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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, 4. Appraising Mangers Performance, 5. Hagen Henry, Framework for Cooperative Legislation, ILO, 1998

6. Promoting Cooperatives-A guide to ILO Recommendation 193, 7. Basic Training methodology-Materials for Training of Cooperative Trainers, Trainers Manual, ILO, 8. G.K.Sharma, Cooperative Laws in Asia and the Pacific, COOP TIMES, NewDelhi, 1997. 9. 10. Ethiopian Commercial Code 1960. Note: The student is expected to refer all the business relevant proclamations of Ethiopia. Method of Evaluation Sl.No. 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

Part I Management
Unit I Cooperative Management: Definition, Objectives, Relevance, 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. K. Taimni, 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. 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. E.V. 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.

The above definitions bring to fore the following features of cooperative management. Cooperative management is a complex decision making process, and decisions are made at all the three levels of management pyramid. The overriding objective of cooperative management is to serve the needs of members. The conduct of all the activities must be governed jointly by the two sets of principles namely, a) principles of management and b) principles of cooperation. 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, it seeks to achieve its aim by means of effective and efficient use of resources. Objectives of Cooperative Management: Cooperative management has the following objectives: Firstly, the improvement of the operational efficiency is the fore-most concern of cooperative management, so that the organization is able to compete effectively. It must acquire capacity to thrive as a business institution in its own right. Cooperative management aims at evolving methods and techniques on the basis of the principle of management, which will help the managers to avoid mistake and improve their practice. Secondly, cooperative management aims at improving the viability of the cooperative society. The soundness of its strength, growth potentials and the quality of the service depend on the viability. viability. Thirdly, cooperative management should constantly strive to achieve member satisfaction. By providing efficient service to the patron-members on economical terms, cooperative organization can achieve equilibrium, and development member-loyalty and greater patronage. 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

individual objectives into meaningful reality and make visible impact on the people who from the organization. Fourthly, cooperative organization must also strive for community acceptance by carrying out the social responsibilities expected of it. Fifthly, cooperative management must also aim at ethical and moral development of the members. The object of cooperative organization is much more than improving the material standards of its members. Ultimately it strives to lift them to higher social and moral standards and enable them to realize higher spiritual potential. Sixthly, to fulfill the above objective it must develop organizational and management competence by professional sing management, and by taking up management development programme. The task of cooperative management is therefore, to understand the basic concepts, 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. The system concept of management is more relevant to cooperative management. A cooperative society should be understood as a sub-system of the larger socio-economic system. It draws resources and inputs from the environment, transforms them into service and sends the gods and services into the systems. There is constant interaction between the cooperative society and the larger system to which it is a part. The system approach to cooperative management has four basic ingredients. They are: A clear enunciation of the goals, which can be translated in terms of performance measures. 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. 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.

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.

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

a distinct aims system.

The aims system is still more complex in respect of the

integrated type of cooperatives. In such integrated cooperatives the individual membereconomies, which are quite distinct from the cooperative enterprise, are organically linked with the latter. 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 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. The several aims system linked together with one another makes the operational objective and decision making process highly complex. Superior Value Structure: Apart from being an economic enterprise, a cooperative society is an ethical, social and moral entity as well. The cooperative ideology draws its moral and social content from the reformist doctrine of Robert Owen, the father of cooperation, who advocated a new moral world free from profit, competition and exploitation. The Christian Socialists too gave an ethical orientation to cooperation so as to make it an instrument of social ethics, i.e. creation of more civilized society and the salvation of social sins. Besides promoting material prosperity the cooperative movement aims at educational betterment, thrift and morals, honesty, independence and self-respect, democracy, brotherhood and religion. Thus a cooperative society is both an enterprise and an association. To use Roymond firths language, it is an economic organization set in a social framework.

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. It follows that the successful cooperative management must involve both these aspects. It is the responsibility of cooperative management to aim at success in both fields and to perform the management functions of planning, organizing, directing and control in such a way that a fair balance between these two is achieved. 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. In cooperatives there is close linkage between the ownership, control and use. It is a business organization in which the components of ownership, control and use are integrated by being all vested in one body of people, 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. For, the services rendered by cooperative organization is on the anvil of constant review and any lapse is prone to harsh and sensitive criticism. Furthermore the production process also distinctly differs in cooperative enterprise from other forms of business. Of the two basic pattern of organization of producers cooperative viz. cooperative production society and cooperative service society, the second type has certain uniqueness. In one members are workers and shareholders simultaneously. In the other case, the members possess individual enterprises and delegate one or more functions to the cooperative establishment which thus becomes auxiliary in character. In such societies the cooperative managements tasks becomes complex. The management decisions have to be made not only for member economies also. Integration of member economies with the cooperative enterprise objectives, 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. 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, it is beset with practical limitation. The cooperative mangers need to involve more group of people

in the decision process.

As a result the decision making process tends to become

wasteful and vexatious. 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. As a result the Board either interferes with the executive management, or performs only the watchdog function of voicing the members grievances or fritters away the time and energy in trivialities. Aside this, wherever the Board is pliable it becomes a handmaid of the chief executive leading to quagmire of control. nebulous and counter-productive. 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. 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; and making the decision process dynamic by a clear demarcation of the powers and functions of the Chief-Executive. Harmony with Macro-Policy of State: Cooperation is an instrument of state policy and planning in most of the developing countries, 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. Perforce, this mutual process requires the harmonization of the macro-policy of the cooperative groups. Such integration imposes certain severe constraints on the management of cooperatives. 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. 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. In such situations the role of the Board becomes

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

Cooperative Democracy
Cooperation is a people centered organization. As such the concept of democracy is central to cooperative philosophy. Democracy is a product of modern civilization. It first emerged in the political field in the form of Chartist movement in England around 836, which sowed the seed of political reforms. The demand for the peoples 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. 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, Equality and Fraternity. The Rochdale Pioneers took up the principle of universal suffrage from Chartist Movement and applied to our economic situation. Thus the cooperative democracy is essentially an economic democracy. The principles of freedom of association, equality within the organization and participation in the organization process are the foundation of cooperative democracy. According to Paul Lambert: In the broadest sense economic democracy is partaking of persons concerned in the deliberations and decisions in the economic spheres. Economic democracy when it is pure, completely excludes capital as a source of authority; decisions are taken by persons concerned or the representatives that they have designated, all having the same right. Cooperative Democracy has two aspects i) Structural and ii) Operational.

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

Management Structure of Cooperatives


Members Board of Directors


Chief Executive

Middle-Level Employees

Structure of the Organization

Responsibilities Functions
Sets the societys objectives: decides bylaws: exercises ownership control over the societys growth. 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. As chairperson of the board and ex officio member of all committees, provides the link between board and management. Manages the business in line with board policies; establishes operating procedures; sets out jobs to be done; engages, supervises and trains staff; fixes salaries within ranges established by the board. Manages the department; provides specialized technical know-how for the department; supervises and trains staff; enforces operating procedures for the department. Provides services to the cooperative in the line with established policies and operating practices.
Manager of department

General body

Membership elects

Uses the services of the cooperative; elects capable directors; provides capital for operation and expansion; studies boards and auditors reports. Elects president and appoints manager; is responsible to membership for results of operation; operates within the bylaws of the society and abides by its own policies. Has the responsibility of enforcing board policies and providing guidance to the general manger between board meetings; is responsible to the board for all actions. Responsible to the president between board meetings; reports to the board at meetings; provides factual information so that the board can make policy decisions. Responsible to manager for operations. the general departmental

Board of directors


General manager

Manger of department



Responsible to the manger of the department; has to acquire understanding of the society and technical know-how in the department.

Measures to Make Democratic Control Effective The democratic control will be effective only when there is active participation of members. The active participation of member patrons in the control and management is very essential for efficient functioning of cooperatives. Members actual participation in the control of cooperatives include attending and participating in membership meetings, taking part in voting, contesting in election, serving in one or more committees, careful study of the reports presented, extending continuous support and showing genuine interest in the affairs of cooperatives. Several studies conducted in India and abroad reveal that the members participation has declined to a great extent particularly in large cooperatives. The factors responsible for poor participation of members include: illiteracy and ignorance, lack of loyalty, ineffective leadership, inappropriate system of communication, members apathy and domination of vested interests. In order to improve the member participation and involvement and to strength then the democracy following measures have been suggested by Herman Lam. 1. Local Sub-Regional Members Meetings: When the organization is too large the membership meetings tend to become unwieldy. In order to make the democratic control workable it becomes necessary to organize separate membership meetings in the sub-regions of the society. These meetings should in principle discuss all the important subjects meant for the final general assembly. 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. 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. 2. Local Advisory Committee in the Sub-Region: When the cooperative society has several branches, formation of local committees will help to make democratic control more effective. The Committee should meet regularly and summarise the results of the society from the local membership point of view. It is

also the responsibility of the local committee to canvass for more membership, organize member education programmes and represent the problems of members to the Board.

