Approaches of the Co-operatives and the Corporates

Project Report:

Approaches of the Co-operatives And the Corporate

Subject

Management of Co-operatives Rehan Ansari

Presented to :

Prepared by : Nida Shaikh (33), Adil Shaikh (34), Amir Reza (35) & Shurjil (36). Date : 22.07.2008

Approaches of the Co-operatives and the Corporates

Sr. Nos.

Contents

Page Nos.

1 Section I Introduction, 4 Approaches 2 Section II - 3 Approaches 3 Section III - 3 Approaches 4 Conclusion, Recommendation 5 Article 6 Bibliography

3 6 8 11 13 17

Index:

Approaches of the Co-operatives and the Corporates

SECTION - I:

INTRODUCTION: As the co-operatives are an integral part of any economy, they have a lot in common with the corporate bodies. A Cooperative organization operates on the lines of the corporate sector. In a professional approach, an organization is a structure managed by a group of individuals who work together towards a common goal. Let us explore the common approaches co-operatives and corporate share:

Approaches of the Co-Operatives and the Corporates:

BUSINESS: The aim of a business is to earn surplus revenue, and satisfy its members (shareholders). A business operates within both an external and an internal environment (macro and micro environment).

Co-operatives:
earn excess revenues.

A co-operative's main

aim is to serve the needs of its members, and to

Approaches of the Co-operatives and the Corporates

Corporates:
shareholders. STAKEHOLDERS: An organization primary role is to maintain good relations with its stakeholders, which include suppliers, dealers, retailers etc.; stakeholders are the backbone of any business. A corporate body has to earn a profit so as to satisfy its

Co-operatives:

A co-operative has to maintain good relations with its stakeholders, which include raw material suppliers, distributors etc., to transfer its products from rural to urban markets. It all depends on the distributors, as the channels are very lengthy.

Corporates:
and distributors as well. AREA OF OPERATIONS:

A corporate also has to

maintain good relations with its stakeholders-its stakeholders include suppliers

Also known as 'sectors' in the industry. An organization has to operate within its functional areas, and also within the industry as a whole. There are lot of similarities between co-operatives and corporate with regards to the areas of operation.

Co-operatives: Corporates:

Co-operatives operate in sectors like banking, sugar,

electrical, healthcare, fertilizers, food processing etc. Corporate also operate in similar sectors; their operations,

however, are on a larger scale as compared to co-operatives.

Approaches of the Co-operatives and the Corporates

GOVERNANCE: An organization has to be professionally managed in order to conduct business effectively, and in a professional manner. In order to ensure the above, the boards of directors appoint managers who help in the day-to-day functioning of the organization.

Co-operatives:

The members in a co-operative appoint the managing

committee, who in turn appoint chairman.

Corporates: In the corporate world, the owners (the shareholders) appoint

board of directors, who appoints a CEO, who in turn appoints the chairman.

Approaches of the Co-operatives and the Corporates

SECTION - II: LEADERSHIP: A good leader is the driving force behind an organizations success. He is the main proponent in decision making processes, generating new business ideas, etc.

Co-operatives: A leader is a visionary,

motivator, a major influences-his main job is to motivate people to join co-operative. An example of one such dynamic leader in the co-operative sector is Dr. Varghese Kurien.

Corporates: The leader in a corporate is a

strategist and a decision maker, like Narayan Murthy. In both corporate and co-operatives, the leader plays an important role in business. MEETINGS: Meetings take place in an organization for various purposes such as planning, organizing the future course of action, and effectively run the enterprise.

Approaches of the Co-operatives and the Corporates

Co-operatives:
There are many types of meeting held in co-operatives-

Statutory Meetings/ First General Meeting, Annual General Body Meeting, Special/ Extraordinary Meetings.

Corporates:
Meeting, BOD Statutory Meetings,

Corporates hold a series of meetings like the General Meetings. Crisis EOGM, Management

Meetings etc., to discuss important issues related to business. Meetings are an integral part of both the co-operatives and the corporate world.

