Approaches of the Co-operatives and the

Corporates
Project Report:

Approaches of the Co-operatives

And the Corporate

Subject

Management of Co-operatives

Presented to :

Rehan Ansari

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

Contents

Sr. Nos.

Page Nos.

1 Section I Introduction, 4 Approaches

2 Section II - 3 Approaches

3 Section III - 3 Approaches

4 Conclusion, Recommendation

11

5 Article

13

6 Bibliography

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Approaches of the Co-operatives and the

Corporates

Index:

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

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
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: A co-operative's main aim

is to serve the needs of its members, and to earn
excess revenues.

Corporates: A corporate body has to earn

a profit so as to satisfy its 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.

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.

Approaches of the Co-operatives and the

Corporates
Corporates:

A corporate also has to maintain good relations with its

stakeholders-its stakeholders include suppliers and distributors as well.

AREA OF OPERATIONS:
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:

Co-operatives operate in sectors like banking, sugar,

electrical, healthcare, fertilizers, food processing etc.

Corporates:

Corporate also operate in similar sectors; their operations,

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

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, a

motivator, a major influences-his main job is to

Approaches of the Co-operatives and the

Corporates
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.

Co-operatives:

There are many

types of meeting held in co-operativesStatutory 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.

Approaches of the Co-operatives and the

Corporates

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:

Corporates

are

accountable to their Shareholders and to the

society at large.
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

Approaches of the Co-operatives and the

Corporates
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 organization. Both co-operatives and corporates have to operate
according to the policy framed by their concerned organizations.
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.

Approaches of the Co-operatives and the

Corporates
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.

Co-operatives:

Many regulatory bodies have been formed to control,

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

also

organize

concerning

agricultural

many

programmes

inputs,

processing,

storage and marketing, as well as awareness

seminars

on

the

benefits

of

forming

co-

operatives. These institutes also provide cooperatives

with

funds

for

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

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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.
RECOMMENDATIONS:
A cooperative represents a unique way of organizing a business. There have
historically been three basic categories of business
structures:

sole

proprietorship,

partnership,

and

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

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Approaches of the Co-operatives and the

Corporates
basic categories of business structures, however, in areas such as legal
requirements, governance, and tax treatment. These differences are examined in
our article.

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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.
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

integrity

in

financial

reporting.

Have

structure

to

independently verify and safeguard the integrity of the company's financial

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.

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Approaches of the Co-operatives and the

Corporates
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.
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

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Approaches of the Co-operatives and the

Corporates
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:
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

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Approaches of the Co-operatives and the

Corporates
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
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

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Approaches of the Co-operatives and the

Corporates
www.answers.com
www.businessworld.com

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