Can Cooperatives Conquer -Part II

What is the parameter to measure success or failure of a cooperative? Search must be driven by differences with IOF, a normal corporate set up under company law in India, to a cooperative rather than looking at similarities. The spirit of cooperation transcends from stakeholders down to the front line of a successful cooperative organization. Organization structure if not rigid provides flexibility. Social physics of human collaboration is too complex to be mechanically embedded as in concrete reality or oriented on autonomous logic independent of environment and history such as propounded by neo-classical economics pervasive in business today. US agricultural cooperatives are successful, and many have their market value higher than the book value in many cases. Success for a cooperative however is more to do with the contribution to the community of interests (e.g., for an agriculture cooperative- education, information dissemination, farm inputs, infrastructure, market development) that would never be defined as an increase in the market value in relation to its book value or net earnings more than the opportunity cost of equity. Cooperative is a perpetual entity, does not result out from the failure of the competitive market as some experts believe. Measure has longer period of assessment so accounting period needs to be longer. Efficiency is an issue; they say and expect transition from cooperative to company in a competitive market. Managerial and Director attitude is fundamental to what values are privileged. Since there is dearth of human resources with cooperative values, many leaders in industry who rise following the neoclassical model of business, perceive cooperative values as incompatible with business success. They (mis)handle cooperative tensions to build a “frozen co-op syndrome”2, end up diverting cooperative capital to IOF. Technology and networking are eliminating need of follow-up-guys in an organization, cooperative model is going to stay efficient and take natural plurality as an advantage rather than liability, pooling resources to confront the market. With equality, cooperative behavior tends to lie outside the boundaries of the neoclassical framework. Rather than to be seen as an individual actor, elements of cooperation together generate a cooperative movement; movement which has beginning but no end except shared coexistence of humans. Such movement demand adherence to the long-standing basic principles including democratic governance. Trends moving in new direction refer employees as members and workplace encourages them to assume ownership and responsibility of organization’s performance and success. Education of human capital for preparation towards such a culture is most urgent need. Environment External In USA and couple of other economies of world, cooperatives function under umbrella of company law. The positioning is good for uniformity and level playing field for all corporate entities registered under different formations. It facilitates restructuring, acquisitions, conversions and other investment-oriented activities that an organic firm needs to embark on during its lifecycle. In India, cooperatives framework runs parallel to the Company Act through an independent legislation. The cooperatives are not registered in stock exchange. Schrader (1989) contended that certain cooperative practices, as well as various State and Federal laws (all based on fundamental cooperative principle) result in a chronic shortage of capital and the lack of a means to reflect equity appreciation to owners and investors. Further government support can seldom be for long term. Nevertheless, independent audit and vigilance provisions linked to such support to stay accountable to taxpayers in the country, inculcates a culture of accountability necessary for any community structure to sustain. Economic activities are complex and normal member may not be able to appreciate numbers, hence periodic check from state and regulatory agencies is necessary to protect their interest. Since there is no appreciation of equity, waving off equity/NetWorth through exceptional agenda also should be barred by provisioning in act. Government must look for international developments in this sector to let cooperatives build seamless global network, if so required. Same language should pervade through various global entities. Uniformity in internal and external environment is key ingredient. The meaning and implementation of duality in India (unfortunate for an old civilization) leaves huge space for manipulation as provisions are obscure in the governing Acts. There is trust deficit that this platform can deliver. It is imperative that impact assessment is made public. The Government coming out with a framework ‘Sahkar se Samridhi’ (Prosperity through Cooperation). Disclosures under cooperative acts are far less robust as under the Company Act. Social cause notwithstanding, it is public money in circulation, more homework may be needed to let a real picture emerge. Registrar of cooperative Societies have a greater role to usher in a conducive culture. Beyond Annual General Meeting they must be enabled to obtain and provide feedback to minister in-charge; on control, decision making, collective ownership: they must undertake that the identity of cooperative is intact, not pilfered. Besides short, medium and long-term impact assessment reports done by professionals through commissions and committees set up to evaluate cooperative sector performance time to time must not sit in Cold box but structured in system rising above politics. It is time for defining a new future.