministic. Programmed decisions are routine repetitive decisions.

is the saying. internal as well as environmental managerial or technical. Such goals make the decision purposeful. All the variety of factors and situations must be taken into account and their complex ramification must be understood. Such disentanglement of pertinent factors is necessary to keep the time and cost factors within the limits. "He who considers too much will perform too little". Such facts and information are particularly needed • • • for fixing the objectives to be able to work to attain the objectives to measure the results of the enterprise activity The information and data obtained must be analysed logically. For instance if the management decision-making pertains to increase in . Analyzing the Problem Effective decision-making depends largely on the availability and usability of facts. The relevant and influential factors must be distinguished from other factors. 2. which involve crucial decisions. tangible as well as intangible. for example/increasing the turn over. because considering too many factors leads only to confusion. The objectives of decision-making must be specified as exactly as possible. are: tomorrow • • • • Extension of the new sphere of activity or new line of business Increasing the volume of business Taking measures for quick and positive development of the enterprise Identifying the limiting factors which slow down development and measures to overcome them. Every decision must contribute to specific goal. It must be practicable or applicable to the problem situation.problem areas in management. After the perception of the problem the aim or objective of decision must be formulated. They should not be too simplified. While decision making we have to consider all critical factors.

social criteria. technology. manpower. quantitative characters which are to be attained. The quantitative aspects of the decision must also be assessed. Every course of action must be judged on the basis of the cost and risk involved.turnover. that course is probably wrong. Dulfar has suggested the following decision. E. If there is only one course of action for a particular goal. the necessity of maintenance of work places. The efficiency of the managerial decision-making lies in developing as many alternative solutions as possible. economic. The futurity of the decision and its relation to various aspects of business must be assessed properly. Developing alternative Solutions For reaching the decision goals. there must always be more than one choice. The reality of the goal largely depends on the available means. which is available to a cooperative organization. have to be analysed. distribution system and promotion strategy etc. political objectives of superordinate bodies Based on the above criteria the decision must be arrived at by competent bodies particularly in respect of cooperative organizations. criteria. for example. money. the necessary speed in solving the problem. where inner democracy has to be preserved. price. all related factors such as demand. For facilitating the objective decision-making in a cooperative organization. purchasing power. 4. economic criteria. Development of the alternative ways is based on the factors such as material. Every decision must have the democratic sanction. 3. compared and analysed. The managerial analysis and cost benefit analysis must be made to determine the quantitative outcome of the decision. with regard to expenditure and result. • • • • • • inevitable national economic necessities. for example. etc. . The choice of a course of action depends on that factors which is considered critical.. Deciding upon the Best Solution The alternative courses of action must be classified.

Inventory Control. Generally problems concerning time. to be effective. cost or amounts of profit can be optimised by using Operational Research. Decisions are made effective only by their implementation. Network Analysis. hunches or even the past experiences. The managers must ensure that the decisions are carried out. Furthermore each decision is interrelated to other aspects and extends beyond the boundaries of one department or section. as one decision is likely to lead to a series of decisions. . which transforms the mental action into physical action. must be implemented within the specified time. Converting the Decision into Effective Action This is a crucial stage. The mangers must recognize the chain reaction in the decision-making. Some of the newer techniques like Operation Research. In the process of implementation the possible errors must be gauged. Operations Research is helpful in many areas of management decision-making. which include Games Theory. Linear Programming and Decision Tree will improve the quality of decision-making. Production Planning and Control etc. Precise estimation of a given decision can be made only by applying sophisticated decision techniques. Decision-making in today's complex business world cannot depend on intuitions.5. Problems best suited for Operation Research are those involving recurring decisions. Operation Research Operation Research is a mathematical technique used in decision-making. Operations Research can determine the lowest amount of materials to satisfy the production requirements. It is a scientific method of solving problems by using mathematical models and probability theory. The time factor must also be taken into account in the implementation. and remedial actions and corrective measures must be taken as quickly as possible. Techniques of Decision Making The scientific decision making process must be based on the systematic process and scientific methods. For example if the problem is in inventory. Risk Analysis. when and what to order and how to dispose the inventory most profitably. It is a scientific method based on the quantitative data and determines the optimum means to reach the goal. Economic Order Quantity. Each decision.

certain amount of risk and uncertainty is involved. or the production manager may be asked to estimate the probability of the rate of returns that the company may hope to earn by means of a new investment. Decision Tree One of the best ways to analyze a decision is to visualize all possible directions that actions may be taken from a decision point. This technique is known as 'decision tree'. That branch which provides highest net returns with lowest cost is chosen as the course of action to adopt. scheduling. It can be used when all the relationships are linear. To give a simple example. which gives the highest profit. The technique consists of drawing a branching network diagram showing various decisions and their probable outcomes and calculating the net present value. sales manager may be asked to estimate the probability of returns by adopting a sale price. before committing the company to a long-term capital expenditure. that is when the cost of producing one or more units is directly proportional to the present cost of production. Based on this the probability of achieving a given return on capital is estimated. It is therefore wise to evaluate how seriously the decision is at risk from such errors. It is useful in the selection of one alternative course among many. Linear programming can be used only with the aid of computers.Linear Programming It is a mathematical technique. Risk Analysis Every major decision that a manager makes is based on forecast. . In choosing each course of action. in order to increase production it is possible to decide between adding new machinery or having additional shifts of production by engaging additional labour. resource allocation and distribution and cost analysis. For example. The probability of the range of errors is used to calculate the risk profile of the project. which consists of expressing the operations of a group of complex interdependent variables by developing mathematical formulae. Every forecast is likely to be inaccurate when it incorporates the interaction of a number of critical variables. Linear programming is applied to problems of production planning.

operation efficiency is organization specific. size and operation of the specific cooperative organization. may prove to be nebulous. But the one major limitation in this type of analysis is that not always the benefits flow from a project can be measured.” The Dictionary of Social Sciences has defined Operational efficiency as “the ability to achieve the desired goal with economy of time and effort in relation to the . “Efficiency” as “the ratio between input and output. which ignores the nature. The ‘Operational Efficiency’ is an elusive concept. cost and the resulting pleasure. expenditure and income. Unit IV Criteria for Judging the Operational Efficiency Of Cooperatives.Cost Benefit Analysis It is the systematic comparison between cost of carrying out a service or activity and the value of the service or activity by quantifying as far as possible all costs and benefits. Performance appraisal and Key Result Areas in Cooperatives Concept: Efficiency is the watchword of modern management. which has several connotations. and the need to achieve a blend of success in both. This apart. In capital project evaluation one assesses all the expected cash outflows and inflows for a project. namely. It is of special importance to cooperatives because of their twin elements in their objectives and operation. Association and Enterprise. There are several intangible benefits such as higher morale. efforts and results. Such intangible factors tend to be ignored in the cost benefit analysis. less pollution etc. and on that basis the rate of return the project can generate is arrived at. An umbrella concept. The Encyclopedia of Social Sciences has outlined. It is therefore necessary to understand certain broad criteria for measuring the operational efficiency of cooperative organizations.

“the effectiveness or competence with which a structure performs its desired functions. It involves the elimination of waste and . which are concerned with the specialized technical know how in the respective field of activity. Dr. A. Technical Efficiency: Technical efficiency pertains to technical competence of an organization. improving Technical Efficiency can increase productivity. we may arrive at four distinct aspects of the concept.amount of work accomplished. It is in this sense the concept of efficiency must be understood in social organizations like cooperatives. For this purpose norms have to be evolved in each technical aspect for improving Technical Efficiency.Jesdanwhlla has defined Operational Efficiency as. which is a measure of the quality of relationship an organization has with its environment. Similarly in each area of specialization. it is the ratio between input and output. is concerned with how well an organization performs a given technology. the concept of efficiency includes the effectiveness. The criterion of efficiency dictates the choice of that alternative which produces the largest result for the given application of resources. Thus the efficiency in the broader sense includes not only the efficiency in the transformation process but also the efficiency as realized in the environment. while in a broader sense it includes organizational effectiveness. rationalization etc. It may relate to the improving productivity of industrial work process such as mechanization. While organizational efficiency in a narrow sense. In other words technical efficiency relates to such matters. Dimensions of Operational Efficiency When we closely examine the concept of operational efficiency in the context of a cooperative organization.” According to the above definition. In other words.” According to this definition operational efficiency means the achievement of the target specified by minimum time and effort. B. Alternatively it also implies minimization of inputs required for realizing a given output of goods or services. Economic Efficiency: The Economic Efficiency on the other hand implies the realization of maximum output from given resources.

C. In cooperatives the operational efficiency is better judged externally. the criteria of efficiency are more complicated in its application to non-commercial than to commercial organizations. In the opinion of H. operational efficiency in cooperatives should not be viewed in the restricted sense of economic and technical aspects. Simon. It reflects the managerial and organizational efficiency more clearly in terms of results and performance. In short economic efficiency lies in judicious use of financial and other resources and devising cost effective methods of operation. In other words the ability of an organization to bring about desired changes in the environment is one more dimension of the concept. D. production performance. Functional Efficiency: It is the resultant efficiency realized from the first two aspects of operational efficiency. Social Efficiency: Every organization is a part of larger environmental system. In general the extent to which larger social purpose is achieved through the organization such as price control.  Efficiency with Reference to Members: It is an attempt to measure efficiency from one basic criterion: to what extent the members have been benefited from the cooperative and to what extent members’ aspirations and needs have been met? A cooperative cannot claim to have attained efficiency unless it fulfils the above criterion.reduction in high cost. will indicate the social . fair distribution etc. Often the goals of an organization extend beyond itself having environmental implication. In the cooperative organization the concept of efficiency should be understood more from the non-profit point of view.A. Therefore. From this angle two more aspects of efficiency should be included as far as cooperatives are concerned. marketing performance etc.  Efficiency with Reference to Society: Efficiency in the broader sense is the measure of quality of relationship an organization has with environment.. The performance or results are again determined by functional performance such as financial performance.

Efficiency in Cost: a) Operational cost (as % to sale) b) Unit cost c) Standard cost . Ability to achieve technical efficiency and economic performance Ability of the cooperative to maintain the cooperative character by observing cooperative values such as democracy. 4. 5. which have been developed for precise measurement and evaluation. formulating programmes and exercising effective control Measurement Parameters of Operational Efficiency The criteria of Operational Efficiency discussed so far can be converted into a set of measurement parameters and ratios. 2. business profit sharing and democratic control Ability of the cooperative to achieve larger social goals like promoting employment. 3. Criteria for Measuring Operational Efficiency of Cooperatives From the above analysis specific criteria may be identified for measuring the Operational Efficiency of cooperative enterprises. autonomy etc.responsibility of an organization. 1. evolving strategies. They are: 1. Ability of the cooperative to satisfy the members’ aspirations by meaningfully relating the enterprise objectives with individual goals Ability of the cooperative to enlist the participation of members in such aspects as equity. generating income and improving the standard of living in the larger community 6. Its impact in the environment such as waste recycle and pollution control will reflect its environmental friendly character. Ability of the cooperative to improve the managerial efficiency by setting realistic goals. Efficiency in Output: a) Achievement of Target b) Input-output ratio c) Capacity utilization d) Value addition 2.

Solvency Tests : a) Debt-equity ratio b) Own equity to total Capitalization c) Coverage ratio i. Operating Profit Interest on L. Service to Members: a) Member Turnover No. of People leaving No.T. of members joining + No. Profitability : a) Return on sale b) Return on investment c) Percentage of gross profit to sales d) Percentage of net profit to sales 4. Liquidity Testes (Ratios): a) Current assets: Current Liabilities b) Liquid Assets: Current Liabilities c) Percentage of receivables to assets d) Percentage of receivables 5.e. of Members Leaving No..3. of Members at the beginning + at the end/2 X 100 . of Members at the beginning + at the end/2 X 100 b) Drop out No. Liabilities 6.

finance. On the other hand every organization performs the organizational functions such as operation. performance establishes the link between the two. It is assessing the net outcome of the business. material and manpower and employees them in the production of certain services and outputs. Again the resultoriented appraisal has three aspects: .c) Service Surplus Average price differentials X Total Volume of Business done with members d) Patronage Refund TPR X MVB MPR = TVB MPR = Annual Patronage Refund due to a Member TPR = Total amount Allocated to Patronage Refund TVB = Total Volume of Business MVB =Volume of Business Contributed by a Member Performance appraisal and Key Result Areas in Cooperatives The goals of every organization are realized by means of performance and results.. is the key for success or failure of any organization. Every organization on one hand mobilizes inputs and resources like money. This kind of appraisal is known as result oriented appraisal. which is responsible for performance in different functional areas. marketing etc. Result Appraisal Usually the result achieved is the basis of appraisal. The management. There are different kinds of appraisal which are discussed below: 1.

Whether the new products have been launched in time? Was training programme successfully completed by personnel department? These are the examples of objective centered appraisal. While setting objectives it must be ensured whether the objectives are practical and attainable? Are they compatible with the overall objectives and plans of the company? Are they measurable? 2. the acid test of executive performance is the profit. Method Appraisal It is the most commonly used form of appraisal. Methods are the direct means of achieving of results. comparable to profit and loss centers.a) Profit Appraisal: The highest form of result in any business is the attainment of profit objectives. The results are often long term while the methods applied are short term. Profit becomes the yardstick of the operational efficiency of finance. For making the objective centered appraisal a success. production and marketing. The cost centered appraisal is more universally applied than the profit-centered appraisal. cost appraisal has special significance to cooperatives. The cost centered appraisal is closely related to cost standard and performance standard evolved in different operations like finance. It focuses on the methods employed in management. which is the responsibility of superiors. Therefore. branches or the regional offices are the cost centers. Being non-profit organization where in profit cannot be the right basis of appraisal. Methods are the means for achieving the goals of an organization. The objective centered appraisal is based on the prior establishment of various achievement goals. enterprise interest and national interest. it is necessary to set meaningful and clear objectives in advance. In most organizations production and marketing are the important cost centers. Only by means of profit an organization can serve shareholders interest. Method appraisal is necessary for judging the . whereas in some other organizations. c) Objective Centered Appraisal: The next level of results is that which measures the achievement of objectives. production and marketing. b) Cost Appraisal: Looking backwards the next level of appraisal is the Cost centers are measurement of cost at various cost centers of business.

a pattern of desired managerial qualities has to be determined first. in judging one’s personality one has to consider many important desirable qualities like enthusiasm. it is necessary to take into account only exceptional qualities. In other words. Secondly appraisal has to be done by examining whether individual manger possesses these qualities.performance from the management process adopted and techniques used. This is the most difficult aspect of appraisal. While making personality appraisal. if all the qualities. initiative and self-confidence. Personality is the sum of individual traits and behavior and is more comprehensive in character therefore. the average rating may conceal many significant qualities. which are real strength or weakness of one’s personality and rate them. relevant or irrelevant are taken into consideration for rating. Personality Appraisal Sometimes it is called behavior appraisal. motivation. it is difficult to separate methods from skill and work habits. While evaluating the methods. For meaningful appraisal of personality the following factors are to be taken into consideration. The method appraisal will have to examine the following:  Does the manager use company policy as a basis of decision-making?  Whether there has been proper delegation of authority?  Whether there has been consultation and teamwork?  Whether right procedures have been established?  Whether the decision making process is sound? As far as cooperatives are concerned the method appraisal has greater significance and it has to be examined whether the democratic and participative process have been followed. morale. First of all desirable qualities of one’s personality relevant to the job has to be listed. 3. Therefore. They all go hand in hand. .

the performance of which is essential for achieving the goals of the organization. External situations. 4. It should aim at capitalizing the strength and ignore weakness. The performance of cooperatives should be evaluated based on the internal planning and control mechanisms like budget. have to be spotted out. It aims at isolating those areas. It rather simplifies the management process. opportunities and challenges and the ability of the organization to cope up with the environmental changes should be taken into consideration in the appraisal of cooperatives. time. Vital value areas in which certain vital value decisions like quality. Appraisal of Cooperatives A cooperative organization is an integrated system. Key result areas have to be identified. cost standard etc. should examine the following issues:  The first and most crucial question is whether the net income of the members increased over the period of operation? If so what is the magnitude of increase and what is the contribution of cooperatives by means of their activities and programmes to the increase? . Further the ability of cooperatives to develop the members is another vital aspect of evolution. Evaluation of any cooperative. which need special attention.Personality appraisal has to be done by means of appraisal interviews and objective analysis of success and failures. It avoids mangers being overwhelmed with problems and trivial matters. The success of appraisal lies in identification and selection of critical spots and focusing attention on them. Management by Exception The performance appraisal must necessarily adopt the principle of exception. Critical areas where often the failure is caused or problem areas. according to Gupta and Gaikwad. are involved have also to be noted. The appraisal must be positive in the sense it must reveal the strength and inherent potential rather than pointing out weakness. performance etc.. It permits a manger to find solutions to problems that need his action and avoid dealing with those matters that are handled by subordinates. which adversely affect the results of the organization.

production methods etc. planning and control? And to what extent a sense of responsibility and accountability have been cultivated in them?  The fifth question is to what extent the policy of government on cooperatives have changed? And to what extent various welfare programmes and sectoral development programmes have been helpful to the cooperatives and their members?  The sixth question is what is the new technology of production such as machinery. The second question is to what extent the member resources has been mobilized in terms of human material and financial resources?  The third question is whether the activities of the cooperatives were really integrated with the need structure of members? To what extent the cooperatives moved away from pure mercantile approach to the advanced integrated approach?  The fourth question is how effectively the board of directors plays its role in policy formulation. span of control etc. equipment. available to the cooperatives? And what is the extent of product diversification and by-product development in the cooperatives?  The seventh question is what are the likely new markets for the products of cooperatives? And what changes have been introduced in the marketing strategies of cooperatives?  The eighth question is how effectively and efficiently the management played its role in planning and executing the cooperatives activities? And what is the performance of cooperative with reference to the targets and budgets?  The ninth question is whether the organization structure of the cooperatives such as division of work. are sound and are appropriate for efficiency and effective operation?  The tenth question is whether the financial arrangement and facilities are adequate? And whether member share capital contribution and deposits are satisfactory? And whether capitalization and investments are safe and secure? ... line of authority.