ACCOUNTABILITY: All businesses are accountable to their owners (members/shareholders); without accountability, an organization cannot prosper, and becomes corrupt.

Co-operatives:

Co-operatives is

accountable to its members, and has to provide better returns on their investments. Moreover, it has to provide society with high quality products at reasonable prices.

Corporates:
society at large.

Corporates

are

accountable to their Shareholders and to the

Approaches of the Co-operatives and the Corporates

Accountability is a common denominator in both co-operative and corporate bodies.

SECTION - III: POLICY INTERFACE: An organization has to register itself with the Registrar of the Industry. Only after the registration can an organization form a business policy that provides the guidelines and framework within which it has to operate. The Committee generally formulates policies in accordance to standard format developed by the Registrar of the Organization.

Co-operatives: Every co-operative has to

register itself with the Registrar of Co-operatives.

Corporates:

Every

corporate

has

to

register itself with the Registrar of Companies Its only after registration that an organization becomes a legal entity. Registration gives birth to an organizations. organization. Both co-operatives and corporates have to operate according to the policy framed by their concerned

Approaches of the Co-operatives and the Corporates

SOCIAL RESPONSIBILITY: An organizations main motive is to make profit, and to provide for societal welfare. Every organization has to perform some social activity in accordance with company rules.

Co-operatives:

Co-operatives mainly operate in

order to provide welfare to their members and to the society, by providing the latter with quality goods and services at very reasonable prices, by organizing welfare programmes, by using the environment friendly technology, and by providing employment opportunities.

Corporates:

Similarly

corporates

also

perform welfare activities by organising festivals in villages, providing employment opportunities, quality products, proper remuneration, good working conditions and fair returns on investments, and making proper use of funds. REGULATORY BODIES: There are many regulatory bodies that govern the workings of specific sectors like software, textiles, dairy, steel, etc. These bodies generally lay down the rules and regulations of running an organization. They also provide guidance to certain companies.

Approaches of the Co-operatives and the Corporates

Co-operatives:
They also organize agricultural on the Many regulatory bodies have been formed to control, many inputs, of programmes processing, forming co-

promote, strengthen, and develop the co-operatives in villages and in rural areas. concerning seminars operatives

storage and marketing, as well as awareness benefits funds for operatives. These institutes also provide cowith developmental activities, godowns, processing units etc. An example of just such a governing body is the National Co-operative Development Corporation.

Corporates:

Here, regulatory bodies control the working of the corporate,

fair business practices, shareholders' meetings, the misuse of funds collected from shares, etc. These organizations regularly inspect the companies' accounting practices, and maintain the minutes of meetings conducted by themtwo examples of corporate regulatory bodies are SEBI and NASCOM.

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Approaches of the Co-operatives and the Corporates

It can be inferred from the above points that a Co-operative organization functions on lines similar to those of a corporate organization. However, a few differences exist between the two. If all Co-operative organizations follow a professional approach like corporates, they can succeed at being successful models of organizations to bring about dynamic changes in our economy.

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Approaches of the Co-operatives and the Corporates

RECOMMENDATIONS: A cooperative represents a unique way of organizing a business. There have historically been three basic categories of business structures: corporation. Cooperatives are a type of corporation. Cooperatives are in no way restricted to the agriculture industry or to rural areas. They can be found in many different sectors of the economy, including credit and financial services, housing, utilities, health care, child care, and insurance Cooperatives, like other business entities, are formed out of economic motivation; there is an identified economic need or opportunity to be met. A cooperative allows a group of people to achieve economic goals. By combining their resources in a cooperative, a group of people can achieve objectives that they could not do if they acted alone. Once started, cooperatives compete with and are subject to the same marketplace demands as other businesses. There are differences among the basic categories of business structures, however, in areas such as legal requirements, governance, and tax treatment. These differences are examined in our article. sole proprietorship, partnership, and

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Approaches of the Co-operatives and the Corporates

ARTICLE: INTRODUCTION: Co-operatives are unique businesses that are based on explicit values and principles. Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility and caring for others.