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

discussed and various measure to be taken for improving the business may be suggested on the basis of such reports. The Board can exercise control through the following statements and reports. 1. 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. It is an accurate and reliable statement, which serves as the basis for preparing the balance sheet, estimating gross margin, operating expenses etc. It gives a total picture and it enables the manger and the Board of Directors to keep the business well under control. 2. Operations for the month: A monthly statement of sale, production or other key operations of the cooperatives is necessary control device. These ought to be compared with the previous months performance and with the corresponding month of the previous year. If the performance is lower than the previous month the Board should take steps to remedy the situation. 3. 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. 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; b) above three month and less than 6 month old; and c) accounts more than 6 month old. 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. 4. Accounts Payable: By keeping an eye on this item, from month to month, board members will get an idea of how the management is taking care of current obligations. If the current payable show a tendency to increase, 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. 3) the business may be expanded. The Board should identify the reasons for increase in the account receivable

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

1. Setting up of organizational Goals: The Board is responsible for setting up organizational goals meant for achieving specific objectives, and interpreting the objectives. It is also responsible for making required change in the long term objectives. 2. Establishing Policies and Programmes: The Board in its meeting should consider important policies and long-term programmes involving vital matters and approve them. 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. 3. 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. The Board should realize the necessity of delegating responsibilities as well as authority to the managers. One cannot be held responsible without being armed with adequate powers to make ones own decision. 4. Systematic Appraisal of Operations: Systematic appraisal of the operations of the organization is another responsibility of the Board. 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. With such appraisals the Board will be able to exercise overall control over the management. 5. Maintain Public/Member Relation: It is the responsibility of Board of build a bridge between general membership and paid staff. The Board always represents members interest as well as the organization to the public, by means of good public relation.

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

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

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

Relationships to Members leadership role, providing an example and interpreting views and needs of members. Directors acts as a team with the other directors; has authority as a director only in board meetings and as delegated by the board, for example on committees. General manager at board meetings the general manager is a key resource and part of the overall management team; between board meetings the relationship is the same as for other members. Staff no special status beyond that of an informed member. 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, for the direction of the cooperative. Establish the organization of the board, including the appointment of committees, and clearly define the responsibilities and the authority assigned. Determine the job description, establish the salary range and appoint the general manager; set the salary and appraise the performance of the general manager. Approve the organization structure and salary schedules for all levels of the structure; and personnel policies and programmes for the organization. Approve major plans and programmes and capital and operating budgets. Analyze and appraise progress in achieving objectives and goals. Authorize changes in the assets of the organization. Recommend any by-law amendments. Deal with applications for membership. Recommend schedule of patronage refunds in accordance with the by-law.

Authorize repayment of member equities. Establish and administer controls and regulations for the protection of members and creditors. Provide for effective communications, and membership and public relations for the organization. Provide policies and programmes for the maintenance of a well-informed, effective board of directors. Provide for effective relations and coordination with other cooperatives serving the area. Support the cooperative. 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, coordinating the activities of and giving leadership to the board of directors, liaising with the general manager and board of directors, and engaging in communication with the members, other cooperatives, local organizations and government. Responsibilities Act as chairperson of meetings of the board and of the executive committee. Be ex officio member of all board committee receive reports and minutes, but not necessarily attend. 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; also, give leadership in planning the years agenda of special items. Perform the task of signing officer for the cooperative along with other appointed by the board. Interpret and clarify policies and decisions of the board.

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

Keep. The board informed of progress and of results in comparison with goals in all areas. Maintain effective relations with members and general public. Participate in, and cooperate and coordinate effectively with, other cooperatives in the community. Plan for personnel development as required to manage the society. Maintain liaison with the president. Provide leadership and direction to all staff members. Unit III

Decision Making in Cooperatives: Concept, Kinds, Process and Techniques

Decision-making is the essence of management so much so the management itself is understood as a decision-making science. Management is identified with perpetual choice making, where one is continuously engaged in choosing between alternatives. Decisionmaking is a universal function of all the managers in every part of the organization. The decision-making is an integral part of the management process such as planning, organization, direction, control etc. According to George Terry: "Decision making is selection of one behaviour alternative from two or more possible alternatives". In the words of P.F. Drucker: "A decision is a judgment. It is a choice between alternatives." 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. 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. 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; but it must also ensure that uniform action is achieved, there is proper participation and collaboration between members and employees in carrying out the decision. The managerial decisions may vary greatly according to the nature, significance and the

levels of decision. E. Dulfer has classified the decision making in cooperative on the basis of the levels. 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. Strategic decisions have long - term importance and a complex character. They are goal decisions and bring about fundamental changes. They are directed and coordinated at the higher levels of the enterprise. Tactical decisions are routine decision, which are directed at the regulation of limited fields of activity or shorter periods. They are based on strategic decisions and aim at their implementation. The tactical decisions are the task of middle and lower level management. Upper Management Level

Middle Management Level

Lower Management Level Extent of Decisions

Strategic Decision

Tactical Decision

On the basis of the method, the decision making, may be classified as programmed and unprogrammed decisions. Programmed decisions are routine repetitive decisions. It involves less risk and may be delegated easily. The quantitative nature of these decisions facilitates computer programming of these decision. Unprogrammed decisions are nonrepetitive. They cannot be assessed in quantitative terms and involve greater risk. Based on the person making the decision, the decision-making may be classified as individual decision and group decision. Individual decision-making is used in small organizations at times of emergency and in circumstances where the group has little knowledge. The prestige, power and the expertise enjoyed by the individuals who make decision are the factors, which contribute to individual decision-making. Group decisionmaking is participative decision making. It makes use of collective wisdom of several individuals. The members of the group get a chance to voice their opinion. The technical service of experts may also be made available. The group decision may take either of the two forms: Group advisory or Group deterministic.

Process of Decision Making The decision-making involves logical and sequential steps, which have to be followed in any scientific decision-making process. According to P.F. Drucker, "the decision making have five distinct stages: defining the problem; analysing the problem, developing alternative solutions; deciding upon the best solutions; converting the decision into effective action." 1. Developing the Problem A manager must continuously scan the environment to identify and perceive the problems of development. In a cooperative organization a manager can get new problems from the orders of superiors, direction issued by Board of Directors, suggestions from members and employees or by analyzing the system of operation and accounting. The common

problem areas in management, which involve crucial decisions, 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. After the perception of the problem the aim or objective of decision must be formulated. Every decision must contribute to specific goal, for example/increasing the turn over. Such goals make the decision purposeful. The objectives of decision-making must be specified as exactly as possible. It must be practicable or applicable to the problem situation. 2. Analyzing the Problem Effective decision-making depends largely on the availability and usability of facts. While decision making we have to consider all critical factors, tangible as well as intangible, internal as well as environmental managerial or technical. 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. They should not be too simplified. All the variety of factors and situations must be taken into account and their complex ramification must be understood. The relevant and influential factors must be distinguished from other factors, because considering too many factors leads only to confusion. "He who considers too much will perform too little", is the saying. Such disentanglement of pertinent factors is necessary to keep the time and cost factors within the limits. For instance if the management decision-making pertains to increase in

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

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

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

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. In capital project evaluation one assesses all the expected cash outflows and inflows for a project, and on that basis the rate of return the project can generate is arrived at. But the one major limitation in this type of analysis is that not always the benefits flow from a project can be measured. There are several intangible benefits such as higher morale, less pollution etc. Such intangible factors tend to be ignored in the cost benefit analysis.

Unit IV Criteria for Judging the Operational Efficiency Of Cooperatives, Performance appraisal and Key Result Areas in Cooperatives

Concept: Efficiency is the watchword of modern management. It is of special importance to cooperatives because of their twin elements in their objectives and operation, namely, Association and Enterprise; and the need to achieve a blend of success in both. The Operational Efficiency is an elusive concept, which has several connotations. This apart, operation efficiency is organization specific. An umbrella concept, which ignores the nature, size and operation of the specific cooperative organization, may prove to be nebulous. It is therefore necessary to understand certain broad criteria for measuring the operational efficiency of cooperative organizations. The Encyclopedia of Social Sciences has outlined, Efficiency as the ratio between input and output, efforts and results, expenditure and income, cost and the resulting pleasure. 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

amount of work accomplished.