The principle as accepted by the ICA and the cooperative movements in countries of Africa. education needs to be defined in a very broad sense which includes academic education of more than one kind but much besides. and employees and of the general public. Every phase of experience. It aims to provide the trainees learners with such attitudes. it is stated as under: “All cooperative societies should make provision for the education of their members.” Cooperative Training Cooperative Training is here defined as those training activities that are organized to improve job performance of the cooperative staff and of government employees engaged in support and supervision of cooperatives. The concept of cooperative education becomes clearer when it is stated as one of the basic Principle of Cooperation and has worldwide acceptance.Unit V Training Methods Cooperative Training-Some Concepts Co-operative Education For the purpose of Cooperation. knowledge and skills that are necessary for him/her to carry out work efficiently. It includes both what people learn and how they learn it. in the principles and techniques of cooperation. however. officers. Less and less in the contemporary world can education be limited to what is learnt in schools and colleges at special periods of people’s lives. Cooperative concept is of education as a life long process. Education v/s Training . widens their outlook. develops their faculties and skill. which adds to people’s knowledge. both economic and democratic. trains them to work harmoniously and effectively with their fellows and inspires them to fulfill their responsibilities as men or women and citizens can have educational significance for Cooperation.

Educationist differentiates education from training. MDT aims at maximizing managerial effectiveness and personal adjustment. Education on the other hand. It is essentially a process to create the capacity to grow and allow others as well to grow. Training refers to the communication of specific skills. It at the same time. grow and improve their abilities to perform management task in a progressional way. MDT includes to the process of educating and developing employees so that they have knowledge. Achievement Values Operationally defined. growth and development of learners. It aims at the development of individuals’ whole personality. Training process is likely to be less effective and useful for an individual and organization if the individual is not interested nor motivated enough to learn. autonomy and feed back. Training Experience . Development Development is a process which not only inculcates skills-vocational and general but also encourages and improves the ability to teach and train one and others. Thus development is aimed at through the process of training. skills. personal/social interaction etc. attitudes and understanding needed to mange in future. the achievement value of an individual was the importance that she/he attaches to a particular job activity or personal activity (including hobbies. aims at optimizing human resource development in an organization. task significance.) or any other pursuit. refers to imparting of knowledge and attitudes which contextual and serve as necessary ‘floor’ for understanding and practicing skills. It is structured and stratified and can be communicated objectively by one person to another. Motivating Potential Motivating potential has been defined as a degree to which a job has a potential to motivate an individual to work in terms of skill and variety. Management Development (MD) MD encompasses the whole – a complete process by which mangers as individuals learn.

measurable knowledge and . the following main target groups can be identified for communication. working productively in teams. Technicians. children. a new salesperson how to sell her firm’s product. Special groups such as women. It may also be noted that cooperative education by its nature tends to be interpersonal ideological and metrological. Managers and other employees iv. or a new supervisor how to interview and appraise employees. rural poor (as prospective members) v. Training might thus mean showing a machinist how to operate his new machine. variety. Board members and other leaders iii. They promote group morale organizational efficiency and leadership qualities. General Public vi.Step Training and Development Process We can conveniently think of a typical training or development program as consisting of five steps. It requires people who are capable of analyzing and solving job-related problems. Target Groups In any cooperative organization. Methods are mostly participative. convenience. and the employees of primary coops is the most important element in enabling the coops to perform their tasks and ultimately to become self-reliant in management and funds. and timeliness. Its approach methods and techniques are social and business oriented. education and training on a regular basis: i. The Training Process Introduction Training gives new or present employees the skills they need to perform their jobs.It is the perception of the training process as a whole and its different specific aspects – growth adjustment and development to gain knowledge and skills. Training is moving to center stage as a means of improving employers’ competitiveness. The purpose of the needs analysis step is to identify the specific job performance skills needed to analyze the skills and needs of the prospective trainees. The expansion of training’s role reflects the fact that “the game of economic competition has new rules. The Five. customization. and to develop specific. Thriving today requires that the firm be fast and responsive. as summarized in the Figure 1. it’s no longer enough to just be efficient. Consultants and Researchers Cooperative education of members. And it requires responding to customers’ needs for quality. and “switching gears” and shifting from job to job as well. Cooperative training may involve skill development improvement of insight and performance of employees’ personnel. Meeting these new standards requires a work force that is more than just technically trained.” In particular. Members and the active members ii. board members. youth. democratic and group oriented.

5. Label or identify each feature of the machine and /or step in the process. perhaps with a quick “well done. To train employees. 2. If possible. instructional design step. exercises. the actual content of the training program is compiled and produced including workbooks. Use a variety of familiar examples when presenting material. 2. Trainees learn best when correct responses are immediately reinforced. therefore. Trainees learn best at their own pace. Try to use terms and concepts that are already familiar to trainees. Second. People learn best by doing. Next there may be a third validation step in which the bugs are worked out of the training program by presenting it to a small representative audience. At the start of training. make sure it is easy to transfer new skills and behaviors from the training site to the job site: 1. First. it is useful to know something about how people learn. .” 3. motivate the trainee: 1. Provide adequate training practice. Third. and activities. Maximize the similarity between the training situation and the work situation. 4. 2.performance objectives. Try to provide as much realistic practice as possible. Organize the material so that it is presented in a logical manner and in meaningful units. Some suggestions based on learning theory follow. provide the trainees with a bird’s-eye view of the material to be presented. 3. using techniques like those discussed in the following chapter. In the second. let trainees pace themselves. the training program is implemented. Use as many visual aids as possible. Knowing the overall picture facilitates learning. Fifth. it is easier for trainees to understand and remember material that is meaningful: 1. Training and Learning Training is essentially a learning process. 3. there should be an evaluation and follow-up step in which the program’s successes or failures are assessed. Fourth.

as well as their attitudes and personal motivations.Document the learners’ immediate reactions to the training. complement each other.Figure 1 Five. 2. • Make sure all materials. are written clearly. 3.Note supervisors’ reactions to learners’ performance following completion of the training. examples. film.Steps in the Training and Development Process 1. and participants’ workbooks. or tape-to guarantee quality and effectiveness. . Implementation • When applicable. such as video scripts. methods. Behavior. and activities. Evaluation and Follow-up • Assess program success according to: Reaction. and skills. 5. This is one way to measure the degree to which learners apply new skills and knowledge to their jobs. 4. Learning.Use feedback devices or pre-and posttests to measure what learners have actually learned. Needs Analysis • Identify specific job performance skills needed to improve performance and productivity. leaders’ guides. • Analyze the audience to ensure that the program will be suited to their specific levels of education. exercises. Validation • Introduce and validate the training before a representative audience. • Use research to develop specific measurable knowledge and performance objectives. media. experience. Instructional Design • Gather instructional objectives. • Carefully and professionally handle all program elements-whether reproduced on paper. boost success with a train-the-trainer workshop that focuses on presentation knowledge and skills in addition to training content. Base final revisions on pilot results to ensure program effectiveness. and blend into unified training geared directly to the stated learning objectives. Organize them into a curriculum that supports adult learning theory and provides a blueprint for program development. description of and sequence of content.

is another OJT technique. But this technique is also widely used at topmanagement levels.Training Techniques After you have determined the employees’ training needs. Apprenticeship training is a structured process by which individuals become skilled workers through a combination of classroom instruction and on-the-job training. and there is no need for expensive off-job facilities like classrooms or programmed learning devices. and designed the program. Here the employee is trained on the job by an experienced worker or the trainee’s supervisor. running a machine by observing the supervisor. say. . from mailroom clerk to company president. There are several types of on-the-job training. It is widely used to train individuals for many occupations including electrician and plumber. Job rotation. It is relatively inexpensive. Special assignments similarly give lower-level executives firsthand experience in working on actual problems. gets some onthe-job training when he or she joins a firm. and it is essentially the type of training new medical interns get during the several years they spend working in hospitals after graduation. A description of the most popular training techniques follows. Training Techniques After you have determined the employees’ training needs. It usually involves assigning new employees to experienced workers or supervisors who then do the actual training. in which an employee (usually a management trainee) moves from job to job at planned intervals. The position of assistant is often used to train and develop the future top managers. The method also facilitates learning since trainees learn by actually doing the job and get quick feedback about the correctness of their performance. At lower levels trainees may acquire skills for. In many cooperatives OJT is the only type of training available. Virtually every employee. The most familiar is the coaching or understudy method. the training program can be implemented. On-the-Job Training (OJT) means having a person learn a job by actually performing it. OJT has several advantages. trainees learn while producing. set training objectives. set training objectives.

and experienced worker is simply told to “go train John. Have the learner go through the job several times. Correct mistakes and. find out what the learner already knows about his or her job or other jobs. checking work from time to time against quality and quantity standards. 2. there are several trainer-related factors to keep in mind when designing OJT programs. 3. Step 3: Performance Tryout 1. Gradually decrease supervision. 4. (Often. 3. 4. or those in which errors are likely to be made. if necessary. 3. 4. Go through the job at a slow pace several times. Step 4: Follow-Up 1. 5. and do it before they become a habit. Have the learner do the job gradually building up skill and speed. Explain why he or she is being taught. Step 2: Presentation of the Operation 1. Again go through the job at a slow pace several times. Explain quantity requirements. . Show why the learned method is superior. encourage questions. You. explain the key point. materials. the trainer. The trainers themselves should be carefully trained and given the necessary training materials. tools. Put the learner at ease-relieve the tension. Go through the job at the normal work pace. explaining each step. explains the difficult parts. Explain the why of the whole job and relate it to some job the worker already knows. let the work begin. A useful step-by-step job instruction approach for giving a new employee on-the-job training is as follows: Step 1: Preparation of the Learner 1. slowly. 5. Designate to whom the learner should go for help if he or she needs it. 6. Compliment good work. but don’t abandon him or her. run the job at the normal pace. Correct faulty work patterns that begin to creep into the work. 2. 2. As soon as the learner demonstrates ability to do the job. Create interest. explaining each step to you. Place the learner as close to the normal working position as possible.However. Have the learner explain the steps as you go through the job at a slow pace. encourage the worker until he or she is able to meet the quality/quantity standards. 4. do some of the complicated steps the first few times. 2. and trade terms.”) Experienced workers who are chosen as trainers should be thoroughly trained in the proper methods of instruction-in particular the principles of learning and perhaps the job instruction technique. Familiarize the worker with the equipment. instead. 3. Between operations.

if you have a list of items. Simultaneously pull cutter and safety releases 8. . each in its proper sequence. key Points None Carefully read scale-to prevent wrong-sized cut Make sure paper is even-to prevent uneven cut Make sure paper is tight-to prevent uneven Do not release left hand-to prevent hand caught in cutter Do not release right hand-to prevent hand from being caught in cutter Keep both hands on corresponding releases-to avoid hands being on cutting table Keep both hands on releases-to avoid having hands on cutting table Make sure cutter is retracted. Set cutting distance 3. Shut off motor Lectures Lecturing has several advantages. The first . Place paper on cutting table 4. . while the key points show how it’s to be done-and why. list all necessary steps in the job.” Keep your conclusions short. Start motor 2. This step-by-step process is called job instruction training (JIT).Job Instruction Training Many jobs consist of a logical sequence of steps and are best taught step by step. “I really don’t know why I was asked to speak here today. For instance. as when the sales force must be taught the special features of a new product. Grasp safety release with from being left hand 6. the second . It is a quick and simple way of providing knowledge to large groups of trainees. they may involve considerable printing expense. While written material like books and manuals could be used instead. Push paper up to cutter cut 5. start by saying something like ″There are four reasons why the sales reports are necessary. . keep both hands away from releases None . Here is an example of a job instruction training sheet for teaching a trainee how to operate a large motorized paper cutter in a Cooperative Printing Press. Just summarize your main point or points in one or two succinct sentences. Wait for cutter to retract 9. For instance. don’t open with an irrelevant joke or story or by saying something like." Don’t start out on the wrong foot. . To begin.. Be alert to your audience. The steps show what is to be done. Retract paper 10. Some useful guidelines for presenting your lecture follow: Give your listeners signals to help them follow your ideas. Grasp cutter release with right hand 7. . Steps 1.. Alongside each step also list a corresponding “key point” (if any). and they don’t permit the give and take of questioning that lectures do. Watch body language for negative signals like fidgeting and crossed arms.

Dozens of businesses issue catalogs listing audiovisual programs on topics ranging form applicant interviewing to zoo management. make sure to rehearse under conditions similar to those under which you will actually give your presentation. Eliminate bad habits. 3. Write out clear. Because the . Control your hands. such as when teaching procurement of milk by the tester. Consider using them in the following situations: 1. you can make your own. At a minimum you should look at each section of the audience during your presentation. and videotapes can be very effective and are widely used. Talk from notes rather than from a script. and so on.Maintain eye contact with the trainees in the program. The communication links are established either by sending specially “compressed” audio and video signals over telephone lines or via satellite. Practice. Use a mike or talk loudly enough so that you can be heard by people in the last row and if necessary repeat questions that you get from trainees from the front of the room before you answer. Make sure everyone in the room can hear. . there are several things to keep in mind before getting up in front of the camera. films like Mandhan have been used as a basis for discussing the organizational problems of cooperatives in their Training Institutes. for instance. Audiovisual Techniques Audiovisual techniques like films. or you can have a production company produce the video for you. Beware of distracting your listeners by jiggling coins in your pocket or pulling on an earlobe. . At AMUL Cooperatives. Given that videoconferencing is by nature visual.” Videoconferencing allows people in one location to communicate live with people in another city or country or with groups in several other cities. When there is a need to illustrate how a certain sequence should be followed over time. then your back. then your pockets. If you have the time. 2. a means of joining two or more distant groups using a combination of audio and visual equipment. interactive. It has been defined as “. When there is a need to expose trainees to events not easily demonstrable in live lectures. legible notes on large index cards and then use these as an outline rather than memorizing your whole presentation. closed-circuit television. Videoconferencing is an increasingly popular way to train employees. audiotapes. There are three options when it comes to video: You can buy an existing videotape or film. Get in the habit of leaving them hanging naturally at your sides rather than letting them drift to your face. and remote. When the training is going to be used organization wide and it is too costly to move the trainers from place to place. Audiovisuals are more expensive than conventional lectures but offer some advantages. such as a visual tour of a factory or open-heart surgery. Putting your hands near your face can block your voice projection and also give the impression that you lack confidence in what you are saying.

Avoid focusing just on one group at one remote site (if there are several) and avoid presenting just to the video camera and not to the in-house participants. Programmed Learning Whether the programmed instruction device is a textbook or a computer. programmed instruction can also facilitate learning since it lets trainees learn at their own pace. Therefore. In terms of the principles of learning listed earlier. On the other hand. put lighting in front of participants to avoid shadows. Putting new assembly-line workers right to work could slow production.training is remote. for instance. the main advantages of flight simulators are as follows: . Vestibule or Simulated Training Vestibule or simulated training is a technique in which trainees learn on the actual or simulated equipment they will use on the job but are actually trained off the job. Vestibule training may just place in a separate room the equipment the trainees will actually be using on the job. and (from the learner’s point of view) reduces the risk of error. provides immediate feedback. The main advantage of programmed learning is that it reduces training time by about one-third. Project your voice and speak clearly. trainees do not learn much more from programmed learning than they would from a traditional textbook. it aims to obtain the advantages of on-the-job training without actually putting the trainee on the job. programmed learning consists of three functions: 1. the cost of developing the manuals and/or software for programmed instruction has to be weighed against the accelerated but not improved learning that should occur. and when safety is a concern-as with pilotsvestibule training may be the only practical alternative. keep yours free of jargon and needlessly complex words. Providing feedback on the accuracy of his or her answers. 3. In pilot training. flashy jewelry or heavily patterned clothing. Have all participants introduce themselves. Arrive at least 20 minutes early. or problems to the learner. Presenting questions. facts. However. it often involves the use of equipment simulators. A sampling of other hints would include: Avoid bright. Allowing the person to respond. for instance. Therefore. Test all equipment you will be using. Adjust lights (if necessary and if possible). Vestibule training is virtually a necessity when it is too costly or dangerous to train employees on the job. particularly if people at the remote site have a different native language. it’s particularly important to prepare a training guide ahead of time. Remember that excessive physical movement will cause distortion of the video image where compressed telephone transmissions are being used. 2. specifically a manual the learners can use to keep track of the points that the trainer s making.

Computer-Based Training In computer-based training the trainee uses a computer-based system to interactively increase his or her knowledge or skills. of course. the general management development process consists of: 1) Assessing the company’s needs (for instance. The absence of the conflicting air traffic and radio chatter that exists in real flight situations allows for total concentration on the business of learning how to fly the craft. Learning efficiency. While vestibule or simulated training doesn’t necessarily have to rely on computerization. and rotational assignments professional programs like Ethiopian Management Institute Programs. controlled environment. and the cost of not having the aircraft in regular service. We will turn now to some specific training and development techniques in wide spread use today which could be adopted to top Managers/leaders of cooperatives. This includes savings on maintenance costs. OJT is still . 2) Appraising the mangers’ performance. computer-based training almost always involves presenting trainees with computerized simulations and the use of multimedia including videotapes to help the trainee lean how to do the job. For this reason. Even if an organization has a well-developed off-the-job training program. or increasing skills. The ultimate aim of such development programs is. to enhance the future performance of the organization itself. changing attitudes. fuel cost. or to make the firm more responsive).Safety. and then 3) Developing the mangers themselves Developing Managerial and Supervisory Abilities There are many techniques and approaches in use today for furthering managerial and supervisory abilities and for meeting the developmental needs of employees. On-the-Job Training Methods Although on-the-job training (OJT) methods are considered more useful for skills training. OJT also forms an important part of managerial and supervisory development. Money. For convenience. and university programs like executive MBA programs. to fill future executive openings. pilot cost. Management Development Management development is any attempt to improve managerial performance by imparting knowledge. It thus includes in-house programs like courses. these techniques can be divided into two categories. coaching. The cost of flying a flight simulator is only a fraction of the cost of flying an aircraft. on-the-job and off-the-job training methods. Crews can practice hazardous flight maneuvers in a safe.

and mentoring. and evaluate progress toward those goals.” For example. The major OJT methods are coaching. In addition. Such assignments are not intended to prepare the manager for a career in production or sales. inform employees what is expected of them. particularly to proved and element of practicality to the training. the understudy should be able to perform at about the same level as the experienced manger. The effectiveness of understudy assignments depends on the willingness and ability of the higher-level manger to share experience and to transfer knowledge to the understudy manger. Sequencing these assignments so that the inexperienced manger is faced with progressively larger responsibilities can result in effective training.often necessary. rotations and transfers. Improved performance change is supported by using positive feedback and reinforcement. The understudy manger normally progresses from performing rather mundane. coaches train employees to fill in during absences and prepare them for promotion. A variation of the understudy approach involves placing novice mangers on certain committees. Rotations and transfers are often based on an analysis of career paths. These experiences should lead to better human resources decisions and recommendations. Coaching Coaching involves frequent helping activities on the part of a superior toward a subordinate. and discipline. mangers hired to work in the human resources department may be required to serve stints as production supervisors or salespeople. the manager is placed in a position that carries similar authority and responsibility but in a different part of the firm. particularly when the manager perceives the activity as a waste of time and effort. understudy assignments. The following is an excellent statement of what the superior should do in the role as coach: Coaches are mangers who help employees grow and improve their job competence on a day-to-day basis. Coaches set challenging goals. Eventually. detailed tasks to more advanced work. such as in hiring. Coaches also appraise performance in a regular and objective manner. The best committees for such assignments include a mixture of experienced and inexperienced mangers. Rotations and Transfers Rotations and transfers are designed to prepare mangers to take on additional responsibilities by providing them with experience in different areas of the firm. Understudy Assignments Understudy assignments involves assigning an inexperienced manger to work for a more experienced manger. that is. However. creating artificial committees or limiting assignments to low-level committees can be counterproductive. often on an “assistant to” basis. Many rotations and transfers are considered lateral promotions. the varied assignments can help the personnel specialist better understand the unique problems and needs of mangers in other operating departments. The new position can be outside the manger’s “specialty. whose interaction results in a coaching type of situation. Rather. training. .

