PA 113Lorelie P. Pineda

Dr. Josefina Bitonio

Firm Commitment to Achieve Fundamental Objectives

a. To provide its members with more economical and efficient services

better service at the same cost, or the same service at lower cost Management is duty-bound to develop a cooperative

into a paragon of business economy and efficiency with the proper blending of accepted and effective business management practices. In the process, the management of cooperatives should not merely duplicate or imitate the services of ordinary corporations.

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It should be able to present a different business image by introducing new and innovative business practices and strategies that will improve its services. Finally, cooperative management should strive to make cooperatives innovators and pacesetters in their respective fields.

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Firm Commitment to Achieve Fundamental Objectives

b. To recast the pattern of distribution of savings (surplus) by making patronage and not capital the residual claimants to the savings.service at cost to the members – distribution of savings or surplus; wherein the volume of business contributed by a member-patron and not the amount of capital contributed by a member-owner is made the basis of distribution of the savings of a cooperative.

One area of management which definitely should be given major emphasis is the installation of a rigid system of cost allocation and control. This requires that the entries in the books of accounts be complete, accurate, and up-to-date and that the transactions of each and every-member-patron be properly recorded in individual ledger cards. This also requires a realistic pricing policy that will govern the general dispensation of goods and services.

Firm Commitment to Achieve Fundamental Objectives

c. To place the control of a cooperative in the hands of its member-patrons

Real democracy – a cooperative should be controlled by the members as “ users ” or “ patrons ” and not as “ investors ” . The cooperative practice of “one member, one vote” was formulated as a precise guideline to meet this objective. There is a need for cooperative management to work out a responsive member relations program which provides for a free exchange of communication between the members, on the one hand, and the board of directors and hired management, on the other.

Basic Cooperative PrincipleI. Democratic control by member-patrons

- “ Cooperatives are democratic organizations that are controlled by their members who actively participate in setting their policies and making decisions. Men and women serving as elected representatives, directors or officers are accountable to the membership. In primary cooperatives, members have equal voting rights of one-member, one-vote. Cooperatives at other levels are organized in the same democratic manner.”

Source: Art4 (2),RA9520

a. It affirms the democratic nature and purposes of a cooperative. The administration and control of the affairs of a cooperative are placed in the hands of the members themselves with each member in a primary society having voting rights on the basis of “ one member, one vote ” . In other words, in a cooperative, it is the man and not the money that votes. The principle also tacitly recognizes that the management and control of a cooperative should be vested in the hands of members who are actually using the services of their cooperative, likewise known as member-users.

c. It stresses the necessity for an equitable representation of the members in secondary societies. The principle counsels secondary societies to carry out the administration of their affairs in a manner whereby their member-associations can in turn represent the interest of their individual members in an equitable manner to maintain and preserve the democratic nature of their cooperative.

II. Limited Returns on Share Capital

- “The term “share” refers to a unit of capital in a primary cooperative the par value of which may be fixed at any figure not more than One thousand pesos (P 1,000.00). The share capital of a cooperative is the money paid or required to be paid for the operations of the cooperative. The method for the issuance of share certificates shall be prescribed in its bylaws.”

Source: Art76, RA9520

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b. It underscores the need for the members to be fully conscious of their duties and responsibilities. The complete and absolute authority given to the members to manage and control the affairs of their cooperative challenges them to accept and assume the duties and responsibilities that go with such authority.

a. It affirms the service orientation of a cooperative. This principle underscores the fact that services and not profit is the principal motivation of a cooperative. This basic orientation should be internalized by the members, officials and employees of a cooperative.

b. It forestalls speculation on capital contribution or share capital. It stresses the fact that a cooperative is an association of people and not of capital. Under this scheme, for example, purchase of shares of stock cannot be considered as an investment opportunity because of the limited interest earnings of share capital.

c. It provides capital at just rates. This principle enables the cooperative to have access to and the use of capital with interest at prevailing market rates. The availment of such nonspeculative capital is an advantage that the management of a cooperative enjoys.

d. It emphasizes the importance of sound financial management. This principle creates some problems or difficulties in encouraging the members to increase their capital contribution because of the misconception in the limited rate of interest principle. Members think that cooperative investments are not competitive and that interest are below the market rates.

In reality, cooperative investments are nonspeculative and are based on actual needs or demands of members and the market and hence are nonspeculative investments. Measures such as implementing relevant education and information programs are, of course, at the full discretion of the management. In addition, management can initiate, a sound program of financial management so that the capital resources, can be used in the most effective and efficient manner.

e. It underscores further the need for sound general management. The

paramount objective of cooperative management is to operate at the highest possible level of efficiency in order, to boost he capital contribution of the members out of the savings from operations and also from funds which may be generated from the operations of retains like in the case of marketing cooperatives.

The collection of retain is, of course, an indirect but effective way of raising capital when it is difficult to raise direct capital contributions. He principle explains why the management of a cooperative should at all times operate at a high level of efficiency.

f. It increases the amount available for patronage refund. In allocating the net savings o surplus, the schedule of which is expressly stipulated in a cooperative’s by-laws, it is a standard practice to first set aside funds for reserves and other specific purposes. The remaining balance is then alloted to interest on share capital and patronage refund. The limitation imposed by the principle on the interest on share capital increases the amount available for distribution as patronage.

Order of Distribution:

1. Reserve fund – at least per centum (10%) of the net surplus. Provided, that in the first five (5) years of operation after registration, this amount shall not be less than fifty per centum (50%)of the net surplus

2. Education and training fund – shall not be more than ten per centum (10%) of the net surplus.

3. Community development fund – shall not be less than three per centum (3%) of the net surplus.

4. Optional fund – a land and building, and any other necessary fund the total of which shall not exceed seven per centum (7%).

5. Remaining net surplus shall be made available to the members in the form of interest on share capital not to exceed the normal rate of return of investments and patronage refunds. Provided, that any amount remaining after the allowable interest and the patronage refund have been deducted shall be credited to the reserve fund.

Source: Art86, RA9520

g. Minimizes concentration of wealth. This principle is completely compatible with one of the ultimate objectives of cooperatives i.e. effecting an equitable distribution of wealth. The net effect of the principle is that capital receives a smaller share of the savings of a cooperative. Thus, it is systematically regulates the possible concentration of wealth to those with large capital contributions by plowing back to the members more of the savings of the cooperative based on patronage.

III. Service at Cost

- the central point of this principle is that, ideally speaking, a cooperative must not make profit or incur a loss. It is the members who stand to benefit or suffer from their cooperative’s operations. If the cooperative is successful, gains accrue to members in the form of patronage refund. If unsuccessful, members lose either by being paid lower prices for their products or through a diminution of their equity in their cooperative, or both.

References:• Dr. Eulogio Castillo (2013)The Path to the

Success of Cooperatives. UP

• The Philippine Cooperative Code of 2008 (Republic Act No. 9520

• Local Government Code (Republic Act 7160)

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