According to this definition operational efficiency

means the achievement of the target specified by minimum time and effort. In other words, it is the ratio between input and output. The criterion of efficiency dictates the choice of that alternative which produces the largest result for the given application of resources. Dr.Jesdanwhlla has defined Operational Efficiency as, the effectiveness or competence with which a structure performs its desired functions. According to the above definition, the concept of efficiency includes the effectiveness. While organizational efficiency in a narrow sense, is concerned with how well an organization performs a given technology, while in a broader sense it includes organizational effectiveness, which is a measure of the quality of relationship an organization has with its environment. 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. It is in this sense the concept of efficiency must be understood in social organizations like cooperatives. Dimensions of Operational Efficiency When we closely examine the concept of operational efficiency in the context of a cooperative organization, we may arrive at four distinct aspects of the concept. A. Technical Efficiency: Technical efficiency pertains to technical competence of an organization. In other words technical efficiency relates to such matters, which are concerned with the specialized technical know how in the respective field of activity. It may relate to the improving productivity of industrial work process such as mechanization, rationalization etc. Similarly in each area of specialization, improving Technical Efficiency can increase productivity. For this purpose norms have to be evolved in each technical aspect for improving Technical Efficiency. B. Economic Efficiency: The Economic Efficiency on the other hand implies the realization of maximum output from given resources. Alternatively it also implies minimization of inputs required for realizing a given output of goods or services. It involves the elimination of waste and

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

responsibility of an organization. Its impact in the environment such as waste recycle and pollution control will reflect its environmental friendly character. Criteria for Measuring Operational Efficiency of Cooperatives From the above analysis specific criteria may be identified for measuring the Operational Efficiency of cooperative enterprises. 1. 2. 3. 4. 5. Ability to achieve technical efficiency and economic performance Ability of the cooperative to maintain the cooperative character by observing cooperative values such as democracy, autonomy etc. 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, business profit sharing and democratic control Ability of the cooperative to achieve larger social goals like promoting employment, generating income and improving the standard of living in the larger community 6. Ability of the cooperative to improve the managerial efficiency by setting realistic goals, evolving strategies, 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, which have been developed for precise measurement and evaluation. They are: 1. Efficiency in Output: a) Achievement of Target b) Input-output ratio c) Capacity utilization d) Value addition 2. Efficiency in Cost: a) Operational cost (as % to sale) b) Unit cost c) Standard cost



a) Return on sale b) Return on investment c) Percentage of gross profit to sales d) Percentage of net profit to sales


Liquidity Testes (Ratios): a) Current assets: Current Liabilities b) Liquid Assets: Current Liabilities c) Percentage of receivables to assets d) Percentage of receivables


Solvency Tests

: a) Debt-equity ratio b) Own equity to total Capitalization c) Coverage ratio i.e., Operating Profit

Interest on L.T. Liabilities 6. Service to Members:

a) Member Turnover

No. of members joining + No. of Members Leaving No. of Members at the beginning + at the end/2

X 100

b) Drop out

No. of People leaving No. of Members at the beginning + at the end/2

X 100

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. Every organization on one hand mobilizes inputs and resources like money, material and manpower and employees them in the production of certain services and outputs. On the other hand every organization performs the organizational functions such as operation, finance, marketing etc., performance establishes the link between the two. The management, which is responsible for performance in different functional areas, is the key for success or failure of any organization. There are different kinds of appraisal which are discussed below: 1. Result Appraisal Usually the result achieved is the basis of appraisal. It is assessing the net outcome of the business. This kind of appraisal is known as result oriented appraisal. Again the resultoriented appraisal has three aspects:

a) Profit Appraisal: The highest form of result in any business is the attainment of profit objectives. Profit becomes the yardstick of the operational efficiency of finance, production and marketing. Only by means of profit an organization can serve shareholders interest, enterprise interest and national interest. Therefore, the acid test of executive performance is the profit. b) Cost Appraisal: Looking backwards the next level of appraisal is the Cost centers are measurement of cost at various cost centers of business.

comparable to profit and loss centers. In most organizations production and marketing are the important cost centers; whereas in some other organizations, branches or the regional offices are the cost centers. The cost centered appraisal is more universally applied than the profit-centered appraisal. Being non-profit organization where in profit cannot be the right basis of 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, production and marketing. c) Objective Centered Appraisal: The next level of results is that which measures the achievement of objectives. 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. The objective centered appraisal is based on the prior establishment of various achievement goals. For making the objective centered appraisal a success, it is necessary to set meaningful and clear objectives in advance, which is the responsibility of superiors. 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. Method Appraisal It is the most commonly used form of appraisal. It focuses on the methods employed in management. Methods are the means for achieving the goals of an organization. The results are often long term while the methods applied are short term. Methods are the direct means of achieving of results. Method appraisal is necessary for judging the

performance from the management process adopted and techniques used. 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. While evaluating the methods, it is difficult to separate methods from skill and work habits. They all go hand in hand. 3. Personality Appraisal Sometimes it is called behavior appraisal. This is the most difficult aspect of appraisal. Personality is the sum of individual traits and behavior and is more comprehensive in character therefore, in judging ones personality one has to consider many important desirable qualities like enthusiasm, motivation, morale, initiative and self-confidence. For meaningful appraisal of personality the following factors are to be taken into consideration. First of all desirable qualities of ones personality relevant to the job has to be listed. Secondly appraisal has to be done by examining whether individual manger possesses these qualities. While making personality appraisal, it is necessary to take into account only exceptional qualities, which are real strength or weakness of ones personality and rate them. In other words, if all the qualities, relevant or irrelevant are taken into consideration for rating, the average rating may conceal many significant qualities. Therefore, a pattern of desired managerial qualities has to be determined first.

Personality appraisal has to be done by means of appraisal interviews and objective analysis of success and failures. The appraisal must be positive in the sense it must reveal the strength and inherent potential rather than pointing out weakness. It should aim at capitalizing the strength and ignore weakness.

4. Management by Exception The performance appraisal must necessarily adopt the principle of exception. The

success of appraisal lies in identification and selection of critical spots and focusing attention on them. It avoids mangers being overwhelmed with problems and trivial matters. It aims at isolating those areas, which need special attention. It rather simplifies the management process. It permits a manger to find solutions to problems that need his action and avoid dealing with those matters that are handled by subordinates. Key result areas have to be identified, the performance of which is essential for achieving the goals of the organization. Critical areas where often the failure is caused or problem areas, which adversely affect the results of the organization, have to be spotted out. Vital value areas in which certain vital value decisions like quality, time, performance etc., are involved have also to be noted. Appraisal of Cooperatives A cooperative organization is an integrated system. The performance of cooperatives should be evaluated based on the internal planning and control mechanisms like budget, cost standard etc. External situations, 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. Further the ability of cooperatives to develop the members is another vital aspect of evolution. Evaluation of any cooperative, according to Gupta and Gaikwad, 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?

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, 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, equipment, production methods etc., 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, line of authority, span of control etc., 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?

Unit V Training Methods Cooperative Training-Some Concepts

Co-operative Education For the purpose of Cooperation, however, education needs to be defined in a very broad sense which includes academic education of more than one kind but much besides. It includes both what people learn and how they learn it. Every phase of experience, which adds to peoples knowledge, develops their faculties and skill, widens their outlook, 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. Less and less in the contemporary world can education be limited to what is learnt in schools and colleges at special periods of peoples lives. Cooperative concept is of education as a life long process. The concept of cooperative education becomes clearer when it is stated as one of the basic Principle of Cooperation and has worldwide acceptance. The principle as accepted by the ICA and the cooperative movements in countries of Africa, it is stated as under: All cooperative societies should make provision for the education of their members, officers, and employees and of the general public, in the principles and techniques of cooperation, both economic and democratic. 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. It aims to provide the trainees learners with such attitudes, knowledge and skills that are necessary for him/her to carry out work efficiently. Education v/s Training

Educationist differentiates education from training. Training refers to the communication of specific skills. It is structured and stratified and can be communicated objectively by one person to another. Education on the other hand, refers to imparting of knowledge and attitudes which contextual and serve as necessary floor for understanding and practicing skills.