Devil’s advocate: to provide challenges and to give the trainee practice in asserting ideas and being influential 4. and what interests and long –term aspiration they have Several guidelines can help ensure a successful mentoring program: 1. the mentor. what skills they possess. 2. Provide mentors with information about the mentoring role. Off-the-Job Training Methods The general nature of managerial and supervisory development requires that much or the training be performed off the job. Avoid pairing up people who seem to be clones of each other. or a mentor can meet with a small group of four to six protégés.Mentoring According to the American Heritage Dictionary. Give mentors recognition and visibility 5. and to transmit organizational culture 3.’’ In contrast to the coaching function performed by an employee’s immediate superior. In such programs. Seminars and Lectures Most management and supervisory training programs include seminars and /or lectures. All the off-the –job training methods discussed in this section can be conducted in –house (but off the job) or by outside firms that specialize in training. 3. Encourage mentors and trainees to negotiate realistic expectations. Coach: to support trainees in finding out what is important to them. Mentors can play several valuable roles: 1. Sponsor: to widen opportunities for special assignments 2. and the organization. more and more firms are establishing formal mentoring programs. managers who wish to be mentors indicate their interest in this additional activity and are given a specific assignment. a mentor is “a wise and trusted counselor teacher. These guidelines can help organizations avoid potential problems and can increase the possibility that the mentoring program will be rewarding for the trainee. Both seminars and lectures involve assembling a group of . There will be more growth for both parties if they can look at different ways of doing things. Smaller firms typically can not justify the cost of doing much of this kind of training themselves. Although informal mentoring occurs daily in all types of organizations. but encourage them to develop their own style and approach. Make sure that mentor participation is voluntary and that potential mentors have a realistic picture of the time involved and problems that might emerge. 4. and urge mentors to make clear what they can and cannot do. particularly at the beginning. to create learning situations with hypothetical problems. The group approach has the potential of the group becoming a learning team whose members can also coach each other. Teacher: to help solve real problems. Keep the trainee’s supervisor informed 6. or both individually and as a group. Mentoring can be on a person –to person basis. In –house training is most often conducted by larger firms that need a large and on going supply of managers and supervisor.

such as forecasting the price of key raw materials. models can provide participants with sufficient realism to allow practice applications without undue risk that the organization’s operations will be disrupted or that the firm will lose money. a videotape followed by small group discussion. Four approaches can provide the trainees with practice in making managerial decisions. Although no computer model can completely simulate an actual business situation. the group leader generally focuses on coordinating and motivating discussion among the group members. the leader presents material in a classroom lecture manner. the main objective is to provide an opportunity to derive insights from the dynamics of the sessions and from the feed back of other participants. however. wage rates. The trainee then analyzes the situation and makes a decision. gaming simulations (or management games) can be used. such as case discussions. and a two-hour ‘’lecture’’ session might include a lecture followed by discussion. Laboratory Training Laboratory training: Can be described as experience-based learning workshop that utilize one or more approaches. As indicated. First. and inventory size. and are given scores as they progress through a series of changes in the economic environment. although seminar groups tend to be smaller than lecture audiences. and group reports. The knowledge and insight from such training are often supplemented by lectures. Trainees typically receive feedback about their decisions or actions. In other forms of laboratory training. sale of stock. These are management development exercises in which participants are given background information. for example.In some forms of training. and perhaps roles to play. In lectures. role plays. and /or relatively unstructured group discussions . computer simulation models can be developed to simulate or approximate various business situations. Second. may be based on assigned readings. The content. The simulation program generally provides the trainee with information about a specific type of decision. After receiving the trainee’s decision. In seminars. computer simulations. management games or problem-solving exercises. and the group members tend to focus on the acquisition of knowledge. Another example-not computerized –is a consensus exercise in which members of groups make individual decisions and then attempt to improve their . instructions about rules and conditions. the simulation program can calculate the outcome and provide feedback to the trainee. most training and development programs use a variety of methods. the major objective is to apply specific managerial and supervisory techniques to making decisions and taking action in simulated work situations.trainees and a group leader. One example would be a complex computerized game in which competing groups make a series of management decisions such as product price.

people who are neither working in the same unit of an organization nor have a reporting . Third. case studies involve providing the trainees with written or videotaped descriptions of decision-making situations. Because of the self. but this term is frequently misapplied to training other then T-groups. Fourth. developing more effective interpersonal skills. meeting under the guidance of trainer. of approximately ten to twelve participants. and learning from the perception and reactions of others. Further. The case is subsequently discussed. usually involve small groups. for example. and probable decision outcomes. Such an exercise is used to highlight the advantages of and problems with consensus decision making and to provide a laboratory in which participants can examine group dynamics.individual scores through effective group interaction. except that there is a strong emphasis on learning about effective group development and processes. and that participation be voluntary. Since each role player brings his or her own personality to a given role. role playing tends to be more appropriate for problems and decisions having to do with human relations. a form of laboratory training. are often based on this method. with emphasis normally on the trainees’ analyses. it is very important that T-groups be conducted by highly qualified professionals.disclosure and potential stress involved.) The groups are largely unstructured in the sense that there is a very flexible agenda and a minimum of formal leadership. implications of those decisions. learning how to communicate feelings and perceptions clearly and in constructive ways. all participants experience the realistic variability that managers actually encounter in real job situations. and then each assumes and acts out the role of a specific person. The discussions are essentially unguided by the trainer. Executive MBA programs. Participants are typically provided with a specific situation that they must analyze. decisions. (This type of training is also called sensitivity training. T-Groups T-groups (derived from the term training groups). it is recommended that these groups consist of ‘’strangers’’ that is.

the extent to which participants can translate these outdoor experiences to their relationships and performance back on the job is a crucial matter. In most wilderness programs. the learning takes place in a wilderness area involving such activities as river rafting. Group discussions and sort lectures are usually included in both types of programs. or scaling obstacles. In particular. Making a decision about the issue. which must or should be delayed. mountain climbing. a permanent conference center is used for both indoor and outdoor learning. 2. Delaying a decision about the issue. such as handling employee complaints. which is important enough in most managerial jobs to justify the cist of the training. team-oriented task outdoors and then return indoors to debrief the experience. Outdoor-Based and Wilderness Programs In recent years. For example. Behavioral modeling emphasizes positive reinforcement for participants demonstrating appropriate behaviors during the role playing. The objective of in-basket training is to help trainees determine which decisions can be made quickly. Although outdoor and wilderness programs enjoy considerable popularity. and other items that a manger might find in the in-basket upon arriving at work. letters. As in perhaps all experiential and laboratory learning. and which should be management. The trainer and the group then analyze the responses to see whether any improvements can be made. participants may undertake some challenging physical. and building leadership and teamwork skills. increasing self-confidence and risk taking. their contribution needs to be studied carefully. This approach may consist of six to twelve modules for small groups in a series of two-or three-hour sessions spread over a few weeks or months. and then having the participants practice the behavior through role playing. behavioral modeling usually addresses only useful and effective practices. In-Basket Training consists of giving trainees a set of memos. In-basket training is also useful for teaching good time management. or 3. with debriefing occurring at the campsite. a significant number of companies have involved executives and other employees in outdoor-based and wilderness programs that have such objectives as fostering individual growth and development. The trainee is required to respond by 1. Whereas other training approaches often address both effective and ineffective management techniques.relationship. Behavioral Modeling Behavioral modeling (sometimes called interaction modeling) consists of presenting or showing participants a particular behavior or way of doing something. Referring the issue to someone else in the organization. much . In outdoor-based programs.

self-administration. co-use and co control their cooperative society). self-responsibility) and democratic control (“one member = one vote”). co-administer. o Economic contribution as a condition for membership and equitable participation in the economic results independently of the amount of capital invested. o Self-determination (i. Part II Cooperative Law Unit I Framework of cooperative legislation Cooperative principles The ILO and the ICA. race. training and information. o Identity principle (the members co-finance. co-own. . This is incompatible with any attempt to impose members. The interpretation of the open door principle. i. and the efforts made to modify the culture of organizations to accommodate the learning. the only two universal organizations that promote the development of cooperative societies. self-help. have elaborated the following cooperative principles. social origin. o Limited interests on capital (de-emphasized role of capital). o Voluntary open membership within the limits of the social objective defined in the byelaws of the cooperative society in question and the right to freely withdraw. the voluntary nature of the program. political affiliation or religion must take into account the associative character of cooperative societies.e.e. The free will of the members to work together constitutes one of the keys of their motivation.depends on the skill of the trainers. o Education. negative and positive non discrimination as regards gender. o Service to the members and concern for the community.

such as the dissipation of natural resources. Undoubtedly international and regional. the non-mastering of certain technologies and the growing anonymization of decision making procedures etc.The ICA added this last principle of "concern for the community" during its Congress. This explains why these principles. forces aim at limiting the margin of their autonomy through cooperative legislation. consequently. held in Manchester in 1995. questions linked to the quality of life. elaborated on three decades ago were not always respected. However. . governmental and non-governmental cooperation in cooperative reforms is working in favor of a universal consensus on these cooperative principles. require that the interests of the members of cooperatives be constantly redefined. with the absence of the ideological divide of the world attitudes have changed. The ICA is a non-governmental organization whose decisions cannot be imposed upon states. the well being of the community stems from that of the members of cooperatives. at the same time. and the ILO recommendations do not have the mandatory character of its conventions. a country which does not respect the principles established by the ICA and the ILO. The cooperative movements benefit from this evolution even though. not only risks losing the support of these organizations and. these cooperative principles do not legally bind the legislator. This does not mean that the debate on the question if cooperatives should exclusively serve their members or if they should also serve their communities is re-opened because nothing prevented the members of a cooperative in the past from working in a voluntary manner in favor of their community According to the cooperative ideal. An international customary cooperative law is emerging. but it also risks losing the possibility of remaining or becoming a member of these organizations. Nevertheless. Whether emanating from the ICA or the ILO. and many countries now consider themselves more at risk by not adhering to universally agreed principles. that of others. Thus.

the rule of law. The redefinition of the role of cooperatives must be accompanied by a fair redistribution of the assets and the debts of the dissolved or restructured societies. 2. taking into account.The birth of an authentic cooperative movement can only become effective once the old system has been discharged. After decades of interference in the affairs of cooperatives and in times where the living conditions of disadvantaged people in a number of developing countries are further deteriorating. Apart from exercising the functions of registration.The gradual transfer of tasks to the cooperative movement means that government personnel will have to be retrenched. because of its temporary and subsidiary character. This statement needs three clarifications: 1. the state must not withdraw completely and instantly. The state will have to take into account the problems related to this. It determines the legal nature of the cooperative law and restrains the possibility to grant cooperatives preferential treatment.It goes without saying that the .For new and genuine cooperatives to develop without hindrance. private property as well as a clear distinction between the public and the private sector according to the principle of subsidiary. the state in a market economy must not interfere in the economic affairs of private agents and must maintain favorable conditions for their development. the state must ensure the respect for human and civil rights. cooperative societies need a favorable political framework. Being democratic. The first should be conceived and applied alongside the cooperative policy as such. political and administrative factors In order to thrive. free access to national and international markets. This type of relationship between the state and cooperatives in a market economy is not cooperative specific. The current development model is based on economic and political freedom.Socio-economic. deregistration and general normative control. in particular. the free choice of one’s economic activity. the responsibility of the state in the past errors while preserving the interests of the creditors. cooperative policy needs to be complemented by a policy of disengagement of the state and of promotion of cooperative societies.

The administration of cooperatives by the state must be as restrained as that of the private sector in general.The private character of cooperative law should thus prevent cooperatives from being used as instruments for political. which would be destructive in the long term to the system as a whole. This necessary redistribution of roles between the state. it can only function thanks to a highly complex political and legal structure. 3. one single register for companies and cooperatives could be envisaged. the cooperative movement and other private actors might be facilitated by setting up a national council for cooperatives which could reconcile state sovereignty with the independence of the cooperative movement. Thus. to the extent the constitutional system permits it.application of these necessary measures should be dealt with case by case. Conceived as a forum. this implies the impossibility for decision makers to convert cooperatives into transmission belts for national policies and. Thus. so that decisions can be taken and applied at the local level where cooperatives mainly operate. . A complex law can only maintain the balance between non-intervention and a policy of laissez-faire. in particular. this council would in no case take on a mission of tutelage. for example. It would be an illusion to think that modern market economy needs only a simple political and legal structure. The law must induce maximum participation of private agents who should have the essential decision making power in economic matters. The application of a policy of non-intervention in the economic activities of the private sector depends essentially on the organization of the politico-administrative system and the willingness of its office holders. develop mentalist. With regard to cooperatives. associating the persons concerned with the decisions. social or other goals. Any such use of cooperatives endangers their economic efficiency. Quite on the contrary. for policies accompanying structural adjustment. decentralization and deconcentration should be favored.

Cooperative administration by the state is required to ensure the good functioning. of the tax administration. the administration is only an instrument in the hands of the government. industry and agriculture. water. These institutions are all necessary for the good functioning of cooperatives as of other enterprises. the insurance system and the promotion of chambers of commerce. The transition from a more or less direct intervention in the management of dependent cooperatives to the necessity to recognize cooperatives as independent structures by applying more subtle rules requires flexibility and qualifications which administrators have not always been prepared to exercise. competition. marked by the wish . company. In theory. commercial law. investment. labour. The effectiveness and efficiency of the cooperative law therefore depends on the whole legal system. When drafting the law the legislator must therefore make sure that other legal provisions do not run counter to his project. consumer protection and social security. accountancy. transports and marketing. tax. banking. The situation of the employees of the old state and parastatal structures in charge of the control of cooperatives is particularly delicate since the passage to market economy brings about a real revolution in their domain. constitutional and administrative norms. on contracts. at all levels. administrators acquire certain independence. bankruptcy. the organization and the operation of cooperatives. going as far as to oppose changes in orientation. It will be particularly important to be vigilant regarding the provisions contained in social and labour laws. rules on local and regional administration. and credit laws. all form part of cooperative legislation. of the judiciary. etc. Thus. inheritance. the rule on the non discretional and non discriminatory exercise of administrative power and on the justifiability of all public acts. Frequently. exports and pricing. The latter is constituted by all normative. administrative and judicial acts having an influence on the formation. of the banking system. The systemic nature of the cooperative law The cooperative law is part of cooperative legislation. however. real estate and private law in general. irrigation. regulations on imports.

law establishes the criteria for the definition of legal persons. The existence of a cooperative law is a necessary but not a sufficient condition for getting a cooperative policy to work. cooperative movements prosper without being ruled by their own law. Failing which. This presupposes that the legal relationship between citizens and the state is founded on acts of parliament. Why a cooperative law? In certain countries. In complex societies where social control can no longer be based on close relationships. as a means of information and communication. It represents the just balance between the autonomy of the Cooperators and the cooperatives on the one hand. Two main reasons may be given: 1. International cooperation uses law. In general. Law is a reference point and a guide mark. and the scope of normative control by the state on the other. This approach requires resorting to a legal expert who looks after the compatibility of the different texts. The rule of law is a fundamental element in the new approach to development. which gives physical persons the possibility of avoiding personal. The duality of law is apparent here. the ministry of justice supervises the harmonization of the laws. something which is at times incompatible with the freedom of private agents. law is the instrument. such as Denmark and Norway.to guarantee minimum social protection and to re-establish a balance between unequal partners. For example. law has proven to be the most adequate means of regulating the activities of economic agents who are not personally linked to each other. which establishes this balance. But there are no cooperative movements prospering without cooperative legislation. in an everincreasing manner. which emphasizes the respect for human rights. the self-determination of cooperatives might be in danger. . financial liability. At the same time. 2.

on the other hand. cooperatives have seen state officials survey their formation and operations. private law is the logical choice since the legislator is not seeking to interfere in the activities of cooperatives. This obligation. it will be part of public economic law and should include besides rules on the formation.127 (paragr. Public law or private law? The legal nature of the cooperative law depends on the definition of its object. The insertion of the cooperative law in one or the other of these fields reflects a political choice. the law thus offers Cooperators a legal framework. the formation of cooperatives has often been characterized by: o The obligation to limit their activities to a specified territory. one finds oneself in the domain of private law. In the context of structural adjustment. often became institutionalized. which will permit them to develop their activities in an autonomous manner. defines the kind and scope of issues to be dealt with in a cooperative law. In accordance with ILO Recommendation No. structure. coinciding more often than not with the boundaries of administrative districts. it is only a question of proposing to potential Cooperators a mode of organization. not only contravened the freedom of the cooperative . allegedly for the sake of cooperatives' economic efficiency and control by the government. originally meant to be provisional. thus closing the vicious circle of government involvement and a growing dependence of the cooperative system on the state. Guided by the theories of “development of law” and of “law of development”. Public funding has brought about tighter control. No longer masters of their destiny. rules on a tutelage authority and its powers. More concretely. the management of the cooperative sector by the state. If cooperative legislation is to regulate the activity of the cooperative sector. operations and dissolution of cooperatives. Development law? The history of cooperatives has been frequently marked by their being used as instruments to serve the development goals of the state.10 (a)). be it socialist or capitalist. If. define their activities or organize their vertical integration.The nature of cooperative law The answer to the question of whether we are in the realm of public or in the realm of private law and whether mainly externally provoked accelerated development requires a specific law.

but also they were. their remuneration and their eventual "replacement" at times by state commissioners. To this a priori control. which sometimes had been convened directly by them. Practically without a say in defining their field of activity and their internal functioning. obliged to join structures established at the place of their residence.movement. regarding their selection. Loan. Supposedly freezing the cooperative’s bank account could sanction inefficient management. the administration would add an a posteriori control by auditing the cooperatives directly or having them audited. cooperatives were often o Excluded from certain sectors. the positive effects of competition on economic efficiency were excluded. o Compulsory membership Not only did individuals lose the possibility to constitute themselves freely as cooperatives. elected or employed. but it also contributed to its politicisation. o Held ordinary or extraordinary GAs. they were not free to dispose of their resources. . sometimes it simply created cooperatives ex nihilo. o Took decisions normally made by the organs of the cooperative. furthermore. and even the services to be provided to their members and users were the object of external decisions. The personnel. found themselves under close supervision. it o Organized general assemblies (GA) to establish cooperatives. For example. o Deprived of the choice of their activities. State administration intervened in the management of cooperatives more or less directly. by delegating state representatives to sit in these sessions. saw themselves assigned pre-determined objectives. By the same token. and even decisions on the distribution of a surplus had to be submitted for approval. investment. meetings of the board of directors and of other organs. Once these interventions were accepted. the interference would not stop there.