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Approaches of the Co-operatives and the Corporates

MAIN BODY: Ten essential corporate governance principles which are identified in the corporate and less in the co-operatives is stated as follows: Lay solid foundations for management and oversight. Recognize and publish the respective roles and responsibilities of board and management. Structure the board to add value. Have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties. Promote ethical and responsible decision-making. Actively promote ethical and responsible decision-making. Safeguard reporting. Make timely and balanced disclosure. Promote timely and balanced disclosure of all material matters concerning the company. Respect the rights of shareholders. Respect the rights of shareholders and facilitate the effective exercise of those rights. Recognize and manage risk. Establish a sound system of risk oversight and management and internal control. Encourage enhanced performance. Fairly review and actively encourage enhanced board and management effectiveness. Remunerate fairly and responsibly. Ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to corporate and individual performance is defined. integrity in financial reporting. Have a structure to independently verify and safeguard the integrity of the company's financial

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Approaches of the Co-operatives and the Corporates

Recognize the legitimate interests of stakeholders. Recognize legal and other obligations to all legitimate stakeholders. Co-operative Difference: The principles, however, do not sufficiently recognize the unique differences between co-operatives and investor owned companies. While not acknowledging the co-operative difference, we recognise that a "one size fits all" approach is inappropriate. Co-operatives, therefore, need to adopt the principles to the unique governance circumstances of co-operatives. There is a significant difference between co-operatives and investor-owned companies. The discussion on Principle 1. Lay solid foundations for management and oversight emphasizes that a company's framework should enable the board to provide strategic guidance for the company and effective oversight of management, clarify the respective roles and responsibilities of board members and senior management and ensure a balance of authority so that no single individual has unfettered powers. For a co-operative, it is important to recognized the accountability of the board to the co-operative's member-owners and that this should include monitoring member education and involvement programs and recognition that induction training and continuing education arrangements for directors should include cooperative education. The Discussion on Principle 2. Structure the board to add value defines an independent director as a non-executive director that is not a member of management and that this includes:

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Approaches of the Co-operatives and the Corporates

1. is not a material supplier or customer of the company or other group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer. 2. Has no material contractual relationship with the company or another group member other than as a director of the company. Co-operatives have the legislative option of appointing independent directors. But, the nature and desirability of independent directors for co-operatives is significantly different than independent directors for investor-owned companies. Co-operatives require members to be active and this necessitates members being suppliers or customers. Co-operatives are owned and controlled by their member-users and, therefore, a majority of directors should be user-owners and this imposes an overriding obligation on directors and management. The guidelines recommend independent chairs and a majority of independent directors on boards. This is inappropriate for co-operatives. Most directors of co-operatives are not financially independent of their cooperative. They are members and customers and/or suppliers. It is a benefit to a co-operative that a director is a customer and/or supplier. The issue of independence for co-operative directors is about other interests beyond the relationship that every member has with a co-operative. Co-operatives, however, not only have a code of conduct as another policy but a social purpose that has clear and enduring values and principles that are integral to and guide co-operative practice

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Approaches of the Co-operatives and the Corporates

CONCLUSION: Co-operatives cannot afford to ignore the work Corporate Governance Council and the relevance to their own governance. It is an important guideline for corporate, and co-operative, practice. Governance is a central issue for co-operatives because they are democratic businesses - an alternative to the plutocracy of investor-owned companies with differing purposes and structures. The governance principles for co-operatives must be interpreted and applied consistently with co-operative values or principles and, therefore, the challenge is to learn from and build-on the work that affirms and demonstrates the co-operative difference.

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Approaches of the Co-operatives and the Corporates

BIBLIOGRAPHY

Books: Management of Co-operative Ram Kisheny Magazines: India Today August 5, 2007 subscription Articles: The Times of India- August 31, 2007 Hindustan Times- January20, 2008 Websites: www.google.com www.yahoo.com en.wikipedia.org www.answers.com www.businessworld.com

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