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. It aims at the development of individuals whole personality. It is essentially a process to create the capacity to grow and allow others as well to grow. Thus development is aimed at through the process of training. Management Development (MD) MD encompasses the whole a complete process by which mangers as individuals learn, grow and improve their abilities to perform management task in a progressional way. MDT aims at maximizing managerial effectiveness and personal adjustment, growth and development of learners. It at the same time, aims at optimizing human resource development in an organization. MDT includes to the process of educating and developing employees so that they have knowledge, skills, attitudes and understanding needed to mange in future. 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, task significance, autonomy and feed back. 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. Achievement Values Operationally defined, the achievement value of an individual was the importance that she/he attaches to a particular job activity or personal activity (including hobbies, personal/social interaction etc.) or any other pursuit. Training Experience

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. Target Groups In any cooperative organization, the following main target groups can be identified for communication, education and training on a regular basis: i. Members and the active members ii. Board members and other leaders iii. Managers and other employees iv. Special groups such as women, youth, children, rural poor (as prospective members) v. General Public vi. Technicians, Consultants and Researchers Cooperative education of members, board members, 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. It may also be noted that cooperative education by its nature tends to be interpersonal ideological and metrological. Its approach methods and techniques are social and business oriented. Methods are mostly participative, democratic and group oriented. They promote group morale organizational efficiency and leadership qualities. Cooperative training may involve skill development improvement of insight and performance of employees personnel.

The Training Process

Introduction Training gives new or present employees the skills they need to perform their jobs. Training might thus mean showing a machinist how to operate his new machine, a new salesperson how to sell her firms product, or a new supervisor how to interview and appraise employees. The expansion of trainings role reflects the fact that the game of economic competition has new rules. In particular, its no longer enough to just be efficient. Thriving today requires that the firm be fast and responsive. And it requires responding to customers needs for quality, variety, customization, convenience, and timeliness. Meeting these new standards requires a work force that is more than just technically trained. It requires people who are capable of analyzing and solving job-related problems, working productively in teams, and switching gears and shifting from job to job as well. Training is moving to center stage as a means of improving employers competitiveness. The Five- Step Training and Development Process We can conveniently think of a typical training or development program as consisting of five steps, as summarized in the Figure 1. 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, and to develop specific, measurable knowledge and

performance objectives. In the second, instructional design step, the actual content of the training program is compiled and produced including workbooks, exercises, and activities. 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. Fourth, the training program is implemented, using techniques like those discussed in the following chapter. Fifth, there should be an evaluation and follow-up step in which the programs successes or failures are assessed.

Training and Learning Training is essentially a learning process. To train employees, therefore, it is useful to know something about how people learn. Some suggestions based on learning theory follow. First, it is easier for trainees to understand and remember material that is meaningful: 1. At the start of training, provide the trainees with a birds-eye view of the material to be presented. Knowing the overall picture facilitates learning. 2. Use a variety of familiar examples when presenting material. 3. Organize the material so that it is presented in a logical manner and in meaningful units. 4. Try to use terms and concepts that are already familiar to trainees. 5. Use as many visual aids as possible. Second, make sure it is easy to transfer new skills and behaviors from the training site to the job site: 1. Maximize the similarity between the training situation and the work situation. 2. Provide adequate training practice. 3. Label or identify each feature of the machine and /or step in the process. Third, motivate the trainee: 1. People learn best by doing. Try to provide as much realistic practice as possible. 2. Trainees learn best when correct responses are immediately reinforced, perhaps with a quick well done. 3. Trainees learn best at their own pace. If possible, let trainees pace themselves.

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

Training Techniques
After you have determined the employees training needs, set training objectives,

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

However, there are several trainer-related factors to keep in mind when designing OJT programs. The trainers themselves should be carefully trained and given the necessary training materials. (Often, instead, and experienced worker is simply told to go train John.) 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. 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. Put the learner at ease-relieve the tension. 2. Explain why he or she is being taught. 3. Create interest, encourage questions, find out what the learner already knows about his or her job or other jobs. 4. Explain the why of the whole job and relate it to some job the worker already knows. 5. Place the learner as close to the normal working position as possible. 6. Familiarize the worker with the equipment, materials, tools, and trade terms. Step 2: Presentation of the Operation 1. Explain quantity requirements. 2. Go through the job at the normal work pace. 3. Go through the job at a slow pace several times, explaining each step. Between operations, explains the difficult parts, or those in which errors are likely to be made. 4. Again go through the job at a slow pace several times; explain the key point. 5. Have the learner explain the steps as you go through the job at a slow pace. Step 3: Performance Tryout 1. Have the learner go through the job several times, slowly, explaining each step to you. Correct mistakes and, if necessary, do some of the complicated steps the first few times. 2. You, the trainer, run the job at the normal pace. 3. Have the learner do the job gradually building up skill and speed. 4. As soon as the learner demonstrates ability to do the job, let the work begin, but dont abandon him or her. Step 4: Follow-Up 1. Designate to whom the learner should go for help if he or she needs it. 2. Gradually decrease supervision, checking work from time to time against quality and quantity standards. 3. Correct faulty work patterns that begin to creep into the work, and do it before they become a habit. Show why the learned method is superior. 4. Compliment good work; encourage the worker until he or she is able to meet the quality/quantity standards.

Job Instruction Training Many jobs consist of a logical sequence of steps and are best taught step by step. This step-by-step process is called job instruction training (JIT). To begin, list all necessary steps in the job, each in its proper sequence. Alongside each step also list a corresponding key point (if any). The steps show what is to be done, while the key points show how its to be done-and why. 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. Steps 1. Start motor 2. Set cutting distance 3. Place paper on cutting table 4. Push paper up to cutter cut 5. Grasp safety release with from being left hand 6. Grasp cutter release with right hand 7. Simultaneously pull cutter and safety releases 8. Wait for cutter to retract 9. Retract paper 10. Shut off motor Lectures Lecturing has several advantages. It is a quick and simple way of providing knowledge to large groups of trainees, as when the sales force must be taught the special features of a new product. While written material like books and manuals could be used instead, they may involve considerable printing expense, and they dont permit the give and take of questioning that lectures do. Some useful guidelines for presenting your lecture follow: Give your listeners signals to help them follow your ideas. For instance, if you have a list of items, start by saying something like There are four reasons why the sales reports are necessary. ... The first . . . the second . . ." Dont start out on the wrong foot. For instance, dont open with an irrelevant joke or story or by saying something like, I really dont know why I was asked to speak here today. Keep your conclusions short. Just summarize your main point or points in one or two succinct sentences. Be alert to your audience. Watch body language for negative signals like fidgeting and crossed arms. 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; keep both hands away from releases None

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

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

Safety. Crews can practice hazardous flight maneuvers in a safe, controlled environment. Learning efficiency. 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. Money. The cost of flying a flight simulator is only a fraction of the cost of flying an aircraft. This includes savings on maintenance costs, pilot cost, fuel cost, and the cost of not having the aircraft in regular service. Computer-Based Training In computer-based training the trainee uses a computer-based system to interactively increase his or her knowledge or skills. While vestibule or simulated training doesnt necessarily have to rely on computerization, 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.

Management Development
Management development is any attempt to improve managerial performance by imparting knowledge, changing attitudes, or increasing skills. It thus includes in-house programs like courses, coaching, and rotational assignments professional programs like Ethiopian Management Institute Programs, and university programs like executive MBA programs. The ultimate aim of such development programs is, of course, to enhance the future performance of the organization itself. For this reason, the general management development process consists of: 1) Assessing the companys needs (for instance, to fill future executive openings, or to make the firm more responsive), 2) Appraising the mangers performance, 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. 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. For convenience, these techniques can be divided into two categories, on-the-job and off-the-job training methods. 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. Even if an organization has a well-developed off-the-job training program, OJT is still

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

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

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

individual scores through effective group interaction. 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. Third, case studies involve providing the trainees with written or videotaped descriptions of decision-making situations. The case is subsequently discussed, with emphasis normally on the trainees analyses, decisions, implications of those decisions, and probable decision outcomes. Executive MBA programs, for example, are often based on this method. Fourth, role playing tends to be more appropriate for problems and decisions having to do with human relations. Participants are typically provided with a specific situation that they must analyze, and then each assumes and acts out the role of a specific person. Since each role player brings his or her own personality to a given role, all participants experience the realistic variability that managers actually encounter in real job situations.

T-Groups T-groups (derived from the term training groups), a form of laboratory training, usually involve small groups, of approximately ten to twelve participants, meeting under the guidance of trainer. (This type of training is also called sensitivity training, but this term is frequently misapplied to training other then T-groups.) The groups are largely unstructured in the sense that there is a very flexible agenda and a minimum of formal leadership. The discussions are essentially unguided by the trainer, except that there is a strong emphasis on learning about effective group development and processes, developing more effective interpersonal skills, learning how to communicate feelings and perceptions clearly and in constructive ways, and learning from the perception and reactions of others. Because of the self- disclosure and potential stress involved, it is very important that T-groups be conducted by highly qualified professionals, and that participation be voluntary. Further, it is recommended that these groups consist of strangers that is, people who are neither working in the same unit of an organization nor have a reporting

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

depends on the skill of the trainers, the voluntary nature of the program, and the efforts made to modify the culture of organizations to accommodate the learning.