Only matters. According to the rule of law. Their elaboration contributes to strengthening the motivation of Cooperators and thereby reinforcing the capacity of self-management. it also arbitrated the relationships between the different levels by o Creating and running secondary and tertiary cooperative organizations. Originally conceived to promote vertical delegation of central state power. ranging from the constitution and laws. . should not be inscribed in the law. They are incompatible with it belonging to the private law. may be regulated through norms. the law should regulate existing social activities and not try to give birth to them. cooperatives were allowed privileges in matters of taxation. this principle calls for each cooperative to be the master of its own decisions unless these are of public concern or involve third party interests. Past experience with the above mentioned theories of “development of law” and “development law” have not proven satisfactory. Such constraints and privileges can no longer be part of cooperative law. law must regulate questions relating to cooperative principles. have to respect the implications of the human right to development. The legislator will. fusing and dividing such structures.Not only did the administration interfere in the day-to-day management of primary cooperatives. however. Provisions of a temporary nature or those. whereas decrees or other administrative acts will operationalise the law. and o Settling disputes without there being any possibility of an appeal to ordinary tribunals. On the other hand. In this context the byelaws of cooperatives and their internal regulations have a primordial role. Moreover. such as rules on fixed interest rates. Which instrument? The autonomy of cooperatives will only be achieved by respecting the principle of subsidiary. which are subject to frequent changes. access to credit or state controlled support. which surpass the competence of an individual cooperative. to decrees and other administrative acts. foremost by allowing for cultural diversity within the limits of cooperative principles.

be they single. o Favors the unity of the cooperative movement. o Reduces bureaucracy. number of members. Taking into account the advantages and inconveniences of the different alternatives. Similarly. the cooperative law must not be an exception. which existed prior to the new legislation. their degree of inter-relatedness with competitors and other business organizations and the existence of several types of cooperatives (producers’. Its language must be consistent with that of the other legal texts so as to ensure the uniformity of the legal system. and finally o Guarantees legal security for those dealing with cooperatives Language of the cooperative law It is not unusual that the primary addressees of the cooperative law neither master the official language in which the text is written. the legislator will have to decide whether to pass one single law catering for their different aspects. consumer cooperatives) in all economic sectors. nor understand the legal terminology. resorting to a single law including. This explains why the systemic character of cooperative law should always be kept in mind. The promulgation of the law in vernacular languages. However. It is even possible that the civil code. It .or multi-purpose cooperatives. . specific chapters dealing with particular types or activities of cooperatives. a rule cannot be cancelled unless there is a revision of the law. the use of an accessible style or the adoption of a law that one can understand without having. in no event may the legislator allow for essential matters to be regulated trough administrative acts. are some of the means to improve access to the cooperative law. seems to be the best solution. if necessary.. As already mentioned however. to resort to other texts. One cooperative law or several laws? Considering the diversity of self-help organizations in terms of activity. or whether to pass several laws. by stipulating in excessively general terms. possibly containing specific chapters for particular cases. level of development.. the company law and/or other fields of law make a specific cooperative legislation superfluous.Once inscribed in the law.. needs.. in as far as possible. service. o Guarantees the autonomy of cooperatives because of its inevitably general character. a text of any nature cannot nullify clauses contained in other texts of the same order.

Obligations and rights of members. Format of the Cooperative law The format of the cooperative law might seem of secondary importance. A brief law. it prevents the excessive resort to administrative decisions. defining an organizational framework for cooperatives only. The following main topics of a cooperative law be presented here: Contents of a Cooperative law            Preamble. must be reached by through popularization. . Capital formation. However. Dispute settlement. As a rule. From practical point of view. Miscellaneous. which is not a simple question of translation. making it less intelligible and therefore relatively difficult to apply. Their internal functioning as well as their dealings with third parties have to be regulated. it must be noted that form and content are one. Nevertheless. Forms of dissolution. such a text risks impeding the autonomy of cooperatives by limiting notably the role of their bye-laws. On the other hand. accounts and distribution of results. transitory and final provisions. The dimension of time has to be taken into consideration as well.Unless one wants to instigate a revolution at the level of the language of the law. registration and publication. a detailed law thus seems preferable. necessarily refers to other provisions. Audit. Simplified structures. the byelaws recapitulate and specify the main points of the law and relevant administrative acts. Very often cooperative laws have been marked by too detailed texts. Organs and management of the cooperative society. Vertical integration. a prerequisite for its acceptance. General. An ABC of a Cooperative Law Starting with their formation and ending with their dissolution cooperatives are subject to legislation. an understanding of the law. which become inapplicable because of frequent political changes.

generating investment and their contribution to the economy. Scope. and . and Recognising the importance of cooperatives in job creation. adopted by the International Labour Conference at its 86th Session (1998). International Cooperation VI. Final Provision Annex: Statement of Cooperative Identity Further Information Preamble The General Conference of the International Labour Organisation (ILO). Policy Framework and Role of Government III.Unit II Promotion of Cooperatives Recommendation (2002) International Labour Conference (20 June 2002) Recommendation 193 CONTENTS Preamble I. Role of Employers' and Workers' Organizations and Cooperative Organizations. and Relationships between them V. and that stronger forms of human solidarity at national and international levels are required to facilitate a more equitable distribution of the benefits of globalisation. and Recognising that globalisation has created new and different pressures. problems. and having met in its 90th Session on 3 June 2002. Definition and Objectives II. and Recognising that cooperatives in their various forms promote the fullest participation in the economic and social development of all people. and Noting the ILO Declaration on Fundamental Principles and Rights at Work. Having been convened at Geneva by the Governing Body of the International Labour Office. challenges and opportunities for cooperatives. Implementation of Public Policies for the Promotion of Cooperatives IV. mobilising resources.

Noting the rights and principles embodied in international labour Conventions and Recommendations. 1957. 1948. 1973. 1975. Scope. 2002. the Right to Organise and Collective Bargaining Convention. 1951. 1975. 1930. the the Rural Workers' Organisations Convention and Recommendation. which is the fourth item on the agenda of the session. . the Equal Remuneration Convention. the Human Resources Development Convention and Recommendation. in particular the Forced Labour Convention. 1949. 1964. the Minimum Age Convention. 2. This Recommendation applies to all types and forms of cooperatives. social and cultural needs and aspirations through jointly owned and democratically controlled enterprise. I. the Discrimination (Employment and Occupation) Convention. 1998. the Abolition of Forced Labour Convention. Adopts this twentieth day of June of the year two thousand and two the following Recommendation. 1958. the Employment Policy Convention. the term "cooperative" means an autonomous association of persons united voluntarily to meet their common economic. and Having determined that these proposals shall take the form of a Recommendation. 1999. the Job Creation in Small and Medium-Sized Enterprises Recommendation. the Social Security (Minimum Standards) Convention. It is recognized that cooperatives operate in all sectors of the economy. and Recalling that the realisation of decent work for workers everywhere is a primary objective of the International Labour Organisation (ILO). and Recalling the principle embodied in the Declaration of Philadelphia that "labour is not a commodity". the Freedom Association and Protection of the Right to Organise Convention. 1984. 1952. and the Worst Forms of Child Labour Convention. For the purposes of this Recommendation. and Having decided upon the adoption of certain proposals with regard to the promotion of cooperatives. Definition and Objectives 1. Employment Policy (Supplementary Provisions) Recommendation. which may be cited as the Promotion of Cooperatives Recommendation.

and concern for community. These principles are: voluntary and open membership. member economic participation. f) improve social and economic well-being. equality. autonomy and independence. democracy. equity and solidarity. social responsibility and caring for others. self-responsibility. g) contribute to sustainable human development. b) develop human resource capacities and knowledge of the values. education. including entrepreneurial and managerial capacities. as well as ethical values of honesty. as enterprises and organisations inspired by solidarity. Measures should be adopted to promote the potential of cooperatives in all countries. irrespective of their level of development. to respond to their members' needs and the needs of society. d) strengthen their competitiveness as well as gain access to markets and to institutional finance. advantages and benefits of the cooperative movement through education and training. c) develop their business potential. 4.3. democratic member control. which includes cooperatives. The adoption of special measures should be encouraged to enable cooperatives. 5. . openness. e) increase savings and investment. in order to assist them and their membership to: a) create and develop income-generating activities and sustainable decent employment. that respond to the social and economic needs of the community. The promotion and strengthening of the identity of cooperatives should be encouraged on the basis of: a) cooperative values of self-help. taking into account the need to eliminate all forms of discrimination. including those of disadvantaged groups in order to achieve their social inclusion. and b) cooperative principles as developed by the international cooperative movement and referred to in the Annex hereto. and h) establish and expand a viable and dynamic distinctive sector of the economy. training and information. cooperation among cooperatives.

II. which would: a) establish an institutional framework with the purpose of allowing for the registration of cooperatives in as rapid. 7. b) promote policies aimed at allowing the creation of appropriate reserves. simple. part of which at least could be indivisible. on terms appropriate to their nature and functions. loans. affordable and efficient a manner as possible. and are in accordance with national law and practice. c) provide for the adoption of measures for the oversight of cooperatives. as well as a strong cooperative. A balanced society necessitates the existence of strong public and private sectors. mutual and the other social and non-governmental sector.2 Cooperatives should be treated in accordance with natural law and practice and on terms no less favourable than those accorded to other forms of enterprise and social organisation. 7. . Such measures could include. which respect their autonomy. such as employment promotion or the development of activities benefiting disadvantaged groups or regions. Governments should introduce support measures. among others and in so far as possible. It is in this context that Governments should provide a supportive policy and legal framework consistent with the nature and function of cooperatives and guided by the cooperative values and principles set out in Paragraph 3.1 The promotion of cooperatives guided by the values and principles set out in Paragraph 3 should be considered as one of the pillars of national and international economic and social development. tax benefits. access to public works programmes. for the activities of cooperatives that meet specific social and public policy outcomes. grants. and solidarity funds within cooperatives. and special procurement provisions. and e) encourage the development of cooperatives as autonomous and self-managed enterprises. and which are no less favourable than those applicable to other forms of enterprise and social organisation. particularly in areas where cooperatives have an important role to play or provide services that are not otherwise provided. Policy Framework and Role of Government 6. d) facilitate the membership of cooperatives in cooperative structures responding to the needs of cooperative members. where appropriate.

k) promote the dissemination of information on cooperatives. entrepreneurial and managerial abilities. particularly at management and leadership levels.1 National policies should notably: a) promote the ILO Fundamental Labour Standards and the ILO Declaration on Fundamental Principles and Rights at Work. 8. at all appropriate levels of the national education and training systems. h) provide training and other forms of assistance to improve the level of productivity and competitiveness of cooperatives and the quality of goods and services they produce. d) promote measures to ensure that best labour practices are followed in cooperatives. and general economic and social policy skills. e) develop the technical and vocational skills. i) facilitate access of cooperatives to credit.7. and combat pseudo cooperatives violating workers' rights. where appropriate. and in the wider society. c) promote gender equality in cooperatives and in their work. including access to relevant information. or used for. non-compliance with labour law or used to establish disguised employment relationships. the formulation and implementation of policies and regulations regarding cooperatives. 10. for all workers in cooperatives without distinction whatsoever. by ensuring that labour legislation is applied in all enterprises. j) facilitate access of cooperatives to markets. b) ensure that cooperatives are not set up for. workers and managers. . and improve their access to information and communication technologies.1 Such policies should: a) decentralise to the regional and local levels. and l) seek to improve national statistics on cooperatives with a view to the formulation and implementation of development policies. f) promote education and training in cooperative principles and practices. knowledge of business potential.1 Special consideration should be given to increasing women's participation in the cooperative movement at all levels. of members. g) promote the adoption of measures that provide for safety and health in the workplace.

g) consultancy services on technology and innovations. their business viability and their capacity to create employment and income. i) support services for marketing. Implementation of Public Policies for the Promotion of Cooperatives 10. Governments should promote the important role of cooperatives in transforming what are often called marginal survival activities (sometimes referred to as the "informal economy") into legally protected work. e) management information service. which are guided by cooperative values and principles.4 Governments should facilitate the establishment of these support services. III. set out in Paragraph 3. 9. f) information and public relations services. fully integrated into mainstream economic life. to finance them. as well as the employers' and workers' organizations concerned. . Cooperatives and their organizations should be encouraged to participate in the organization and management of these services and. and j) other support services where appropriate.1 Governments should facilitate access of cooperatives to support services in order to strengthen them. in the formulation and revision of legislation. d) accountancy and audit services. b) research and management consultancy services. policies and regulations applicable to cooperatives. 10. and c) promote best practice on corporate governance in cooperatives.1 Member States should adopt specific legislation and regulations on cooperatives. wherever feasible and appropriate.2 These services should include. h) legal and taxation services. and the obtaining of licences. and revise such legislation and regulations when appropriate. financial and social audits. 11. 11. 11.2 Governments should consult cooperative organizations. wherever possible: a) human resource development programmes. c) access to finance and investment.b) define legal obligations of cooperatives in areas such as registration.

commercial and financial linkages among all forms of cooperatives so as to facilitate an exchange of experience and the sharing of risks and benefits. Workers' organizations should be encouraged: a) advise and assist workers in cooperatives to join workers' organizations. b) assist their members to establish cooperatives.11. and reduce the cost of loan transactions. b) simplify administrative procedures. Employers' and workers' organizations. . ways and means of cooperative promotion. recognizing the significance of cooperatives for the attainment of sustainable development goals. c) participate in committees and working groups at the local. including with the aim of facilitating access to basic goods and services. Employers' organizations should consider. and d) include special provisions for disadvantaged groups. 15. adopt measures to facilitate the access of cooperatives to investment finance and credit. where appropriate. Governments should. c) facilitate an autonomous system of finance for cooperatives. national and international levels that consider economic and social issues having an impact on cooperatives. IV. should seek. 16. 13. including savings and credit. where appropriate. For the promotion of the cooperative movement. banking and insurance cooperatives. 12.5 Governments should recognize the role of cooperatives and their organizations by developing appropriate instruments aimed at creating and strengthening cooperatives at national and local levels. Such measures should notably: a) allow loans and other financial facilities to be offered. Role of Employers' and Workers' Organizations and Cooperative Organizations. the extension of membership to cooperatives wishing to join them and provide appropriate support services on the same terms and conditions applying to other members. together with cooperative organizations. remedy any inadequate level of cooperative assets. governments should encourage conditions favoring the development of technical. and Relationships between them 14.

b) encouraging and promoting relationships between national and international bodies and institutions involved in the development of cooperatives in order to permit: (i) the exchange of personnel and ideas. d) further the development of and affiliation with national and international cooperative organizations. methodologies and reference materials. and h) undertake any other activities for the promotion of cooperatives. e) represent the national cooperative movement at the international level. g) promote the exercise of the rights of worker-members of cooperatives. e) assist and participate in programmes for cooperatives aimed at improving their productivity. a) manage their own support services and contribute to their financing. (ii) the compilation and utilization of research material and other data on cooperatives and their development. c) invest in. b) provide commercial and financial services to affiliated cooperatives. of educational and training materials. 17 Cooperatives and organizations representing them should be encouraged to: a) establish an active relationship with employers' and workers' organizations and concerned governmental and non-governmental agencies with a view to creating a favorable climate for the development of cooperatives.d) assist and participate in the setting up of new cooperatives with a view to the creation or maintenance of employment. including in cases of proposed closures of enterprises. . including education and training. f) promote equality of opportunity in cooperatives. workers and managers. human resource development of their members. and f) undertake any other activities for the promotion of cooperatives. International Cooperation 18 International cooperation should be facilitated through: a) exchanging information on policies and programmes that have proved to be effective in employment creation and income generation for members of cooperatives. V. and further.

legislation. E-mail: coop@ilo. Switzerland. 1966.(iii) the establishment of alliances and international partnerships between cooperatives. c) access of cooperatives to national and international data. 4 route des Morillons.org . employers' and workers' organizations concerned. International Labour Organization. Further Information For further information contact: Cooperative Branch. and d) developing. Final Provision 19 The present Recommendation revises and replaces the Co-operatives (Developing Countries) Recommendation. training methods and techniques. (iv) the promotion and protection of cooperative values and principles. where it is warranted and possible. technology and product standards. Job Creation and Enterprise Development Department. and in consultation with cooperatives. common regional and international guidelines and legislation to support cooperatives. and (v) the establishment of commercial relations between cooperatives. such as market information. VI. CH-1211 Geneva 22.

" 2. NOW.Unit IV Cooperative societies Proclamation No. WHEREAS. WHEREAS. in accordance with Article 55 (1) of the Constitution of the Federal Democratic Republic of Ethiopia. THEREFORE. knowledge and property. it has become necessary to establish cooperative societies which are formed by individuals on voluntary basis and who have similar needs for creating savings and mutual assistance among themselves by pooling their resources. Short Title This Proclamation may be cited as the "Cooperative Societies Proclamation No. it has become necessary to enable cooperative societies to actively participate in the free market economic system. it has become imperative to issue a comprehensive legislation by which cooperative societies are organized and managed in order to achieve the above-mentioned objectives. 147/98 with Amendment No. Definitions In this Proclamation unless the context otherwise requires: 1/ "Society" means a cooperative society established and registered in accordance with this Proclamation and it shall in particular include the following: . 402/2004 and 106/2004 PROCLAMATION NO 147/1998 A PROCLAMATION TO PROVIDE FOR THE ESTABLISHMENT OF COOPERATIVE SOCIETIES WHEREAS. 147/1998. it is hereby proclaimed as follows: PART ONE GENERAL 1.