Part II Cooperative Law

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

The ICA added this last principle of "concern for the community" during its Congress, held in Manchester in 1995. 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, the well being of the community stems from that of the members of cooperatives. Nevertheless, questions linked to the quality of life, such as the dissipation of natural resources, the non-mastering of certain technologies and the growing anonymization of decision making procedures etc. require that the interests of the members of cooperatives be constantly redefined. Whether emanating from the ICA or the ILO, these cooperative principles do not legally bind the legislator. The ICA is a non-governmental organization whose decisions cannot be imposed upon states, and the ILO recommendations do not have the mandatory character of its conventions. This explains why these principles, elaborated on three decades ago were not always respected. However, with the absence of the ideological divide of the world attitudes have changed, and many countries now consider themselves more at risk by not adhering to universally agreed principles. The cooperative movements benefit from this evolution even though, at the same time, forces aim at limiting the margin of their autonomy through cooperative legislation. Undoubtedly international and regional, governmental and non-governmental cooperation in cooperative reforms is working in favor of a universal consensus on these cooperative principles. An international customary cooperative law is emerging. Thus, a country which does not respect the principles established by the ICA and the ILO, not only risks losing the support of these organizations and, consequently, that of others, but it also risks losing the possibility of remaining or becoming a member of these organizations.

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

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

Cooperative administration by the state is required to ensure the good functioning, at all levels, of the tax administration, of the judiciary, of the banking system, the insurance system and the promotion of chambers of commerce, industry and agriculture. These institutions are all necessary for the good functioning of cooperatives as of other enterprises. In theory, the administration is only an instrument in the hands of the government. Frequently, however, administrators acquire certain independence, going as far as to oppose changes in orientation. 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. 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.

The systemic nature of the cooperative law The cooperative law is part of cooperative legislation. The latter is constituted by all normative, administrative and judicial acts having an influence on the formation, the organization and the operation of cooperatives. Thus, the rule on the non discretional and non discriminatory exercise of administrative power and on the justifiability of all public acts, constitutional and administrative norms, rules on local and regional administration, real estate and private law in general, irrigation, water, investment, commercial law, company, tax, competition, labour, bankruptcy, and credit laws, regulations on imports, exports and pricing, on contracts, inheritance, accountancy, banking, consumer protection and social security, transports and marketing, etc. all form part of cooperative legislation. 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. It will be particularly important to be vigilant regarding the provisions contained in social and labour laws, marked by the wish

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

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

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

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

Once inscribed in the law, a rule cannot be cancelled unless there is a revision of the law. Similarly, a text of any nature cannot nullify clauses contained in other texts of the same order, which existed prior to the new legislation. This explains why the systemic character of cooperative law should always be kept in mind. One cooperative law or several laws? Considering the diversity of self-help organizations in terms of activity, number of members, level of development, needs, their degree of inter-relatedness with competitors and other business organizations and the existence of several types of cooperatives (producers, service, consumer cooperatives) in all economic sectors, be they single- or multi-purpose cooperatives, the legislator will have to decide whether to pass one single law catering for their different aspects, possibly containing specific chapters for particular cases, or whether to pass several laws. It is even possible that the civil code, the company law and/or other fields of law make a specific cooperative legislation superfluous. As already mentioned however, in no event may the legislator allow for essential matters to be regulated trough administrative acts, by stipulating in excessively general terms. Taking into account the advantages and inconveniences of the different alternatives, resorting to a single law including, if necessary, specific chapters dealing with particular types or activities of cooperatives, seems to be the best solution. It ..... o Guarantees the autonomy of cooperatives because of its inevitably general character; o Reduces bureaucracy; o Favors the unity of the cooperative movement; 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, nor understand the legal terminology. The promulgation of the law in vernacular languages, the use of an accessible style or the adoption of a law that one can understand without having, in as far as possible, to resort to other texts, are some of the means to improve access to the cooperative law. However, the cooperative law must not be an exception. Its language must be consistent with that of the other legal texts so as to ensure the uniformity of the legal system.

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

Unit II
Promotion of Cooperatives Recommendation (2002) International Labour Conference (20 June 2002) Recommendation 193
Preamble I. Scope, Definition and Objectives II. Policy Framework and Role of Government III. Implementation of Public Policies for the Promotion of Cooperatives IV. Role of Employers' and Workers' Organizations and Cooperative Organizations, and Relationships between them V. International Cooperation VI. Final Provision Annex: Statement of Cooperative Identity Further Information

Preamble The General Conference of the International Labour Organisation (ILO), Having been convened at Geneva by the Governing Body of the International Labour Office, and having met in its 90th Session on 3 June 2002, and Recognising the importance of cooperatives in job creation, mobilising resources, generating investment and their contribution to the economy, and Recognising that cooperatives in their various forms promote the fullest participation in the economic and social development of all people, and Recognising that globalisation has created new and different pressures, problems, challenges and opportunities for cooperatives, 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 Noting the ILO Declaration on Fundamental Principles and Rights at Work, adopted by the International Labour Conference at its 86th Session (1998), and

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

3. The promotion and strengthening of the identity of cooperatives should be encouraged on the basis of: a) cooperative values of self-help, self-responsibility, democracy, equality, equity and solidarity; as well as ethical values of honesty, openness, social responsibility and caring for others; and b) cooperative principles as developed by the international cooperative movement and referred to in the Annex hereto. These principles are: voluntary and open membership; democratic member control; member economic participation; autonomy and independence; education, training and information; cooperation among cooperatives; and concern for community. 4. Measures should be adopted to promote the potential of cooperatives in all countries, irrespective of their level of development, in order to assist them and their membership to: a) create and develop income-generating activities and sustainable decent employment; b) develop human resource capacities and knowledge of the values, advantages and benefits of the cooperative movement through education and training; c) develop their business potential, including entrepreneurial and managerial capacities; d) strengthen their competitiveness as well as gain access to markets and to institutional finance; e) increase savings and investment; f) improve social and economic well-being, taking into account the need to eliminate all forms of discrimination; g) contribute to sustainable human development; and h) establish and expand a viable and dynamic distinctive sector of the economy, which includes cooperatives, that respond to the social and economic needs of the community. 5. The adoption of special measures should be encouraged to enable cooperatives, as enterprises and organisations inspired by solidarity, to respond to their members' needs and the needs of society, including those of disadvantaged groups in order to achieve their social inclusion.

II. Policy Framework and Role of Government 6. A balanced society necessitates the existence of strong public and private sectors, as well as a strong cooperative, mutual and the other social and non-governmental sector. 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, which would: a) establish an institutional framework with the purpose of allowing for the registration of cooperatives in as rapid, simple, affordable and efficient a manner as possible; b) promote policies aimed at allowing the creation of appropriate reserves, part of which at least could be indivisible, and solidarity funds within cooperatives; c) provide for the adoption of measures for the oversight of cooperatives, on terms appropriate to their nature and functions, which respect their autonomy, and are in accordance with national law and practice, and which are no less favourable than those applicable to other forms of enterprise and social organisation; d) facilitate the membership of cooperatives in cooperative structures responding to the needs of cooperative members; and e) encourage the development of cooperatives as autonomous and self-managed enterprises, particularly in areas where cooperatives have an important role to play or provide services that are not otherwise provided. 7.1 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. 7.2 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. Governments should introduce support measures, where appropriate, for the activities of cooperatives that meet specific social and public policy outcomes, such as employment promotion or the development of activities benefiting disadvantaged groups or regions. Such measures could include, among others and in so far as possible, tax benefits, loans, grants, access to public works programmes, and special procurement provisions.