(a) Agricultural Cooperative Societies; (b) Housing Cooperative Societies; (c) Industrial and Artisans Producers’ Cooperative Societies; (d) Consumers Cooperative Societies; (e) Savings and credit Cooperative Societies; (f) Fishery Cooperative Societies; (g) Mining Cooperative Societies. 2/ "Cooperative Society" means a society established by individuals on voluntary basis to collectively solve their economic and social problems and to democratically manage same; 3/ "Member" means any physical person, or society established under this proclamation, which is registered after fulfilling his membership obligations. 4/ "General Assembly" means a meeting of members of the Primary Cooperative society or representatives of societies above primary level: 5/ "Special resolution" means a resolution passed by a two third majority of the members to be binding on all members; 6/ "Management Committee" means a body elected and empowered by the General Assembly with the responsibility to manage the activities of the society; 7/ "Appropriate Authority" means an organ established at federal level, or a bureau or an organ established for the same purpose at Regional or city Administration level, to organize and register cooperative societies and to give training, conduct research and provide other technical assistances to cooperative societies. 8/ "Person" means a natural or juridical person. 3. Where the provisions of the Proclamation are set out in the masculine gender they apply equally to the feminine gender. 4. Objectives of the Society The society to be established under this proclamation shall have one or more of the following objectives: 1/ to solve problems collectively which members cannot individually achieve; 2/ to achieve a better result by coordinating their knowledge, wealth and labour; 3/ to promote self-reliance among members;

4/ to collectively protect, withstand and solve economic problems; 5/ to improve the living standards of members by reducing production and service costs by providing input or service at a minimum cost or by finding a better price to their products or services; 6/ to expand the mechanism by which technical knowledge could be put in to practice; 7/ to develop and promote savings and credit services; 8/ to minimize and reduce the individual impact of risks and uncertainties; 9/ to develop the social and economic culture of the members through education and training. 5. Guiding Principles of Co-operative Societies 1/ Co-operative societies 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/ Co-operative societies are democratic organizations controlled by their members who actively participate in setting their policies and making decisions. Every member has equal voting rights and accordingly one member shall have one vote. 3/ Members shall receive dividends from profit according to their shares and contribution after deducting and setting aside an amount necessary for reserve and social services. 4/ Co-operative societies are autonomous self-help organizations controlled by their members. If they enter into agreement with other organizations, including governments or raise capital from external sources, shall do so on terms that ensure democratic control by their members and maintain their autonomy. 5/ Co-operative societies provide education and training for their members, elected representatives, managers and employees so as to enable them to contribute effectively to the development of their societies. They inform the general public, particularly youth about the nature and benefit of societies.

6/ Co-operative societies serve their members most effectively and strengthen the societies movement by working together through local, national, regional and international structures. 7/ Co-operative societies work for the sustainable development of their communities through policies approved by their members.
PART TWO

FORMATION AND REGISTRATION OF CO-OPERATIVE SOCIETIES 6. Formation of Co-operative Societies 1/ Co-operative societies may, according to their nature, be established at different levels from primary up to the federal level. 2/ A primary society shall be established by persons who live or work within a given area. 3/ The number of members in a primary society to be established shall not be less than ten. 4/ Notwithstanding Sub-Article (2) of this Article, the appropriate authority may specify in the directive, the minimum number of members that could make a society economically feasible. 5/ A society may sell some of its shares to persons outside its area when the society faces shortage of capital. 7. Types of Societies 1/ A society may engage in either production or service rendering activities or in both. 2/ The field of activities to be engaged in by any society shall be determined by the by-laws of the society. 8. Name of a society 1/ Any society shall have its own name. 2/ The words "Cooperative Society and Limited Liability" shall appear in the name of every society. 3/ A name or distinguishing mark registered by one society shall not be used by any other society;

it shall give a written explanation to the representatives of the society . (c) names. (j) other particulars that may be specified in the regulations or directives issued for the implementation of this Proclamation. address and signature of the members of the management committee of the society. address and signature of members of the societies above primary level. when established. (d) name. Registration of a Co-operative society 1/ Any society shall be registered by the appropriate authority. It should also be written or sealed on every notices letters. address and signature of the members. 9. that it has been deposited in a place where the appropriate authority has designated. 2/ Any society. 4/ When the appropriate authority rejects the application for the registration of a society. if there is no bank in the area. (i) the description of the land on which the society operates. (g) plan of the society. (e) a detailed description which proves that the registered members of the society have met the requirements for membership in accordance with the provisions of this Proclamation and the by-laws of the society. other specifications and documents which are signed on behalf of the society. (h) documents showing that the amount of capital of the society and the capital has been collected and deposited in a bank account.4/ The name of every society shall be written boldly and be put at every place where the society’s activities are performed. shall submit an application for registration together with the following particulars to the appropriate authority: (a) minutes of the founders meeting. (f) name. 3/ The appropriate authority shall register a society and issue a certificate of registration within 15 days when it is satisfied that the application for registration submitted to it has fulfilled the requirements for registration. (b) the by-laws of the society in three copies.

(h) conditions for re-election. (j) allocation and distribution of profit. (k) auditing. 11. 2/ Any society shall not be liable beyond its total asset. responsibilities. (b) objectives and activities of the society. and duties of management bodies. (g) conditions for withdrawal and dismissal from membership. . (i) conditions for calling of meeting and voting of the society. term of office and suspension or dismissal of the members of the management committee or other management bodies. 3/ By-laws of a society may be amended by the special resolution of the general assembly.within 15 days. Juridical Personality and Responsibility 1/ Any society registered in pursuance of Article 9 of this Proclamation shall have juridical personality as of the date of its registration. By-laws of Society 1/ Every society shall have its own by-laws: 2/ The contents of the by-laws shall include the following particulars:(a) name and address of the society. (f) the powers. the amendment of the by-laws of the society shall be effective on the date of its submission to and registration by the appropriate authority. (e) the rights and duties of the members of the society. appointment. The representatives may appeal to the high court which has jurisdiction on the decision of the appropriate authority. 10. (c) working place (area) of the society. However. (d) requirements necessary for membership of the society. (m) other particulars not contrary to this Proclamation. (l) employment of workers. It has limited liability. 5/ The certificate of registration issued to a society pursuant to Sub-Article (3) of this Article is an evidence to prove that a society is registered in accordance with this Proclamation.

4/ Where the Society decides on the amendment of its by-laws three copies of the amendment and the special resolution of the society made in accordance with this Proclamation shall be submitted to the appropriate authority within 30 days from the date of the decision. 12. or (b) the members and creditors that do not agree have been paid off or their payment is guaranteed. the general assembly of a society through a special resolution may form a new society: (a) by dividing itself into two or more societies. 5/ The appropriate authority shall register the amendment and give evidence or its registration to the society where it is satisfied that the amendment of the by-laws was made in accordance with this Proclamation and regulations issued for the implementation of this Proclamation. 2/ The special resolution on the amalgamation or division of the society shall be effective on the date of its registration by the appropriate authority upon verifying that: (a) the members and creditors of the society fully agree to the amalgamation or division. or (b) by amalgamating itself with one or more societies. . 3/ The previous registration of societies shall be canceled from the register as soon as the newly formed society by amalgamation or by division are registered. 4/ The rights and duties of societies which have lost their identities by amalgamation shall be transferred to the newly formed society. Amalgamation and Division of Societies 1/ Without prejudice to Article 6(3) and (4) of this Proclamation. 5/ The rights and duties of a society which has lost its identity by division shall be transferred to the newly formed societies as specified in Sub-Article (2) of this Article.

(b) to perform those activities which ought to be performed in accordance with the by-laws and directives of the society . 5/ it is registered with the appropriate authority if it is a society above the primary society.PART THREE THE RIGHTS AND DUTIES OF MEMBERS OF A SOCIETY 13. 2/ he is able to pay the share capital and registration fee required by the society. (d) to protect the common property of the society. 15. Requirements Necessary for Membership of a society Any individual may become a member of a society where: 1/ he has attained the age of 14 if it is a primary society. 14. directives and decisions of the society. 3/ he is willing to implement his obligation and observe the objectives and bylaws of the society. (d) to withdraw from the society on his request with payment of benefits. (c) to elect and be elected. Rights and Duties of Members 1/ Any member of a society shall have the following rights: (a) to obtain services and benefits according to his participation in the society. 2/ Any member of a society shall have the following duties: (a) to respect the by-laws. 4/ he fulfills other requirements which may be specified in the regulations and directives issued for the implementation of this Proclamation. (c) to pay for share of capital and registration fee. Dismissal from Membership . (b) to participate in the meetings of the society and to vote.

Register of Members Every society shall keep a register wherein shall be entered: 1/ the name. 17. 3/ The rights of any dismissed member shall be respected in accordance with the by-laws of the society. 2/ The society may sell additional shares if it is found necessary to promote the financial capacity of the society subject to the decision of the general assembly. 3/ No member shall hold more than 10% of the total paid up share capital of such society. 5/ any other particulars that may be specified in the by-laws. 18. However a member dismissed in accordance with Sub-Article (2) of this Article may become a member of the society only if he obtains the approval of the general assembly. by each member. 4/ Without prejudice to the provisions of Article 13 hereof.1/ Any member of a society may leave the society on his own initiative. Voting 1/ Every member shall. occupation. age and sex of each member. address. 2/ Every member in a primary society shall personally be present at the meeting of the society to cast a vote. 2/ Any member of a society may leave the society when it is decided by the general assembly to dismiss him from the society because of committing repeated faults. have only one vote at the meeting of the society. regardless of the number of shares he has. 3/ the amount of shares held and the registration fee paid. any dismissed person may reapply for membership. 4/ the name and address of the heir of the member. . 16. Payment of Shares 1/ The capital which enables the society to expand its work activities shall be obtained from paid up shares of each member in accordance of the decision of the General Assembly. 2/ the date on which he became a member or ceased to be a member.

2/ On the death of a member of a primary society. 19. Transfer of Share or Benefit 1/ No transfer by a member of his share or benefit in a society shall be valid unless:(a) the member has held such share or benefit for at least one year before he transfers. his share or benefit shall be transferred to one of his heirs designated as such in the register of society or failing such designation to his legal heir at law. 3/ Where such heir is not a member and does not wish to become or is not admitted as a member. 21. the member shall be paid the difference in cash. 4/ If the shares or benefit to be transferred to a member under Sub-Article (2) of this Article are found to be beyond the limitation prescribed in Sub-Article (3) of Article 16 hereof.3/ Members of a society above primary level shall cast a vote through their representatives. PART FOUR Management Bodies 20. he shall be paid the value of the share or benefit of the deceased member. (b) the transfer is approved by the management committee. 5/ The transfer or payment concluded in pursuance of Sub-Article (2) of this Article shall not be reversed due to the claims paused by third parties on the society. and where such heir is a member or is willing to be a member. Powers and Duties of the General Assembly The General assembly of a society shall: . Supreme Organ of a Society The supreme organ of any society shall be the General Assembly.

3/ elect and dismiss the members of the management committee. Management Committee 1/ Every society shall have a management committee which is accountable to the general assembly and whose members and manner of election to be determined in the by-laws of the society. 22. 2/ approve and amend the by-laws and internal regulations of the society. an emergency meeting may be held by giving 15 days prior notice.1/ pass decisions after evaluating the general activities of the societies. 2/ The term of office of the management committee shall be three years. 4/ determine the amount of shares of the society. . 23. 7/ hear work reports and give proper decision. They may be dismissed at any time by the general assembly. 8/ decide that a society either be amalgamated with another society or be divided in pursuance of this proclamation. control committee and when necessary the members of other sub -committees. 3/ Where the management committee fails to call an emergency general assembly in accordance with Sub-Article (2) of this Article such meeting shall be called by the appropriate authority and shall in such case be deemed to have been called by the management committee. 5/ decide on how the annual net profit of the society is distributed. Calling of General Assembly 1/ The general assembly shall meet at least once in a year. 9/ approve the annual work plan and budget. 10/ decide any issue submitted by the management committee and other committees. 2/ If the management committee or one-third of the members of the general assembly require a meeting to be called. 6/ give decision on the audit report. 3/ Members of the management committee shall not be elected for more than two consecutive terms.

24. Every society shall have a control committee which is accountable to the General Assembly and the number of which shall be specified by the by-laws of the society. Powers and Duties of the Management Committee The powers and duties of the management committee shall be determined in pursuance of the by-laws and in particular shall include the following: 1/ maintain the minutes of a meeting in writing. They may. 26. implements same upon approval. Other Sub-Committees Other sub-committees may be established pursuant to the by-laws of the society. 2. they have the obligation to submit for inspection the activities they performed during their term of office. 27. Control Committee 1. Powers and Duties of the Control Committee The Control Committee: 1/ follows up that the management committee is carrying out its responsibilities properly.4/ When members of the management committee leave their office for whatever reasons. 6/ submit reports to the general assembly on the activities of the society. 25. . 2/ follows up that the funds and property of the society is properly utilized. No members of the control committee shall be elected for more than two consecutive terms. 4/ call the general assembly in accordance with the by-laws of the society. while in term of office. The term of office of members of the committee shall be three years. 3/ controls that the various activities of the society are carried out pursuant to the by-laws and internal regulations of the society. 5/ execute such other decisions given by the general assembly. be dismissed by the General Assembly. 4/ performs other duties given by the general assembly. 2/ maintain the documents and books of accounts of the society. 3/ prepare the annual work programme and budget of the society.

except the debt owed to the Government. debts owed to the society by a member shall take precedence over all other debts. (c) to receive other assistance from the Federal Government or Regional Government or City administration Government. Societies which are organized and registered under this Proclamation shall be entitled to the following: (a) to be exempted from income tax. the share or benefit of a member in the a society shall not be liable to attachment or sale. members shall pay income tax on their dividends. Priority of Claims by Society Notwithstanding any provision to the contrary in any law. Indivisibility of Asset and Fund of Society not Divisible Except as otherwise prescribed under Article 33(2) and 44 of this Proclamation.PART FIVE Special Privileges of Society 28. rendering man-power training and conducting studies and research shall be established. Share or Benefit not Liable to Attachment or Sale Except as provided in Article 29 hereof. 29. PART SIX accountable to the Federal Asset and Funds Societies 32. 30. Set-off in respect of Share or Benefit of Members The shares or benefits of any member may be set-off for debts due to the society from such a member. 2/ An institute responsible for promoting cooperative movement. provided however. . (b) to acquire land as determined by a Region or a City accountable to the Federal Government. 31. the asset and fund of a society shall not be divided for the members or any other party. Government Assistance 1/ Without prejudice to incentives permitted under Investment laws and other laws.

and liabilities. 35. 2/ Interest on loans received from its members shall not exceed the current interest rate of a bank. (c) for social services. . Restrictions on Loans A society shall not extend loans other than to its members or a society established under this Proclamation. 2/ After the amount prescribed in Sub-Article (1) is deducted the remaining net profit shall be divided among the members. the division shall be made on the basis of the shares the members have in the society and on the amount of goods offered for the sale to the society or goods purchased from the society by members of the society. Allocation of Net Profit 1/ The society shall deduct 30% of the net profit obtained and allocate for the following purposes in accordance with the terms and conditions set forth in the by-laws and plan issued from time to time by the society:(a) for reserve. 2/ The audit conducted pursuant to sub-Article (1) of this Article shall include the examination and verification of overdue debts. securities and assets. the accounts of any society at least once in a year. Audit 1/ The appropriate authority shall audit or causes to be audited by a person assigned by it. (b) for the expansion of work.33. PART SEVEN Audit and Inspection 36. 34. Restrictions on Borrowings 1/ A society shall receive loans from its members or other organizations to such extent and on such conditions as may be specified in the by-laws of the society. if any. 3/ The audit report shall be submitted to the General Assembly. and cash balance.

documents and financial condition of a society. (c) has misappropriated the properties of the society. 2/ The appropriate authority who received the report pursuant to Sub-Article (1) of this Article shall give the person concerned an opportunity to present his defense within fifteen days. Actions to be Taken for Losses of Property or Fund of the Society 1/ The auditor or inspector shall make a report to the management committee or the general assembly or the appropriate authority. the authority shall take the appropriate legal measure. where the person who is or was entrusted with the management of the society or who is or has been an officer or an employee of the society. in the course of an audit or inspection has been found to have committed the following acts: (a) had made any payment contrary to this Proclamation. as the case may be. (b) not less than one-third of the total number of members of the society request. 2/ Without prejudice to Sub-Article (1) of this Article.37. 39. open and easily accessible to everyone. Keeping Audit and Inspection Results Audit and Inspection results conducted pursuant to Article 36 and 37 of this Proclamation shall be kept in the office of the authority and the society. and who. make or cause to be made by such person to be assigned by it an inspection to the organization. the regulations or the by-laws. Inspection 1/ The appropriate authority may. Where the person concerned is not willing to do so. 3/ After fulfilment of the above mentioned conditions. inspection may be made when: (a) a majority of the members of the executive committee request. 38. (b) had caused any damages to the assets of the society by breach of trust or willfully or negligently. the appropriate authority shall ask the person who has been found responsible for misappropriation of the fund or property of the society to return or pay same with interest including compensation and damages. work execution. .

He shall in particular perform the following in order to carry out his duties properly. (e) represent the society in legal proceedings. 41. (a) investigate all claims against the society and decide on priority of payment among them. (d) carry on the work activities of the society in so far as may be necessary for the proper liquidation of the affairs of the society. if necessary. records and documents of the society from damages. 3/ Without prejudice to sub-Articles (1) and (2) of this Article. (c) distribute the assets in accordance with the plan of liquidation approved by the general meeting of the society. 2/ The liquidator shall receive records. . He shall also take the necessary measures to protect the properties and rights. a society the dissolution of which is decided shall notify same to the appropriate Authority within seven days from the decision for its dissolution. Liquidator 1/ Where the dissolution of a society has been decided upon pursuant to Article 40 of this Proclamation. Dissolution of a Society A Society shall be dissolved on the following grounds: 1/ Where a special resolution for its dissolution is given by the members. determine that his remuneration be paid out of the accounts of the society. documents and properties of the society as soon as he is assigned. or 2/ Without prejudice to Article 6 (4) hereof. (b) collect the assets of the society. (f) call meetings of the members as may be necessary for the proper conduct of the liquidation. 42. assign a liquidator. Powers and Duties of the Liquidator 1/ The liquidator shall have all the necessary powers to complete the winding up proceedings.PART EIGHT Dissolution and winding up of Societies 40. It may. where the number of members of a primary society falls below ten. the appropriate authority may.