7.1 Special consideration should be given to increasing women's participation in the cooperative movement at all levels, particularly at management and leadership levels. 8.1 National policies should notably: a) promote the ILO Fundamental Labour Standards and the ILO Declaration on Fundamental Principles and Rights at Work, for all workers in cooperatives without distinction whatsoever; b) ensure that cooperatives are not set up for, or used for, non-compliance with labour law or used to establish disguised employment relationships, and combat pseudo cooperatives violating workers' rights, by ensuring that labour legislation is applied in all enterprises; c) promote gender equality in cooperatives and in their work; d) promote measures to ensure that best labour practices are followed in cooperatives, including access to relevant information; e) develop the technical and vocational skills, entrepreneurial and managerial abilities, knowledge of business potential, and general economic and social policy skills, of members, workers and managers, and improve their access to information and communication technologies; f) promote education and training in cooperative principles and practices, at all appropriate levels of the national education and training systems, and in the wider society; g) promote the adoption of measures that provide for safety and health in the workplace; 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; i) facilitate access of cooperatives to credit; j) facilitate access of cooperatives to markets; k) promote the dissemination of information on cooperatives; and l) seek to improve national statistics on cooperatives with a view to the formulation and implementation of development policies. 10.1 Such policies should: a) decentralise to the regional and local levels, where appropriate, the formulation and implementation of policies and regulations regarding cooperatives;

b) define legal obligations of cooperatives in areas such as registration, financial and social audits, and the obtaining of licences; and c) promote best practice on corporate governance in cooperatives. 9. 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, fully integrated into mainstream economic life. III. Implementation of Public Policies for the Promotion of Cooperatives 10.1 Member States should adopt specific legislation and regulations on cooperatives, which are guided by cooperative values and principles, set out in Paragraph 3, and revise such legislation and regulations when appropriate. 10.2 Governments should consult cooperative organizations, as well as the employers' and workers' organizations concerned, in the formulation and revision of legislation, policies and regulations applicable to cooperatives. 11.1 Governments should facilitate access of cooperatives to support services in order to strengthen them, their business viability and their capacity to create employment and income. 11.2 These services should include, wherever possible: a) human resource development programmes; b) research and management consultancy services; c) access to finance and investment; d) accountancy and audit services; e) management information service; f) information and public relations services; g) consultancy services on technology and innovations; h) legal and taxation services; i) support services for marketing; and j) other support services where appropriate. 11.4 Governments should facilitate the establishment of these support services. Cooperatives and their organizations should be encouraged to participate in the organization and management of these services and, wherever feasible and appropriate, to finance them.

11.5 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. 12. Governments should, where appropriate, adopt measures to facilitate the access of cooperatives to investment finance and credit. Such measures should notably: a) allow loans and other financial facilities to be offered; b) simplify administrative procedures, remedy any inadequate level of cooperative assets, and reduce the cost of loan transactions; c) facilitate an autonomous system of finance for cooperatives, including savings and credit, banking and insurance cooperatives; and d) include special provisions for disadvantaged groups. 13. For the promotion of the cooperative movement, governments should encourage conditions favoring the development of technical, commercial and financial linkages among all forms of cooperatives so as to facilitate an exchange of experience and the sharing of risks and benefits. IV. Role of Employers' and Workers' Organizations and Cooperative Organizations, and Relationships between them 14. Employers' and workers' organizations, recognizing the significance of cooperatives for the attainment of sustainable development goals, should seek, together with cooperative organizations, ways and means of cooperative promotion. 15. Employers' organizations should consider, where appropriate, 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. 16. Workers' organizations should be encouraged: a) advise and assist workers in cooperatives to join workers' organizations; b) assist their members to establish cooperatives, including with the aim of facilitating access to basic goods and services; c) participate in committees and working groups at the local, national and international levels that consider economic and social issues having an impact on 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; e) assist and participate in programmes for cooperatives aimed at improving their productivity; f) promote equality of opportunity in cooperatives; g) promote the exercise of the rights of worker-members of cooperatives; and h) undertake any other activities for the promotion of cooperatives, including education and training. 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; a) manage their own support services and contribute to their financing; b) provide commercial and financial services to affiliated cooperatives; c) invest in, and further, human resource development of their members, workers and managers; d) further the development of and affiliation with national and international cooperative organizations; e) represent the national cooperative movement at the international level; and f) undertake any other activities for the promotion of cooperatives. V. 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; 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, of educational and training materials, methodologies and reference materials; (ii) the compilation and utilization of research material and other data on cooperatives and their development;

(iii) the establishment of alliances and international partnerships between cooperatives; (iv) the promotion and protection of cooperative values and principles; and (v) the establishment of commercial relations between cooperatives; c) access of cooperatives to national and international data, such as market information, legislation, training methods and techniques, technology and product standards; and d) developing, where it is warranted and possible, and in consultation with cooperatives, employers' and workers' organizations concerned, common regional and international guidelines and legislation to support cooperatives. VI. Final Provision 19 The present Recommendation revises and replaces the Co-operatives (Developing Countries) Recommendation, 1966.

Further Information For further information contact: Cooperative Branch, Job Creation and Enterprise Development Department, International Labour Organization, 4 route des Morillons, CH-1211 Geneva 22, Switzerland. E-mail:

Unit IV Cooperative societies Proclamation No. 147/98 with Amendment No. 402/2004 and 106/2004

WHEREAS, 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, knowledge and property; WHEREAS, it has become necessary to enable cooperative societies to actively participate in the free market economic system; WHEREAS, 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; NOW, THEREFORE, in accordance with Article 55 (1) of the Constitution of the Federal Democratic Republic of Ethiopia, it is hereby proclaimed as follows:


GENERAL 1. Short Title This Proclamation may be cited as the "Cooperative Societies Proclamation No. 147/1998." 2. 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:

(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.

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;

4/ The name of every society shall be written boldly and be put at every place where the societys activities are performed. It should also be written or sealed on every notices letters, other specifications and documents which are signed on behalf of the society. 9. Registration of a Co-operative society 1/ Any society shall be registered by the appropriate authority; 2/ Any society, when established, shall submit an application for registration together with the following particulars to the appropriate authority: (a) minutes of the founders meeting; (b) the by-laws of the society in three copies; (c) names, address and signature of the members; (d) name, address and signature of the members of the management committee 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; (f) name, address and signature of members of the societies above primary level; (g) plan 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, if there is no bank in the area, that it has been deposited in a place where the appropriate authority has designated; (i) the description of the land on which the society operates; (j) other particulars that may be specified in the regulations or directives issued for the implementation of this Proclamation. 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. 4/ When the appropriate authority rejects the application for the registration of a society, it shall give a written explanation to the representatives of the society

within 15 days. The representatives may appeal to the high court which has jurisdiction on the decision of the appropriate authority. 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. 10. 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. 2/ Any society shall not be liable beyond its total asset. It has limited liability. 11. 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; (b) objectives and activities of the society; (c) working place (area) of the society; (d) requirements necessary for membership of the society; (e) the rights and duties of the members of the society; (f) the powers, responsibilities, and duties of management bodies; (g) conditions for withdrawal and dismissal from membership; (h) conditions for re-election, appointment, term of office and suspension or dismissal of the members of the management committee or other management bodies; (i) conditions for calling of meeting and voting of the society; (j) allocation and distribution of profit; (k) auditing; (l) employment of workers; (m) other particulars not contrary to this Proclamation. 3/ By-laws of a society may be amended by the special resolution of the general assembly. However, 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.

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. 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. 12. Amalgamation and Division of Societies 1/ Without prejudice to Article 6(3) and (4) of this Proclamation, the general assembly of a society through a special resolution may form a new society: (a) by dividing itself into two or more societies; or (b) by amalgamating itself with one or more societies. 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) the members and creditors that do not agree have been paid off or their payment is guaranteed. 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. 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.

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

15. Dismissal from Membership

1/ Any member of a society may leave the society on his own initiative; 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; 3/ The rights of any dismissed member shall be respected in accordance with the by-laws of the society; 4/ Without prejudice to the provisions of Article 13 hereof, any dismissed person may reapply for membership. 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. 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 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. 17. Register of Members Every society shall keep a register wherein shall be entered: 1/ the name, address, occupation, age and sex of each member; 2/ the date on which he became a member or ceased to be a member; 3/ the amount of shares held and the registration fee paid, by each member; 4/ the name and address of the heir of the member; 5/ any other particulars that may be specified in the by-laws. 18. Voting 1/ Every member shall, regardless of the number of shares he has, have only one vote at the meeting of the society; 2/ Every member in a primary society shall personally be present at the meeting of the society to cast a vote;

3/ Members of a society above primary level shall cast a vote through their representatives. 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; (b) the transfer is approved by the management committee. 2/ On the death of a member of a primary society, 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, and where such heir is a member or is willing to be a member. 3/ Where such heir is not a member and does not wish to become or is not admitted as a member, he shall be paid the value of the share or benefit of the deceased member. 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, the member shall be paid the difference in cash. 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. PART FOUR Management Bodies 20. Supreme Organ of a Society The supreme organ of any society shall be the General Assembly. 21. Powers and Duties of the General Assembly The General assembly of a society shall:

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

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

PART FIVE Special Privileges of Society 28. Priority of Claims by Society Notwithstanding any provision to the contrary in any law, debts owed to the society by a member shall take precedence over all other debts, except the debt owed to the Government. 29. 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. 30. Share or Benefit not Liable to Attachment or Sale Except as provided in Article 29 hereof, the share or benefit of a member in the a society shall not be liable to attachment or sale. 31. Government Assistance 1/ Without prejudice to incentives permitted under Investment laws and other laws, Societies which are organized and registered under this Proclamation shall be entitled to the following: (a) to be exempted from income tax; provided however, members shall pay income tax on their dividends;
(b) to acquire land as determined by a Region or a City accountable to the Federal Government;

(c) to receive other assistance from the Federal Government or Regional Government or City administration Government. 2/ An institute responsible for promoting cooperative movement, rendering man-power training and conducting studies and research shall be established.

accountable to the Federal

Asset and Funds Societies 32. Indivisibility of Asset and Fund of Society not Divisible Except as otherwise prescribed under Article 33(2) and 44 of this Proclamation, the asset and fund of a society shall not be divided for the members or any other party.

33. 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; (b) for the expansion of work; (c) for social services. 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. 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. 2/ Interest on loans received from its members shall not exceed the current interest rate of a bank. 35. Restrictions on Loans A society shall not extend loans other than to its members or a society established under this Proclamation. PART SEVEN Audit and Inspection 36. Audit 1/ The appropriate authority shall audit or causes to be audited by a person assigned by it, the accounts of any society at least once in a year. 2/ The audit conducted pursuant to sub-Article (1) of this Article shall include the examination and verification of overdue debts, if any, and cash balance, securities and assets, and liabilities. 3/ The audit report shall be submitted to the General Assembly.

37. Inspection 1/ The appropriate authority may, make or cause to be made by such person to be assigned by it an inspection to the organization, work execution, documents and financial condition of a society. 2/ Without prejudice to Sub-Article (1) of this Article, inspection may be made when: (a) a majority of the members of the executive committee request; (b) not less than one-third of the total number of members of the society request. 38. 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, open and easily accessible to everyone. 39. 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, as the case may be, 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, and who, 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, the regulations or the by-laws; (b) had caused any damages to the assets of the society by breach of trust or willfully or negligently; (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. 3/ After fulfilment of the above mentioned conditions, 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. Where the person concerned is not willing to do so, the authority shall take the appropriate legal measure.


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

2/ The liquidator shall issue notice in a newspaper, 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. It shall proceed with the distribution where no claim is presented within two months from the date of such notice. No claimant shall have a right after the expiration of such limitation. 3/ Upon completion of the winding up proceedings the liquidator shall prepare and submit a report to the appropriate authority, he shall deposit the records and documents of the society in such places as the appropriate authority may direct. 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. 2/ Creditors shall be informed of the dissolution of the society and required to file their claims with supporting documents. 3/ Creditors appearing in the societys records or who are otherwise known shall be notified directly by registered letter. Notice to other creditors shall be given by notice, published in two successive monthly issues of a newspaper, and also in the form laid down in the by-laws of the society. 44. Protection of Creditors 1/ Until the creditors of the society have been paid or amounts required for payment be deposited, the liquidators may not distribute any part of assets among the members. 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/ 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.

45. 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, and the society shall, upon the date of such cancellation, cease to exist.

Settlement of Disputes

46. 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. 47. Arbitration 1/ When the disputes provided under Article 49 regarding cooperative societies are not settled by conciliation they shall be referred to arbitration. 2/ The arbitration shall consist of three persons of high reputation and

3/ The arbitrators shall conduct their hearing and fulfill any of their duties in
accordance with the Civil Procedure Code.

48. Appointment of the Arbitrators 1/ Each party to the dispute shall appoint one arbitrator. The third arbitrator, who shall be the chairperson, shall be appointed by both parties. 2/ The appropriate authority shall appoint the chairperson arbitrator when the parties fail to reach an agreement. 49. Disputes to be referred to Arbitration The arbitrators shall have the power to hear disputes not settled by conciliation regarding the organization, management, 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; or

2/ members, former members or members or representatives of former members or heirs of deceased members and any officer, representative of the management committee or employee of the society; or 3/ the society or the management committee and any former management committee, any officer, agent or employee, or any former officer, agent or employee or the nominee heirs or representatives or representatives of deceased former members or employees; or 4/ the society and any other society. 50. Civil Court Powers of Arbitrators The Arbitrators shall have the same power, with regard to the cases provided under Article 49 of this Proclamation, as a civil court for the summoning of witnesses, production of evidence, the issuing of orders or the taking of any legal measures. 51. Execution Any decision, order or award made under this Proclamations shall be taken as though made by a civil court, and, where appropriate, the courts shall have jurisdiction to order the enforcement of any such decision, order or award. 52. Power of Courts Appeals on the decisions given by the Arbitrators under Article 47 of this Proclamation may, as the case may be, be instituted in Federal High Court, or the Regional State High court or the Federal High Court of a city accountable to the Federal Government where the society is situated.

PART TEN Miscellaneous Provisions 53. Address of a Society Any society shall have an address registered pursuant to Article 9 of this Proclamation. All services of process, notices and other communications shall be sent in such address. The society shall inform the appropriate authority of any change in such address within thirty days.

54. Supplying Information Every society shall have the obligation to transmit information to the appropriate authority about the activities it performs. 55. Establishment of a Federal Organ A Federal Organ responsible for organizing and registering Apex organizations and for rendering training, conducting research and other technical support to societies may be established by law. 56. Depositing of this Proclamation, Regulations and the By-laws Every society shall deposit at its address copies of this Proclamation, the Regulations and the by-laws, to be accessible free of charge. 57. Repealed and Inapplicable Laws 1/ The Cooperative Societies Proclamation No. 138/1978 and the Agricultural Cooperatives Societies Proclamation No. 85/1995 are hereby repealed. 2/ No law, 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. 58. Transitory Provisions 1/ The cooperative societies which have been established and operating in accordance with Proclamation No. 138/1978 shall be reorganized under this Proclamation. 2/ The cooperative societies which have been established and operating in accordance with Proclamation No. 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. 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. 4/ The appropriate authority shall facilitate the conditions necessary for the reorganization of the societies in accordance with sub-Article (1) of this Article. 59. 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.

60. Effective Date This Proclamation shall come into force on the 29th day of December 1998. Done at Addis Ababa, this 29th day of December, 1998 NEGASO GIDADA (DR)



Proclamation No. 402. /2004 Cooperative Societies (Amendment) Proclamation

Whereas, it is necessary to amend cooperative societies proclamation No. 147/1998; Now, Therefore, in accordance with Article 55(1) of the Constitution of the Federal Democratic Republic of Ethiopia, it is hereby proclaimed as follows: 1. Short Title This Proclamation may be cited as Cooperative Societies (Amendment) Proclamation No. 402/2004. 2. Amendments Cooperative Societies Proclamation No. 147/1998 shall be amended as follows. 1. The following new Sub Articles (6), (7), (8) and (9) are added after Sub Articles 5 of Articles 9: 6. 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. 7. Where the appropriate authority ensures that requirements indicated under Sub Article 2(a)-(g) are met, 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.

8. Where any society is found operating out of the objectives for which it is established, it may be suspended by the appropriate authority from carrying out activities permitted by this law. 9. 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, it may reverse the decision for suspension. Where the appropriate authority did not reverse the suspension it shall give a written explanation to the General Assembly. The General Assembly may appeal to the higher court which has jurisdiction on the decision made by the appropriate Authority. 2. Articles 16(1)-(3) is hereby deleted and replaced by the following new Article 16: Payment of shares 1/ Any cooperative society shall, after securing the decision of 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, 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. And it shall sell the rest of the shares within four years as of the time of its establishment. 3/ Where the need for additional capital is arose, upon completion of the sell of shares in accordance with the decision of the general assembly, the general assembly may decide once again for the sell of additional shares in accordance with Sub article 1 of this Article. 4/ The share that the society sells may be sold either in cash or in kind. Shares paid in kind shall be determined by the by-law of the society. 5/ Any member may not hold more than 10% of shares out of those that the general assembly decides to be sold. 6/ A society, which faces shortage of capital, 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.

3. The following new Sub Articles (3) (4) are added after Sub Articles (2) of Article 31. 3) The council f ministers may make any society free from any court fees that is payable in connection with dispute entertained by courts. 4) Any right emanated from a contract concluded by the society involving its properties shall be barred by statute of limitation after 20 years. 4. 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. 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. 3/ Any member who has received net profit as per Sub Article 2 this Article can buy an additional share. 5. Sub 2 of Article 34 is deleted. 6. The following new Sub-Article (3) and (4) are added after Sub Articles (2) of Article 40. (3) Where the court decides for its dissolution. (4) Where the auditing reveals that it is bankrupt and when the appropriate authority ensures that causes the dissolution and the general assembly decides. 7. Article 40(3) shall become Article 40(5). 8. Article 46 is deleted and replaced by the following new Article. 46. 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. 2/ Each party shall elect reconciliation; the chairperson of the reconciliation shall be elected in accordance with the agreement of the two parties. 3/ Where the two parties failed to reach agreement to elect the chairperson of the reconciliation, the chairperson shall be elected by the appropriate authority.