3/ Sums shall be set aside to meet the claims in respect of undertakings of the society which are not completed or which are under liquidation unless the creditors are guaranteed or distribution of assets is postponed until such undertakings are completed. 4/ After the payment of claims have been completed or verified that sufficient deposit for payment has been made. the liquidators may distribute the assets of the society among the members based on the amount due to them. No claimant shall have a right after the expiration of such limitation. 2/ Where known creditors have failed to present their supporting documents. the amounts owing to them shall be deposited according to the decision of the court. 3/ Upon completion of the winding up proceedings the liquidator shall prepare and submit a report to the appropriate authority. Protection of Creditors 1/ Until the creditors of the society have been paid or amounts required for payment be deposited. 43. Calling on Creditors 1/ Creditors shall be paid on the basis of a balance sheet prepared by the liquidator upon the commencement of his assignment. published in two successive monthly issues of a newspaper. Notice to other creditors shall be given by notice. It shall proceed with the distribution where no claim is presented within two months from the date of such notice.2/ The liquidator shall issue notice in a newspaper. 2/ Creditors shall be informed of the dissolution of the society and required to file their claims with supporting documents. before the distribution of the property of the society takes place in accordance with Sub-Article (1) (c) of this Article. that the society is to be dissolved. 3/ Creditors appearing in the society’s records or who are otherwise known shall be notified directly by registered letter. 44. he shall deposit the records and documents of the society in such places as the appropriate authority may direct. and also in the form laid down in the by-laws of the society. . the liquidators may not distribute any part of assets among the members.

who shall be the chairperson.45. 2/ The arbitration shall consist of three persons of high reputation and impartiality. PART NINE Settlement of Disputes 46. 48. 2/ The appropriate authority shall appoint the chairperson arbitrator when the parties fail to reach an agreement. or operations of a society which arises between: 1/ members or former members and members or representatives of former members or persons claiming in the name of deceased members. The third arbitrator. Arbitration 1/ When the disputes provided under Article 49 regarding cooperative societies are not settled by conciliation they shall be referred to arbitration. 3/ The arbitrators shall conduct their hearing and fulfill any of their duties in accordance with the Civil Procedure Code. 47. 49. upon the date of such cancellation. or . cease to exist. management. Conciliation The disputes provided under Article 48 of this proclamation shall be heard by a third party appointed by the disputing parties before they are referred to the arbitrators. Appointment of the Arbitrators 1/ Each party to the dispute shall appoint one arbitrator. and the society shall. Disputes to be referred to Arbitration The arbitrators shall have the power to hear disputes not settled by conciliation regarding the organization. shall be appointed by both parties. Cancellation of a Society from the Register When the winding up proceedings are completed the certificate of registration shall be returned to the appropriate authority who shall cancel the registration of the society.

. notices and other communications shall be sent in such address. Execution Any decision. 51.2/ members. any officer. where appropriate. agent or employee or the nominee heirs or representatives or representatives of deceased former members or employees. order or award. Civil Court Powers of Arbitrators The Arbitrators shall have the same power. agent or employee. All services of process. or 3/ the society or the management committee and any former management committee. Address of a Society Any society shall have an address registered pursuant to Article 9 of this Proclamation. be instituted in Federal High Court. and. Power of Courts Appeals on the decisions given by the Arbitrators under Article 47 of this Proclamation may. 52. the issuing of orders or the taking of any legal measures. representative of the management committee or employee of the society. former members or members or representatives of former members or heirs of deceased members and any officer. The society shall inform the appropriate authority of any change in such address within thirty days. as a civil court for the summoning of witnesses. or any former officer. 50. production of evidence. or the Regional State High court or the Federal High Court of a city accountable to the Federal Government where the society is situated. with regard to the cases provided under Article 49 of this Proclamation. as the case may be. order or award made under this Proclamations shall be taken as though made by a civil court. or 4/ the society and any other society. PART TEN Miscellaneous Provisions 53. the courts shall have jurisdiction to order the enforcement of any such decision.

to be accessible free of charge. . 2/ The cooperative societies which have been established and operating in accordance with Proclamation No. 55. 3/ The societies indicated in Sub-article (1) of this Article shall continue their operations holding their previous juridical personalities until they are reorganized and registered by the appropriate authority. Transitory Provisions 1/ The cooperative societies which have been established and operating in accordance with Proclamation No. regulation or directive in so far as it is inconsistent with this Proclamation have force or effect in respect of matters provided for by this Proclamation. 85/1995 are hereby repealed. 59. 57. Establishment of a Federal Organ A Federal Organ responsible for organizing and registering Apex organizations and for rendering training. 138/1978 and the Agricultural Cooperatives Societies Proclamation No. Repealed and Inapplicable Laws 1/ The Cooperative Societies Proclamation No. 58. Issuance of Implementing Legislation The Council of Ministers of the Federal Government or the appropriate organ of a Region or city accountable to the Federal Government may issue legislation for the proper implementation of this Proclamation. 4/ The appropriate authority shall facilitate the conditions necessary for the reorganization of the societies in accordance with sub-Article (1) of this Article.54. 2/ No law. the Regulations and the by-laws. 56. 85/1995 shall be deemed to have been established under this Proclamation and shall continue to carry out their functions in accordance with this Proclamation. 138/1978 shall be reorganized under this Proclamation. Regulations and the By-laws Every society shall deposit at its address copies of this Proclamation. Depositing of this Proclamation. conducting research and other technical support to societies may be established by law. Supplying Information Every society shall have the obligation to transmit information to the appropriate authority about the activities it performs.

60. (7). 147/1998 shall be amended as follows. 1.” 2. it shall grant temporary certificate which may serve not more than a year and shall cause the rest requirements to be observed within a specified period of time. Done at Addis Ababa. The following new Sub Articles (6). Effective Date This Proclamation shall come into force on the 29th day of December 1998. it is necessary to amend cooperative societies proclamation No. Any cooperative society which has been legally registered pursuant to Sub Articles 3 of this Article shall engage in any business as of the date of registration without the necessity of securing additional trade license. 402. Amendments Cooperative Societies Proclamation No. Therefore. (8) and (9) are added after Sub Articles 5 of Articles 9: “6. 402/2004. this 29th day of December. in accordance with Article 55(1) of the Constitution of the Federal Democratic Republic of Ethiopia. Now. Short Title This Proclamation may be cited as “Cooperative Societies (Amendment) Proclamation No. it is hereby proclaimed as follows: 1. 1998 NEGASO GIDADA (DR) PRESIDENT OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA Proclamation No. 7. Where the appropriate authority ensures that requirements indicated under Sub Article 2(a)-(g) are met. /2004 Cooperative Societies (Amendment) Proclamation Whereas. . 147/1998.

Where the general assembly of a society suspended pursuant to Sub Articles 8 of this Article submits its request to reverse the decision for suspension and where the appropriate authority found the request appropriate.” . upon its formation from the members at least 1/5 of the amount of the share that the general assembly has decided to be sold.8. The General Assembly may appeal to the higher court which has jurisdiction on the decision made by the appropriate Authority. 6/ A society. 4/ The share that the society sells may be sold either in cash or in kind. Articles 16(1)-(3) is hereby deleted and replaced by the following new “Article 16: Payment of shares 1/ Any cooperative society shall. 5/ Any member may not hold more than 10% of shares out of those that the general assembly decides to be sold. it may reverse the decision for suspension. upon completion of the sell of shares in accordance with the decision of the general assembly. 3/ Where the need for additional capital is arose. Where any society is found operating out of the objectives for which it is established. Where the appropriate authority did not reverse the suspension it shall give a written explanation to the General Assembly. sell shares that shall have equal number and par value with the view to enable the society to obtain capital necessary 2/ Any cooperative society shall collect. after securing the decision of the general assembly. may sell certain shares to a person who is not a member of the society without contradicting the principle of the society. 7/ Particulars as regards to manner of sale of shares to a person who is not member to the society shall be determined by the by-law of the society. it may be suspended by the appropriate authority from carrying out activities permitted by this law. And it shall sell the rest of the shares within four years as of the time of its establishment. the general assembly may decide once again for the sell of additional shares in accordance with Sub article 1 of this Article.” 2. which faces shortage of capital. Shares paid in kind shall be determined by the by-law of the society. 9.

3/ Any member who has received net profit as per Sub Article 2 this Article can buy an additional share. the chairperson of the reconciliation shall be elected in accordance with the agreement of the two parties.” 5. 6.3. Settling disputes through conciliation 1/ Disputes indicated under Article 49 may be settled through reconciliation of parties elected by disputants before they are submitted to arbitration. Article 40(3) shall become Article 40(5). Article 33(1) and (2) are deleted and replaced by the following new Article 33 1/ any cooperative society shall deduct 30% of the net profit and allocate for the reserve fund. 8. The following new Sub Articles (3) (4) are added after Sub Articles (2) of Article 31. 2/ Each party shall elect reconciliation. the chairperson shall be elected by the appropriate authority. The amount allocated for the reserve fund shall not exceed 30% of the capital of the society and it shall be deposited in the saving account of the society 2/ The distribution of the remaining net profit shall be determined by the general assembly.” 4. “3) The council f ministers may make any society free from any court fees that is payable in connection with dispute entertained by courts. 7. “46. Article 46 is deleted and replaced by the following new Article. The following new Sub-Article (3) and (4) are added after Sub Articles (2) of Article 40. (4) Where the auditing reveals that it is bankrupt and when the appropriate authority ensures that causes the dissolution and the general assembly decides. Sub 2 of Article 34 is deleted.” . 4) Any right emanated from a contract concluded by the society involving its properties shall be barred by statute of limitation after 20 years. “(3) Where the court decides for its dissolution. 3/ Where the two parties failed to reach agreement to elect the chairperson of the reconciliation.

85/1995 and which are still operating shall be registered once again in accordance with this Proclamation.” Done at Addis Ababa. .106/2004 Council of Ministers Regulation to Provide for the Implementation of Cooperative Societies Proclamation This Regulation is issued by the council of Ministers pursuant to article 5 of the definition of powers and Duties of the Executive organs of the Federal democratic Republic of Ethiopia Proclamation No. 2. Articles 58(2) is deleted and replaced by the following new Article 58(2) “(2) Agricultural cooperative societies. 11th day of May. Short Title This Regulation may be cited as “Councils of Ministers Regulation No. GIRMA WOLDEGIORGIS PRESIDENT OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA Council of Misters Regulation No. Obligation to cooperate Any concerned organ shall have the obligation to cooperate on matters provided in this Proclamation.147/1998.147/1998. 106/20904 to Provide for the implementation of Cooperative Societies Proclamation No. 2004. The following new Articles added as Articles 59 “59. unless the context requires otherwise.4/1995 and article 59 of Cooperative Societies Proclamation No.” 11. Definition In this Regulation.9. Article 59 shall become Article 60 12 “61 Effective Date The Proclamation shall come into force on 11th date of May. 2004.. which were established pursuant to Proclamation No. Section One General 1.” 10.

2. “League” mans cooperative society league of Ethiopia establish by cooperative societies at the national level. Different kinds of primary cooperative societies may be established in the operational area indicated in sub article 2 of this article. Primary cooperative societies having similar objective may establish a union. . Section Two Establishment of Cooperative Societies 3. taking into account the economic efficiency. Number of members establishing the society shall not be less than ten. “Union” means a union composed of more than one primary cooperative societies that have similar objectives. determine the least number of establishing members through directives issued by itself. “Proclamation” means cooperative societies Proclamation No.1. The operational area of primary cooperative society established pursuant to article 1 of this article may be confined to one-region or cover more than one regions. Establishment of a union 1. Primary cooperative society shall be established by voluntary individuals who live or work in the same area or engaged in the same profession. 4. 6. 4. 3. 5. Subject to the provision of this Regulation and that of other relevant laws on cooperative society. 147/1998. “Regular meeting” means a general assembly convened pursuant to sub article 1 of article 22 of proclamation No 147/1998 3. “Federation” means a group consists of unions and cooperative societies with similar objectives. “Cooperative society” Means an entity that has got a definition referred to (indicated) under article 2(2) of the proclamation mission established pursuant to article 2(1) or proclamation 274/2002 and includes cooperative promotion Bureaus and offices established in each region. The appropriate authority shall. Establishment of Primary Cooperative Societies 1. 2.

The number of the league established pursuant to sub article 1 of this article may not exceed one. Functions of Cooperative society A cooperative society may engage in production or service rendering activities or in both production and service rendering activities. Subject to the Provision of this Regulation and that of other laws an individual who carries out similar activities to that of a union and who is willing to observe the principles of the society may become a member of the union. cooperative societies and an individual that carries out similar activities with that of the Federation may become a member of the Federation. unions having similar objectives at Federal level may establish a Federation.2. and federations may establish a league that represents all cooperative societies in Ethiopia. 2. Section Three Types and Functions of Cooperative societies 8. The operational area of a union or a Federation Established pursuant to Article 4 or 5 of this regulation shall be determined by the by-laws of the union or the Federation. Establishment of Cooperative League 1. 2. 7. Subject to the provision of this Regulation and that of other relevant laws. 6. Operational Area 1. primary cooperative societies. The league shall have an operational area through out the territory of Ethiopia. 5. 2. Subject to the provision of this Regulation and that of other relevant laws. Cooperative Society Engaged in Production Activities Cooperative Society Engaged in Production Activities shall be one which takes part . unions. Establishment of Cooperative Federation 1. Subject to the provision of this Regulation and that of other relevant law. 9.

10. Particular of by-law of a Cooperative society Subject to the provision of article 11 of the proclamation. values and principles of cooperative societies. o Budget year of the society o Manner of keeping the fund of the society and ways of its utilization. Any society established pursuant to this regulation shall have legal personality as of the date of its registration. by-law of a cooperative society shall contain the following particulars: o Objectives. The Federal Cooperative commission shall register the league and the federations as well as unions t the national level.in production process or which converts raw materials or semi-finished products to finished products. Cooperative Societies of different type may be organized in any economic or social sector of the country. Cooperatives societies Engaged in Production and Service rendering activities A cooperative society engaged in production and service rendering shall carry out both activities indicated under article 9 and 10 of this regulation. 12. establishment. The unique nature of cooperative societies shall be determined by a directive issued by the appropriate Authority. Cooperative societies engaged in service rendering activities A cooperative society engaged in service rendering activities shall deliver various services to members or cause them to obtain the same. 14. 2. 3. function and legal personality they have. 2. 11. . Registration 1. Cooperative societies differ from other based on their unique nature such as their working place. o Administrative structure of the society. Section Four Registration of Cooperative societies 13. Types of Cooperative Societies 1.

dismissal or death of members.o Procedures on loans. address and emblem of the society. their powers and duties and term of office. Seal of the society. o Procedure to be applied in the instance of withdrawal. Name. Identification number of share certificate. Name and identification number of the member. Share certificate of members of a Cooperative society 1. The share of the society may not be transferred from one member to the other or from a member to a third party. . o Procedure to the applied in cases where the by-law of the society is amended or in cases where the society is dissolved. divided or amalgamated with other societies. Any member shall be granted certificate for the amount of full shares he has paid for. The amount of shares he has paid for (bought) and the price of the share he has bought. o Matters requiring special or quorum resolutions (decision). month and year of issuance of certificate. Signature of a person entrusted with a power of leading the society. o Rules of procedures for the meeting of the society and notifications to be given to members. Par value of each share. o Other appropriate particulars. Date. 2. o Administration of employee of the society. 3. The share certificate shall be printed in confidence (secretly) and shall contain the following particulars. Date of registration and registration number of the society. 15. o Procedures for the appointment or employment of mangers and other officers of the society.

(d) Has not participated in two consecutive regular meetings of the society without sufficient reason. (b) Deliberately caused harm or caused to be harmed the properties of the society (c) Misappropriate the properties of the society that he has received for various reason. (b) Has failed to meet his obligation emanated from the occupational sector granted by the society for more than two times. Any member who has committed a fault shall be dismissed from membership. Dismissal of members 1. Grant of substitute certificate 1. (f) Sold or caused to be sold under price or bought or caused to be bought over price the properties of the society with view to derive unlawful advantage. 18. (e) Bribed somebody or been bribed by somebody in the name of the society. (d) Deliberately misappropriate the fund of the society or facilitate conditions for the same action to be committed. The member shall be deemed to have committed a fault where he has. .16. (a) Committed a fault which is contrary to the objective of the society. (g) Reduced the amount or the quality of product or service that the society supplies 17. Charges Any cooperative society shall pay charges indicated in the schedule attached thereto to government upon receiving a share certificate or its substitute. (c) Has not participated for a year in any transaction or services rendered by the society. 2. A member who failed to meet his obligation shall be deemed not to meet his obligation where he: (a) Has failed to pay fully for the shares within a period specified. A cooperate society that has lost its certificate may apply to appropriate authority for the grant of substitute certificate.

2. Its objective is found contrary to this regulation. Where there is no . There shall be a quorum where more than half members of the general assembly are present. 4. Any cooperative society shall convene its regular general assembly at least once in a year.2. Conditions for the Prohibition of Registration Any cooperative society shall not get registered and be granted certificate where. 2. It has got similar name and emblem with the society that has already registered. Where there is no quorum for general assembly called for the second time. 21. the meeting shall be convened by members present. 1. the proclamation and directive issued by the appropriate authority. 3. which is convinced in a situation where there is no quorum as is indicated in sub article 3 of this article. 3. Where there is no quorum in an emergency meeting called as per article 22 of the proclamation. The appropriate authority shall grant the substitute certificate within 10 days as of the submission of the request. Regular Meeting of the general assembly 1. 19. Where there is no quorum of the general assembly called. the management committees shall call the second emergency meeting within 15 days as of the date of the first meeting. Emergency meeting of the General Assembly 1. the second general assembly shall be called within 15 days as of the date of the first general assembly. Section Five Meetings of a Cooperative society 20. The appropriate authority shall issue directives on the manner of granting substituted certificate. The decision passed by the general assembly. It lacks its own project proposal. It doesn’t observe registration requirements specified in this regulation and the proclamation. shall be deemed to have been made in the presence of all members. 3. 4.

the chairperson of the general assembly shall have a casting vote. Voting Procedure of a Cooperative society 1. Allocation of Net profit 1. Call for the meeting The management committee shall make a call. decision of regular or emergency meeting shall be passed by a majority vote. . (b) Obtained through donation or inheritance is shall remain indivisible and common asset of the society. 22. Indivisibility of Assets of the society Where the asset of the society is: (a) Registered as a reserve fund account. 2. 2. Unless and otherwise provided in the by-law of the society. Section Six Assets and funds of the Cooperative society 24. The amount of fund deducted from the net profit and allocated for the reserve shall be deposited in a saving account opened in the name of the society. There shall be quorum where tow third of members of the general assembly are present. The amount allocated for the reserve shall be deposited only unti8l is shall not exceed 30% of the capital of the society. 25.quorum in emergency meeting called for the second time. the appropriate authority may call another meeting. In cases of a tie. The utilization/application of this fund shall be determined by directive issued by appropriate authority. 2. 30% of the net profit of the society shall be deducted and allocated for the reserve fund. 23. as per the provisions of the proclamation to all members 15 days before the emergency meeting is convened through a News Paper having nation wide circulation or using any means found convenient.

and to a substitute of a deceased member. Done at Addis Ababa. Manner of distribution of the asset shall be determined by a directive issued by the appropriate authority. 27. Meles Zeawi Prime Minister of the Federal Democratic Republic of Ethiopia The Federal Democratic Republic of Ethiopia Cooperative Commission Schedule of fees for certificate service No. Power to issue a Directive The appropriate authority shall issue a directive necessary for the implementation of this regulation. Repealed laws Regulations or a directives inconsistent with this regulation shall be inapplicable. Description 1 New Registration 2 3 Substitution Temporary certificate Fess/Birr Remark 60 30 30 Unit V . 28. Effective Date This regulation shall come in to force on the date of its publication in the Negarit Gazeta. this 28th day of June 2004. to a member who is dismissed for the reason other than committing a fault. 29.26. Distribution of Assets of Dissolved Cooperative society The assets of a dissolved cooperative society left after the creditors are paid as is indicated under Article 44 sub article 4 of the proclamation shall be distributed to a member who is active at the time when dissolution pronounced.