9. Articles 58(2) is deleted and replaced by the following new Article 58(2) (2) Agricultural cooperative societies, which were established pursuant to Proclamation No.85/1995 and which are still operating shall be registered once again in accordance with this Proclamation. 10. The following new Articles added as Articles 59 59. Obligation to cooperate Any concerned organ shall have the obligation to cooperate on matters provided in this Proclamation. 11. Article 59 shall become Article 60 12 61 Effective Date The Proclamation shall come into force on 11th date of May., 2004. Done at Addis Ababa, 11th day of May, 2004. GIRMA WOLDEGIORGIS PRESIDENT OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA

Council of Misters Regulation No.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.4/1995 and article 59 of Cooperative Societies Proclamation No.147/1998. Section One General 1. Short Title This Regulation may be cited as Councils of Ministers Regulation No. 106/20904 to Provide for the implementation of Cooperative Societies Proclamation No.147/1998. 2. Definition In this Regulation, unless the context requires otherwise.

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

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

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

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

16. Dismissal of members 1. 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, (b) Has failed to meet his obligation emanated from the occupational sector granted by the society for more than two times; (c) Has not participated for a year in any transaction or services rendered by the society; (d) Has not participated in two consecutive regular meetings of the society without sufficient reason. 2. Any member who has committed a fault shall be dismissed from membership. The member shall be deemed to have committed a fault where he has; (a) Committed a fault which is contrary to the objective of the society; (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; (d) Deliberately misappropriate the fund of the society or facilitate conditions for the same action to be committed; (e) Bribed somebody or been bribed by somebody in the name of the society; (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; (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. 18. Grant of substitute certificate 1. A cooperate society that has lost its certificate may apply to appropriate authority for the grant of substitute certificate;

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

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

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, to a member who is dismissed for the reason other than committing a fault, and to a substitute of a deceased member. Manner of distribution of the asset shall be determined by a directive issued by the appropriate authority. 27. Repealed laws Regulations or a directives inconsistent with this regulation shall be inapplicable. 28. Power to issue a Directive The appropriate authority shall issue a directive necessary for the implementation of this regulation. 29. Effective Date This regulation shall come in to force on the date of its publication in the Negarit Gazeta. Done at Addis Ababa, this 28th day of June 2004. 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. Description 1 New Registration 2 3 Substitution Temporary certificate Fess/Birr Remark 60 30 30

Unit V

Proclamation No. 274/2002

Proclamation to Establish Cooperatives Commission
Whereas, 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. Whereas, it has become imperative to establish an autonomous organ responsible for registering and supporting cooperative societies organized at federal level, conducting research, rendering training and other technical support to achieve the above mentioned objective; Now, 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. 147/1998, it is hereby proclaimed as follows: 1. Short Title This Proclamation may be cited as the Cooperatives Commission Establishment Proclamation No.274/2002. 2. Establishment The Cooperatives Commission (hereinafter referred to as the Commission), is hereby established as an autonomous Federal Government Organ,. The Commission shall be accountable to the Ministry of Rural Development. 3. Head Office The Head Office of the Commission shall be in Addis Ababa. 4. 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

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

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

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

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. Inapplicable Laws Any law inconsistent with this Proclamation shall not be applicable to matters provided for herein. 12. 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. 13. Effective Date This Proclamation shall enter into force as of the 14th day of May, 2002.

Done at Addis Ababa, this 14th day of May 2002.


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 countrys 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.

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. Its 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

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

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

participation (50 to 80 per cent) was there in the management committee meetings. One positive note is, 21 per cent of the respondents have said that there was full participation of the members in the committee meetings. It could be inferred from the results that the committee members show interest in the development of their cooperatives.

Democratic Governance:
The uniqueness of the cooperatives is the role of the user, which is different from any other form of business. With the rapid proliferation, diversified activities and extensive coverage cooperatives have emerged as the relevant institutions in the contemporary context. 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. Hence, a cooperative is organised, owned and controlled by those who need and use the services of the cooperatives. By keeping this in mind, 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. And everybody was of the opinion that the elections for the cooperatives were conducted in accordance with the cooperative proclamation. It is interesting to note that in three woredas the elections for few cooperatives were not conducted. Only those cooperatives started during the earlier regime and not functioning (dormant) were not brought under the election process.

Democratic management is a base for Democratic Governance in the Local Administration:

The experience, members get from the cooperatives help the people to become member in the local administration. For many local leaders, cooperatives are the stepping-stone for their long run political career. All the respondents are of the opinion that the Democratic management is a base for Democratic Governance in the Local Administration. This will help the people of the local administration to identify the problems, needs of the locals easily and surmount it in a democratic way.

Policy Implications

It must be impressed upon the members that the satisfactory functioning of their cooperatives depends primarily upon their active participation in democratic management. 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. Member contact, 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. There are members who do participate in the business of the cooperative but neglect their right to participate in the management. 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. It is important that the members of the cooperatives participate not merely in the capital, but in the business and management as well. The democratic management of cooperatives is a base for Democratic Governance in the Local Administration; hence, it is imperative for the government to promote cooperatives in a big way. This will result in the electing the right person for local administrations to identify and fulfil the social, economical, cultural and political needs of the people. It will pave the way for a clean, perfect and efficient political administration.

Selected Reference: 1. Federal Negarit Gazeta of the Federal Democratic Republic of Ethiopia (1998), Proclamation No.147/1998 Cooperative Societies Proclamation. 2. Ian McPherson (1996), Cooperative Principles for the 21st Century, International Cooperative Alliance, Geneva. 3. R.Selvaraju (2000), Cooperatives in the New Millennium, Vikas Publishing House, New Delhi. 4. Frank Ratna Kumar and,(2003), A New World Through Cooperatives, Rainbow Publications, Coimbatore.

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

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

resources like sand and stones gives employment to a small segment of population and increases the non-business revenue of the cooperatives. The threat of over-exploitation and absence of proper guidance exists. Irrigation Cooperatives could convert the barren lands allotted to the members into irrigated lands and they take three crops in a year. The authors suggest an Integrated Cooperative Management of Natural Resources with the help of other stakeholders. Introduction Management of natural resources of land, water, forests, fish etc. of a nation is an important factor affecting the level and pace of its development. Many systems of management of natural resources have been proposed by academics and practitioners. They include privatization, nationalization or centralized public management, and cooperative/collective management by local people themselves. 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, attributes of the resource users, the decision-making environment, and the goals of resource management. 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. Hence, an attempt has been made in this paper to explore and critically analyze the suitability of cooperatives to manage the natural resources in Ethiopia. Objectives of the study The main objectives of the study are: 1. To examine the rationale of cooperative management of natural resources 2. To review the current status of cooperatives engaged in the management of natural resources 3. 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. Observations during the field visits of the authors also form part of the description. Further, the authors had discussion with the officials involved in organization and supervision of cooperatives in the Tigray region. Though this paper can have the limitations of significant level of empirical evidences, the authors believe that this modest attempt would facilitate further research. Findings of the Study The findings of the study are presented in the following paragraphs in concurrence with the objectives.

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

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, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise. The people of Ethiopia have got a very long social history of working together to fulfill their socio-economic needs. Agriculture, Trade and Military Operations were carried out through cooperative efforts. Many social events are still taking place in rural Ethiopia through collective effort. The Federal Government of Ethiopia has identified Cooperative form of business organizations as an instrument of socio-economic change. Many Cooperatives have emerged in the recent past to serve the suppressed and depressed community of Ethiopia. Due to the encouragement given by the present government, there were 514 Multi Purpose Cooperatives, 38 Irrigation Cooperatives, 13 Water Resources Associations, one Fisheries Cooperative, one handicrafts Cooperative, 22 Savings and Credit Cooperatives, 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. The cooperatives and its members should have social responsibility, which includes preservation and promotion of natural resources. Irrespective of the nature of business, the cooperatives are to function with environmental consciousness. Any form of environmental degradation or pollution is against the cooperative philosophy. In Ethiopia, the following cooperatives are directly involved in natural resources management. 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. Multipurpose Cooperatives are functioning with the following objectives: 1. Provision of agricultural credit 2. Provision of agricultural inputs 3. Facilitating sale of agricultural produces 4. Operating a consumer store 5. Optimum utilization of natural resources like sand and stone 6. Inculcation of thrift and savings habit among members

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

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

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

Model for the Cooperative Management of Natural Resources in Ethiopia



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


Technical Information




Case III Comparison of Andhra Pradesh State Cooperative Laws of 1964 and 1995 Andhra Pradesh Andhra Pradesh Mutually Aided

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

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

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

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