Head Office The Head Office of the Commission shall be in Addis Ababa. it has become imperative to establish an autonomous organ responsible for registering and supporting cooperative societies organized at federal level. 147/1998. is hereby established as an autonomous Federal Government Organ. Objective of the commission The objective of the Commission is to enable rural and urban working people to solve the economic and social problem they face by themselves and become self-reliant by . conducting research. The Commission shall be accountable to the Ministry of Rural Development. it has become necessary to enable the rural and urban working people to solve the economic and social problems they face by themselves depending on local resources and become self-reliant by being organized in cooperatives societies different in type and standard.. 2. Short Title This Proclamation may be cited as the “Cooperatives’ Commission Establishment Proclamation No. Establishment The Cooperatives’ Commission (hereinafter referred to as “the Commission”). 4. Now.274/2002. Therefore. in accordance with Article with Article 55(1) of the Constitution of the Federal Democratic Republic of Ethiopia and Article 55 of the Cooperatives Societies Proclamation No. Whereas. 3. rendering training and other technical support to achieve the above mentioned objective.Proclamation No. it is hereby proclaimed as follows: 1. 274/2002 Proclamation to Establish Cooperatives’ Commission Whereas.

Audit and inspect the accounts of cooperative societies to be set up at federal level and assign a liquidator. the cooperative societies to be organized at federal level. 2. 4. Direct and supervise cooperatives’ training institute to be set up at federal level. Undertake research and study to promote traditional and local self-help associations to modern cooperative societies. and submit the same to the government and follow up their implementation. register. Powers and Duties of the Commission The Commission shall have the powers and duties to: 1. or by the union of different cooperative societies organized pursuant to (b) of this Sub Article. cancel them from its record when dissolved: and . and follows up the implementation thereof. 5. principles. and the cooperatives societies to be established by: o Two or more primary societies found in different regions. and benefits of the cooperatives be further known by the society and educational establishments. and issue licenses of the legal personality to. Formulate policies and prepare draft laws suitable for the activities and development of cooperative societies. and unable to be organized at regional level due to their peculiar nature. Make that the values.being organized in cooperatives different in type and standard depending on the local resources. 147/98 and in line with the international principles of cooperatives’ organization. it shall make known and disseminate the results of the study. organization. 3. Encourage that the organization of cooperative societies be in accordance with Cooperatives’ Proclamation No. 6. 7. 5. o The union cooperative societies organized pursuant to (a) and (b) of this Sub-Article. Organize. o Regional cooperative societies found in two or more regions.

and to develop artisans products. Provide professional and technical support to process agricultural products of the cooperative societies to industrial products so that they will have better added-value. 10. Organization of the Commission The Commission shall have: 1. 11. Own property. Establish relationship with concerned local and international organizations in order to expedite the progress and the activities of the cooperative societies. A Commissioner and a Deputy Commissioner to be appointed by the government. The necessary staff . 17. Submit reports on its performances to the concerned government organ. Provide technical and professional assistance for the bureaux and cooperative societies to be set up in the regions. 18. and facilitate conditions in order to bring consumers and producers to direct communication in the home market. 15. enter into contracts. and 2. Facilitate. and to share experiences with one another. in cooperation with regions as may be necessary. 14. 9. 13. Facilitate conditions to enable the cooperative societies in different regions to exchange their products and information about the market. Provide professional assistance to create the organization of cooperatives based on the culture and experiences of pastoralists and which enables them to improve their living conditions. Promote the product of the cooperative societies so that they may find market. 8. 12. Formulate and distribute model by-laws of societies which may vary according to the type and level of societies. sue and be sued in its own name. means to provide support for societies by studying and preparing projects suitable for the development of cooperative societies.it shall provide uniform standards of accounting and audit for cooperative societies throughout the country. Carry out other duties helpful for the implementation of its objectives 6. 16.

and implement the same upon approval. (f) Present reports on the activities of the Commission 3) The Commissioner may delegate part of his powers and duties to other officials and employees of the Commission to the extent necessary for the efficiency of the Commission.7. shall direct and administer the activities of the Commission. Powers and Duties of the Commissioner 1) The Commissioner is the Chief Executive of the Commission and. (b) Employ and administer the staff of the Commission pursuant to the Federal Civil Service Laws. the Commissioner shall: (a) Discharge the powers and duties stated in Article 5 herein. Budget The income of the Commission shall be drawn from the following sources: (a) The budget allocated by the Federal Government. (e) Represent the Commission in all its dealings with third parties. Books of Accounts 1) The Commission shall keep complete and accurate books of accounts. 2) Without prejudice to Sub-Article (1) of the Article. 8. . 9. (b) Aid received form domestic and foreign donors and other resources. (c) Draw up work programmes and budget. (d) Effect expenditures in accordance with approved work programmes and budget of the commission. 2) He shall carry out other activities to be entrusted to him by the Commissioner. The Deputy Commissioner 1) He shall act on behalf of the Commissioner in his absence. 10.

GIRMA WOLDEGIORGIS PRESIDENT OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA . 12. Effective Date This Proclamation shall enter into force as of the 14th day of May. Transfer of Rights and Obligations All rights and obligations relating to the matters provided for by this Proclamation and given to other organs are hereby transferred to the Commission. 2002. Inapplicable Laws Any law inconsistent with this Proclamation shall not be applicable to matters provided for herein. 13. this 14th day of May 2002. Done at Addis Ababa.2) The books of accounts and financial documents of the commission shall be audited annually by the Auditor General or by auditors assigned by him. 11.

Case I Specific Topic: Role of Cooperatives in Promoting Democratic Culture in the Tigray Region Authors: Dr.G.Veerakumaran and Ato Mengistu Hailu, Mekelle University
Research Issue:
The Federal Democratic Republic of Ethiopia, in its Proclamation No147/1998-A Proclamation to Provide for the Establishment of Cooperative Societies, declared that the “Cooperative societies are democratic organizations controlled by their members who actively participate in setting their policies and making decisions. Every member has equal voting rights and accordingly one member shall have one vote (Section 5(2))”. Within cooperatives ‘democracy’ includes considerations of rights and responsibilities. It means fostering the spirit of democracy within cooperatives. ‘Controlled by their members’ mean members participating in setting the policies and making decisions. It implies that members ultimately control their cooperatives and they do so in democratic manner. Elected representatives hold their office in trust of the immediate and long-term benefits of members. Cooperatives belong to the members and not to elected officials. They are trustees on behalf of members. Member control also prohibits a non-member becoming office bearer through nomination to the committee by the government or through the process of cooption. The democracy is the corner stone of cooperative management. The cooperative democracy is essentially an economic democracy. are the foundation of cooperative democracy. The Government of Ethiopia is encouraging and supporting the establishment of cooperatives in various spheres for the development of the country’s economy. As a The principles of freedom of association, equality within the organization and participation in the organization process

result, the cooperative movement is expanding, diversifying and growing at rapid pace. Due to this as on 30th March 2004, there were 4039 Agricultural Cooperatives, 3338 NonAgricultural Cooperatives such as Handicrafts Cooperatives, Savings and Credit Cooperatives, Housing Cooperatives and Construction Cooperatives functioning in Ethiopia. Moreover 35 Unions have been started at the woreda level to market the products of the primary cooperatives. In the years to come, every family is expected to associate with the local cooperative. Every citizen is expected to believe and lead a civilized democratic life. As a minor democratic institution cooperatives are to build a strong democratic culture among their members. Are our cooperatives in Ethiopia adopts the principle of cooperative democracy in all its endeavors? This question needs to be explored scientifically. Hence, an attempt has been made in this paper to study the Role of Cooperatives in Promoting Democratic Culture in the Tigray Region.

Objective of the study:
The major objective of the study is to understand the extent of democratic management in the cooperatives of Tigray region. The specific objectives of the study are: 1. To know the level of members’ participation in the General Assembly and in the election 2. To know the practice of democratic management by the committee members 3. To explore the linkage between the cooperatives and the local administration.

Methodology:
The data for the study to justify the objectives have been collected mainly from the primary sources. As on 30th, November 2003, there were 556 cooperatives in 35 woredas of Tigray region. Due to the cost and time constraints, the study randomly identified 24 woredas and from each Woreda one responsible official was selected as respondent for the preliminary survey. A questionnaire was administered among them to collect the required data. The variables studied were; (i) members participation (ii) Democratic Management (iii) local administration. The second stage is to study the

opinion of members and committee members of cooperatives. This paper is the outcome of preliminary survey conducted during September 2004.

Analytical Framework:
Data so collected were classified into three categories Viz., 1. Members participation in the election, General assembly and in the business, 2. Democratic Management by the Committee members, 3. Local administration and Cooperatives.

Description of the Sample Respondents:
The study randomly covered 24 woredas of 35 in the Tigray region. The total Cooperatives of all types come to about 493. The woredas have got Multi Purpose Cooperatives, Housing Cooperatives, Irrigation Cooperatives, Savings and Credit Cooperatives, Construction Cooperatives, Handicrafts Cooperatives, Fisheries Cooperatives and unions. Each woreda has its own Cooperative Promotion Office with five to ten officials. Cooperative Bureaus were the official development interventionists for promotion of Cooperative sector in their respective woredas. The study collected data from 24 officials of the Cooperative Promotion Bureaus at the woreda level. Out of 24 officials 20 were male and only four were female. It’s evident that there was gender inequality in staff pattern. Age group of the employees showed an interesting revelation that all the respondents are below 40,and that too only four were above 30. All the respondents had a diploma in the related field and were serving for more than five years in the department.

Members’ Participation:
The concept of Members’ participation in cooperatives denotes (i) members participation in the General assembly, (ii) members participation in the election and (iii) members participation in the business. The following paragraphs deals with the concepts and results of the study. Members Participation in the General Assembly General assembly means a meeting of members of the primary cooperatives or representatives of societies above primary level. The supreme organ of any society shall

control committee and when necessary the members of other sub-committee. The general assembly of a society shall pass decisions after evaluating the general activities of the society. give decision on the audit report. the general assembly has to take an intelligent decision for electing the members of the . and the duties and responsibilities of those elected. The next step is nominating qualified members to serve on the management committee and voting in the election process. This involves three steps: Legal framework. Members must have a background of general information on the cooperative before they can make intelligent evaluation of the qualifications of candidates for management committee. approve the annual work plan and budget. convenience and place and willingness to attend. who may vote. decide on how the annual net profit of the society is distributed. hear work reports and give proper decision. method of selection. elect and dismiss the members of the management committee. Articles of incorporation and bylaws usually define who may serve. viz.. 79 percent of the respondents of the study opined that only moderate members’ participation (50 to 80 % of the total membership) was there in the general assembly. decide that a society either be amalgamated with another society or be divided in pursuance of this proclamation. The ultimate mission of the cooperatives may also be get diluted to the whims and fancies of the caucus group. The committee is representative of the general assembly and is responsible and accountable to it for its acts of commission and omission. Absenteeism of members in the general assembly may lead to the loss of democratic character that may result in the dominance of the vested interest. Members Participation in the Election: Democratic election of the management committee is vital to democratic member control. Around 17 per cent of the respondents viewed that less than 50 per cent participation by the members in the general assembly.be the general assembly (Section 20 of Proclamation No147/1998). number of committee members and length of term. Members choose a few of the leading persons from the membership to serve as committee members. Hence. decide any issue submitted by the management committee and other committees. informed member electorate and the election process. determine the amount of shares of the society. approve and amend the by-laws and internal regulations of the society. The attendance in the general assembly depends on factors.

At the same time 17 per cent of the respondents said that the members’ participation was very less i. possibly by setting up reserves. the committee performs several important supporting roles. part of which at least would be indivisible. if any. the committee is accountable to members. function to direct the business affairs of the cooperative and it is the cooperative’s central decision centre. and supporting other activities approves by the membership. 67 per cent of the respondents viewed that moderate members’ . In carrying out this responsibility. the researchers felt it is pertinent to obtain the opinion of the cooperative officials. It is a communication hub. Members usually receive limited compensation. Around 75 per cent of the respondents opined that moderate participation of members in the business of the cooperatives. imparting information between members and management. Members’ Participation in the Business: Members contribute equitably to. benefiting members in proportion to their transactions with the cooperative. Mere investment in the form of share capital will not pave way for the business development of the cooperatives. In this respect.committee. less than 50 per cent. 12 percent of the total respondents opined that the members participate fully in the election process. For which the presence of all members is essential. and democratically control.e. on capital subscribed as a condition of membership. The surplus is generated by the cooperatives by the active involvement of the members in the business of the cooperatives. But in every role and action. the capital of their cooperative. Moreover. At least part of the capital is usually the common property of the cooperative. the members participate in the process moderately (50-80 percent). Democratic Management by the Committee Members Cooperatives have user-owners and for all of them to involve in the decision making process is difficult. So the members elect a few members as members of the management committee who can make most decisions for them. 71per cent of the respondents of the study opined that at the time of election for management committee. The trend is not good for any cooperatives in the long run. most importantly. Members allocate surplus for any or all of the following purposes: developing their cooperative. The committee. providing recommendations and guidance. It is an advisory body to members and management.

members get from the cooperatives help the people to become member in the local administration. Democratic management is a base for Democratic Governance in the Local Administration: The experience. Democratic Governance: The uniqueness of the cooperatives is the role of the user. 21 per cent of the respondents have said that there was full participation of the members in the committee meetings. For many local leaders. By keeping this in mind. The fundamental concept of the democratic governance in a cooperative is that those who need and use the services provided by the cooperative manage it. It is interesting to note that in three woredas the elections for few cooperatives were not conducted. And everybody was of the opinion that the elections for the cooperatives were conducted in accordance with the cooperative proclamation. With the rapid proliferation. One positive note is. needs of the locals easily and surmount it in a democratic way. This will help the people of the local administration to identify the problems. It could be inferred from the results that the committee members show interest in the development of their cooperatives. the researchers got the opinion of the respondents on the democratic governance. Except one everybody said that they have belief in the concept of democracy. diversified activities and extensive coverage cooperatives have emerged as the relevant institutions in the contemporary context. All the respondents are of the opinion that the Democratic management is a base for Democratic Governance in the Local Administration.participation (50 to 80 per cent) was there in the management committee meetings. Only those cooperatives started during the earlier regime and not functioning (dormant) were not brought under the election process. Hence. cooperatives are the stepping-stone for their long run political career. a cooperative is organised. Policy Implications . owned and controlled by those who need and use the services of the cooperatives. which is different from any other form of business.

Ian McPherson (1996).It must be impressed upon the members that the satisfactory functioning of their cooperatives depends primarily upon their active participation in democratic management. There are members who do participate in the business of the cooperative but neglect their right to participate in the management.Selvaraju (2000). Cooperatives in the New Millennium. 2.147/1998 Cooperative Societies Proclamation.al. 4. This will result in the electing the right person for local administrations to identify and fulfil the social. member information and member education are extremely important for democratic management in cooperatives because without enlightening members. it is impossible to secure members’ participation in management which is the essence of democratic management. It is important that the members of the cooperatives participate not merely in the capital. Frank Ratna Kumar and et. The democratic management of cooperatives is a base for Democratic Governance in the Local Administration. To secure satisfactory services from the cooperative it would be in their own interest to participate in the general assembly meetings.. It is an obligation to themselves for protecting and promoting their own interests. but in the business and management as well. Member contact. New Delhi. it is imperative for the government to promote cooperatives in a big way. Vikas Publishing House. R. perfect and efficient political administration. A New World Through Cooperatives. cultural and political needs of the people. hence. . Coimbatore. 3. Federal Negarit Gazeta of the Federal Democratic Republic of Ethiopia (1998). Rainbow Publications. Cooperative Principles for the 21st Century.(2003). Proclamation No. Selected Reference: 1. Geneva. economical. International Cooperative Alliance. It will pave the way for a clean. If such members who do not participate in the business get undue opportunities to shape the policies in a manner which may not be conducive to the interests of the former.

Rural Business Cooperative Services. . Washington. United States Department of Agriculture (1997).5. Cooperative information Reports.

Experience with nationalization of natural resources has not been good in most of the cases all over the world.Veerakumaran. The study was carried out with the following objectives: . Mekelle. 30 Savings and Credit Cooperatives and one Housing Cooperative in the Tigray Region of Ethiopia alone. Abstract Management of natural resources of land. equity. the cooperative mode of natural resources management seems to be the best of all for. nationalization or centralized public management. There is no single best system of management that could be commended for all situations and all times. PO No: 231. and resource users’ satisfaction. water. Faculty of Dryland Agriculture and Natural Resources. Department of Cooperatives. 2003 . as on 7th July. one Handicrafts Cooperative . For improving the management of natural resources. attributes of the resources users. an attempt has been made in this paper to explore and critically analyze the suitability of cooperatives to manage the natural resources in Ethiopia.38 Irrigation Cooperatives. (iii) to propose a cooperative model to manage the natural resources. fish etc. it can better meet the goals of efficiency. sustainability. Faculty of Dryland Agriculture and Natural Resources.. there were 514 Multi Purpose Coopeartives. Privatization of natural resources has yielded mixed results: it has been justified on efficiency grounds and condemned on equity and sustainability grounds. Mekelle University. (ii) to review the current status of cooperatives engaged in the management of natural resources. Lecturer. The core results of the study are as follows. Hence. Mekelle. forests.(i) to examine the rationale of cooperative management of natural resources. to understand the conditions under which each of the three alternative systems of resource management is likely to succeed as well as the conditions under which a system is likely to fail. Assistant Professor and Head. it and is politically and socially more acceptable in most societies and nations than any other alternatives. Optimum utilization of natural .et and Ato Mengistu Hailu. Due to the encouragement given by the present government. Multi Purpose Cooperatives.G.Case II Title of the Paper: Cooperative Management of Natural Resources Authors: Dr.13 Water Users’ Associations. and cooperative / collective management by local people themselves. Theoretically and ideologically. Mekelle University. and the goals of resources management. Email: gveeran@freemail. the decision makingenvironment. it is necessary for resources manager. Department of Cooperatives. Irrigation Cooperatives and Fisheries Cooperatives are all directly involved in the management of natural resources. Further more. The choice of an appropriate system depends on several factors such as the characteristics of resources. Both secondary and primary data were used for the purpose of this study. They include privatization. with proper rules and regulations. PO No: 231. Many alternative systems of management of natural resources have been proposed by academics and practitioners. of a nation is an important factor affecting the level and pace of its development. one Fisheries Cooperative .

and the goals of resource management. an attempt has been made in this paper to explore and critically analyze the suitability of cooperatives to manage the natural resources in Ethiopia. To review the current status of cooperatives engaged in the management of natural resources 3. water. . Hence. the authors had discussion with the officials involved in organization and supervision of cooperatives in the Tigray region. To examine the rationale of cooperative management of natural resources 2. Observations during the field visits of the authors also form part of the description. Objectives of the study The main objectives of the study are: 1. Introduction Management of natural resources of land. Further. Though this paper can have the limitations of significant level of empirical evidences. and cooperative/collective management by local people themselves. The resource management warrants an understanding about the conditions under which each of the three alternative systems of resource management is likely to succeed as well as the conditions under which a system is likely to fail. To propose a cooperative model to manage the natural resources Methodology for the study The data for the study to justify the objectives were collected mainly from the secondary sources. Many systems of management of natural resources have been proposed by academics and practitioners. of a nation is an important factor affecting the level and pace of its development. The threat of over-exploitation and absence of proper guidance exists. the authors believe that this modest attempt would facilitate further research. the decision-making environment. There is no single best system of management that could be commended for all situations and for all times. The choice of an appropriate system depends on several factors such as the characteristics of the resource. Irrigation Cooperatives could convert the barren lands allotted to the members into irrigated lands and they take three crops in a year. Findings of the Study The findings of the study are presented in the following paragraphs in concurrence with the objectives. fish etc. They include privatization.resources like sand and stones gives employment to a small segment of population and increases the non-business revenue of the cooperatives. The authors suggest an Integrated Cooperative Management of Natural Resources with the help of other stakeholders. attributes of the resource users. nationalization or centralized public management. forests.

timber. Privatization has yielded mixed results: it has been justified on efficiency grounds and condemned on equity and sustainability grounds. requires the cooperation or participation of all the people living and using ground water in the watershed. This is so because the use of natural resources by any user has many unintended side-effects. or in technical terms.. etc. inequitable distribution of their benefits often leads to clandestine encroachment. For the success of any strategy of natural resources management. Management of natural resources on sustained yield basis depends upon a careful orchestration of the policies and management practices. or misappropriation of these resources. Cooperative management of natural resources is there fore the most appropriate of all forms of management in most situations. therefore. the involvement of local people is essential. This is best achieved when the planning and management of natural resources is done on watershed basis and the resources managed by their users are organized in the form of an association preferably a cooperative society. If one of the co-users pumps more water. all uses of the natural resources. This is so because. hence. Until recently the role of natural resources in the rural economy was not understood properly. Moreover. it can better meet the goals of efficiency. a need for exploring viable natural resources management strategies for their restoration and utilization within a development context. Optimum use of ground water in a watershed. the cooperative mode of natural resources management seems to be the best of all. Lack of equitable access to natural resources and. with proper rules and regulations. less water is left for use by the others in the watershed. are interdependent and require the cooperation of all the resource users for internalizing/minimizing the externalities involved. . irrespective of whether they are owned privately or publicly. theoretically and ideologically. Therefore. therefore.Rationale for Cooperative Management of Natural Resources The natural resources are dynamic and subject to management interventions that can provide sustainable benefit flows in the form of food. For example. Similarly. externalities on other co-users. sustainability. fuel wood. Experience with nationalization of natural resources has not been good in most of the cases all over the world. fibre. clean surface and ground water. air filtration and humidification. fodder. soil and water conservation in a watershed requires the participation of all the land-owners having land in the watershed in the form of adoption of the recommended soil and water conservation measures. privatization or nationalization of natural resources was suggested as a solution to arrest their degradation and preserve the environment. There is. equity and resource users’ satisfaction and is politically and socially more acceptable in most societies and nations than any other alternatives. pumping of ground water in a watershed affects the aquifer that is a natural resource to which all those who live in the watershed have a legitimate claim. In a nutshell. and Eco-tourism. to that extent. manure.

the cooperatives are to function with environmental consciousness. 38 Irrigation Cooperatives. Many social events are still taking place in rural Ethiopia through collective effort. In Ethiopia. The Federal Government of Ethiopia has identified Cooperative form of business organizations as an instrument of socio-economic change.Current Status of Cooperatives Engaged in the Management of Natural Resources A Cooperative is an autonomous association of persons united voluntarily to meet their common economic. Optimum utilization of natural resources like sand and stone 6. Multipurpose Cooperatives are functioning with the following objectives: 1. The cooperatives and its members should have social responsibility. Many Cooperatives have emerged in the recent past to serve the suppressed and depressed community of Ethiopia. one handicrafts Cooperative. The people of Ethiopia have got a very long social history of working together to fulfill their socio-economic needs. eight Urban Savings and Credit Cooperatives and one Housing Cooperative functioning in the Tigray region of Ethiopia as on the last day of 1995 EC. Facilitating sale of agricultural produces 4. Inculcation of thrift and savings habit among members . Irrespective of the nature of business. which includes preservation and promotion of natural resources. there were 514 Multi Purpose Cooperatives. 22 Savings and Credit Cooperatives. social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise. Agriculture. Any form of environmental degradation or pollution is against the cooperative philosophy. Trade and Military Operations were carried out through cooperative efforts. • Multipurpose Cooperatives • Irrigation Cooperatives • Water Users Associations • Fisheries Cooperatives The level of involvement and scope for further expansion of these cooperatives in management of natural resources is examined below:Multipurpose Cooperatives Multipurpose Cooperatives are considered an institutional intervention to increase agricultural production and productivity. Provision of agricultural inputs 3. one Fisheries Cooperative. the following cooperatives are directly involved in natural resources management. Due to the encouragement given by the present government. Provision of agricultural credit 2. 13 Water Resources Associations. Operating a consumer store 5.

The members of cooperatives should be made aware of the conservation of natural resources. tree bark.planned and accepted schedule. The Cooperatives engaged in such mining operations need a detailed geological study as to what extend they could use the resources and where and when it should be stopped (It can’t be a perpetual operation since land mining has an adverse effect on ecology). They operate on a small scale and need the support of other development interventionists to go for large scale production. The Irrigation Cooperatives block and accumulate the stream water and pump for irrigation as per the pre. Since the entire rural community is involved in the cooperative process.The objective of Optimum utilization of natural resources like sand and stone is operational with the help of local administration. Farmer members of many Irrigation Cooperatives are cultivating more than two crops in a year. and provide a better way for preservation and use of precious water resources for multiple purposes. Tree Growers Cooperatives are for afforestration of dry lands by planting fruits and fodder trees with limited water use. ensure food security. Hence. roots. Soil erosion and degradation are the other major threats to the farming land which need to be addressed only through cooperatives. wild fruits. wax. They have the mandate of preserving and developing the indigenous fish varieties and go for exotic varieties without affecting the ecological balance. Drip irrigation to save water and expand the cultivable area has not been introduced. resin. They share the fuel and motor operator’s expenses. processing and marketing of fish and fish products. The members of cooperatives are engaged in the mining work and get wages for their labor. The amount so generated forms part of the cooperative’s income. medicinal plants. Ground water exploitation has not been explored in any of the irrigation cooperatives. we can go for fisheries cooperatives. Though on a small scale. Forest and Tree Growers Cooperatives Forest Cooperatives are for the collection and marketing of minor forest products/non-timber forests product such as fodder. Wherever we have natural and artificial water reservoirs. the farmers are in need of appropriate help from the development interventionists. Fisheries Cooperatives create employment. The cooperative also gets a moderate commission for every load of supply to the urban consumers/contractors. gum. and seeds. Water Users’ Associations and Irrigation Cooperatives: Water Users’ Associations and Irrigation Cooperatives were started for ensuring supply of water for irrigation purpose. Implications of blocking of a stream have not been studied. Fisheries Cooperatives Fisheries Cooperatives are to provide employment to fishing community through fishing and marketing of fish. management of natural resources will be very much transparent and more effective. honey. the irrigation cooperatives work perfectly and can be replicated in other regions. .

but the value of the trees in the woodlot. but only during a drought. The main benefit of a woodlot is not the value of grass collected. constructing soil and water conservation structures. The authors observed many such non-formal cooperative experiments. bark. or roots. although it needs them very badly. processing and marketing. In a few cases animals are allowed to graze in the woodlot. Involvement of external agency as a catalyst. Violations of restrictions are usually punishable by a cash fine set by the community council. The most woodlots are managed at the village level by the village council. In some cases. Most other uses. 3. though in many cases fines are decided by the local court. In Ethiopia the authors note various instances of ‘Community Management of Natural Resources. Existence and strict enforcement of rules for regulating the use of the resources. It’s time to regularize such experiments in order to cooperativise the management of natural resources. Small and cohesive groups have higher chances of success in management of natural resources. Integration of production. or other purposes. leaves. and collecting fuel-wood. weeding and harrowing are the main collective input. Labor for tree planting. The most common use allowed on woodlots is to cut and collect grass for animal feed. and are used only by members of that village. Factors responsible for the success of cooperative management of natural resources The factors responsible for the success of cooperative management of natural resources are as follows. Willingness of government departments and officials to share power with the cooperatives and to support them in the forms of funds. root materials. Highly deforested lands were converted in to man-made forest lands in India because of Tree Growers Cooperatives. legitimacy and coordination. Based on the above review the authors present the following Model for the Cooperative Management of Natural Resources in Ethiopia (last page). 4. 1. 7.Unfortunately such cooperatives are not found in Ethiopia. Forest Cooperatives are the best form of institution to protect the forests while using the resources in a sustainable way. the guard is compensated by being allowed to collect grass from the woodlot. Good local leadership and social and political entrepreneurship. or dung. 6. shrubs. 5. High stakes of resource users in the resources as well as in the cooperative managing of resources. preventing free riding. are not allowed in woodlots.’ A case study of woodlots in Northern Ethiopia resembles a cooperative. including cutting trees. a non-liquidated capital gain. sharing the cost and benefits of cooperative management equitably (in proportion to the effort put in or contribution made). branches. 2. . Collecting fruits and bee-keeping in woodlots are also commonly allowed. Woodlots are protected in almost all cases by a guard paid in cash or in kind. technical information.

and Cooperativisation. 1994. Anand.2003. 2. Privatization has yielded mixed results: it has been justified on efficiency grounds and condemned on equity and sustainability grounds. 1993. Katar Singh and Kulbhnshan Balooni.). 5. R. Role of Tree Growers’ Cooperatives in Promoting form Forestry in India. nationalization. IRMA. Cooperatives in Natural Resources Management. Katar Singh. Katar Singh and Vishwa Ballabh. IRMA. Institute of Rural Management. equity and resource users’ satisfaction and is politically and socially more acceptable in most societies and nations than any other alternatives. Cooperative Property Rights as an Instrument of Managing Groundwater. Making Cooperatives Work. India. 4. privatization. Anand. 1997. Anand. Cooperativisation or cooperative management is relatively is a relatively nascent regime. Model for the Cooperative Management of Natural Resources in Ethiopia . Institute of Rural Management. But these mode of management seems to hold the highest promise as an instrument of achieving the goals of efficiency. 1994. namely. 1996. International Food Policy Research Institute. Experience with nationalization of natural resources has not been good in most of the cases all over the world. Berhanu Gebremedhin . 3. Rediscovering Cooperation. 6.Rajagopalan (Ed. India. Washington. Thesis Free University. The results of cooperative management of natural resources have so far been mixed. India. Amsterdam. India. sustainability. John Pender and Girmay Tesfay. Community Natural Resources Management: the case of woodlots in Northern Ethiopia.Conclusion There are three alternative systems or regions under which natural resources are and can be managed. Ruerd Ruben. Anand. Selected References 1.

Actors Members Local Leaders Government Department Development Interventionists Sustainable Management National Resources Preservation Promotion Production Process Marketing Land Water Forests Fish Institutional Intervention Cooperatives Agricultural Cooperatives Irrigation Cooperatives Forests and Tree Growers Cooperatives Fisheries Cooperatives Funds Technical Information Legitimacy Coordination Strategies .

can Appoints Registrar. sanctions institution of prosecution. can cancel registration. receives annual reports approve of expulsion of members. can provisions. serves on cooperative tribunal. divide. can admit members. must approve of investments in own business. must approve of all by-law body meeting where a board fails to do so amendments. liabilities. can amend by-laws most by-law provisions. can registers amendments to certain by-law compulsorily amalgamate. etc fixes honorarium to president. but may provide other funds and from legal provisions. . can summon documents etc. etc. takes on record amendments to classify cooperatives. revisions. conducts elections. convenes general compulsorily. sets up Special Courts and Tribunals 3. audits. appoints liquidator. registers Has to register cooperative and its by-laws by-laws. can suspend officers. inspects. can direct Registrar. can recover dues. can call for can conduct special audit where nonspecial general meetings and for meetings of member funds are involved. can and audited financial statements. of amalgamation. can give directions for cooperatives. can recommend dissolution to the tribunal if a supersede committees. sets up Special appeals. can hold equity in cooperatives. winds up cooperative. can exempt cooperatives capital. can give directions Courts and Tribunals to cooperatives regarding reservations on staff. 1995 1. Principles of Cooperation Not stated in the Act Principles of cooperation as internationally accepted at the time of enactment are incorporated in the Act 2. must approve of transfer of assets & if they are in consonance with the Act. 1964 Cooperative Societies Act. must in stipulated time. inquires. Role of Government Appoints Registrar. can handle enter into with cooperative. can not provide share postpone elections. can appoint persons-in-charge for state memorandum of understanding that it may level federations. appoints persons-incooperative works in contravention of the charge. Act and principles of cooperation. Role of Registrar Registers cooperative at his discretion. can no-confidence. approves of bank in which deposits can be kept. settles disputes. handles appeals. can nominate directors to guarantee to cooperatives based on board.Case III Comparison of Andhra Pradesh State Cooperative Laws of 1964 and 1995 Andhra Pradesh Andhra Pradesh Mutually Aided Cooperative Societies Act. disqualify committee members. can surcharge. of division. frames rules. inquires. reviews.

All affairs on every subject covered by the Act of a cooperative are to be regulated by the provisions of the Act and the by-laws of the cooperative 5. conflict of area of jurisdiction. Registrar must approve staffing deputationists from government and other pattern. Mobilisation of funds Cooperatives may mobilise funds within the Cooperatives may mobilise funds within limits fixed by Registrar the limits fixed by by-laws . constitutes common cadres.revisions. staggered terms. etc. with board. Rules The government is empowered to make rules There is no rule-making power. composition of board left to composition of board fixed. for not placing audited accounts before annual general meeting 8. must approve of appointment/removal of chief executive where cooperative is in receipt of government aid 4. disqualification and Admission disqualification and expulsion expulsion of members. term. reviews. Share capital Government and other non-members may Members alone can contribute share contribute share capital capital and non-member share capital is forbidden 10. Management Size of board fixed. approves of staffing pattern. can appoint supervisory staff in cooperatives. for not conducting general body meetings in time. reservations on board incumbent board failing which by ad-hoc committee. Size. same class of cooperative therefore. Staff Common cadre possible. salaries. multiplicity of organisations possible Registrar does not have the right to classify cooperatives 6. Multiplicity of cooperatives Registration can be refused because of nonRegistration cannot be refused except if viability. service conditions. Membership In matters of admission. an organisations possible if a cooperative so improve deputationists from government deserves 9. for by-laws are not in accordance with Act. disqualification of all directors for not conducting elections in time. too little authority All staff fully accountable to cooperative. the Registrar has final of members are the exclusive prerogative say of the cooperative 7. elections by Registrar. elections by by-laws. term of board fixed.

any persons entrusted with responsibility by the Act will be deemed to have committed offences if the responsibility is neglected 18. Deficit The issue of deficit not addressed. Audit Audit is the responsibility of audit wing of the Audit is the responsibility of the board. members have to meet the deficit in proportion to their actual use or commitment to the use of the services of the cooperative during the year. department. Same as available in 1964 Act duties. Subsidiaries No subsidiary organisation can be set up by a Subsidiary organisations may be set up by cooperative a cooperative 15. if the deficit cannot be set off against reasons 13. no penalty for non-conduct of Registrar's office at cooperative's audit discretion. but other investments to be in any non-speculative manner specified by by-laws 12. Disputes Registrar or his appointee is the sole arbitrator By-laws must contain manner of settlement of disputes. offences mentioned in detail and their penalties. several Special Courts to look at offences. accumulated Deficit is required to be analysed and dealt deficits are dealt with at the time of liquidation with on an annual basis. Offences Offences to be tried by Special Courts. Investment of funds Investment of funds even in own business No restriction in investment in own restricted. otherwise held prosecution responsible for the offence. not just . only in the event of poor By members and by Tribunal.11. etc 16. any affected party can move Special Court. Registrar has no role 17. Rights and privileges Exemptions from payments of contains stamps. directors and officers to prove that they too. non presentation of audit report to general body in stipulated time results in disqualification of all directors 14. only after which Tribunal has been given role. Dissolution Only by Registrar. prior permission of Registrar necessary for tried to prevent offence. lending limits are fixed by Registrar business. choice of auditors not available to auditor to be chartered accountant or from cooperatives.

but also because is not possible. as Defined as instrument of its members for chanal for distribution of government resources their economic social betterment. . surplus assets of a After dissolution. Final disposal of assets After dissolution. liquidations proceedings to be completed in 2 years 19. surplus assets of a cooperative will vest in Registrar cooperative will be disposed of in accordance with the by-laws of that cooperative 20. for not functioning in accordance with the Act and Principles of Cooperation. based on mutual aid. Cooperative Projected as an instrument for public good. voluntary dissolution by members because of non-viability. no time limit on liquidation of lack of interest in continuing proceedings cooperative.functioning.

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