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The Co-op Dictionary |
A to
Z of Co-operation
Author David Griffiths
Date
First edition:
2003
Second edition: 2004
The Co-operative Federation of Victoria Ltd and
any employees or agents shall not accept any
responsibility for
loss or other consequence which
may arise acting or
refraining from acting as a result
of material in this article.
Recommended corrections and additions welcome.
Co-operative Federation of Victoria
Ltd
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Introduction
This is a guide for directors, managers, secretaries,
employees and managers of co-operatives.
It is a distillation of information
and experience and not a substitute for a detailed examination of legislation
and regulation and obtaining appropriate professional advice on options.
The
dictionary format facilitates the process of checking out facts, ideas and
concepts. Throughout The Co-op Dictionary the words SEE and REFER will appear:
SEE refers to other relevant entries in The Co-op Dictionary REFER refers to
other reference material.
The following are essential reading:
·
Bosch, Henry Conversations Between Chairmen, Australian Institute of
Company Directors, 1999
·
Bosch, Henry Conversations With a New Director, Australian Institute of
Company Directors, 1997
·
Co-opAdvantage Developing Directors of
Co-operatives, Co-operative Federation of Victoria Ltd, 2001
·
Co-operatives in the 21st Century: The Co-operative Start Up Manual – The
essential field guide for starting co-operatives in
·
Co-operatives Act 1996
Thanks to Col Bodie for the co-operative cartoons: www.cartoonsandcaricatures.com.au
Every effort has been made to ensure that the information
is correct. The Cooperative Federation of Victoria Ltd and its employees and agents
shall not accept any responsibility for loss or other consequence which may
arise acting or refraining from acting as a result of material in this
publication.
The Co-op
Dictionary is a work in progress. Feedback is welcome and will be used to revise
future editions of The Co-op Dictionary – The A to Z of Co-operation. Please
forward suggested amendments,additions,
corrections and deletions to the Co-operative Federation of Victoria Ltd:
71 Franciscan Avenue Frankston VIC 3199
Tel: 9785 6704 Fax: 9785 6542
Email: cfedv@impaq.com.au Website: www.australia.coop
First published: 2003 Total entries: 316
Second edition:
2004 Total entries: 441 - 125 new and 49 revised. David Griffiths
Secretary February 20, 2004
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A
ACCC
Australian Competition and Consumer
Commission is a Federal Government independent statutory authority. The
Commission has a legislated responsibility to seek compliance with competition,
fair-trading and consumer protection laws. The ACCC also encourages competitive
market structures and informed behavior. The ACC is controversial for
co-operatives because competition policy does not sufficiently recognise the co-operative difference
Access
The accessibility of a co-operative
to its members.
Factors relevant to access include physical access, communication and cultural
appropriateness.
Accidents
The definition of an accident is an unplanned or undesired
event that results in injury or illness to a person. This may also involve
damage to plant, equipment and/or the environment.The
definition of an incident is an unplanned or undesired event that could have
resulted in harm. It is often called a ‘enear miss’
or ‘enear hit’ e.g. a container of corrosive is
dropped when being delivered but does not break or open.
ACCORD
Australian Centre for Co-operative Research and
Development was established to help research anddevelop
the co-operative, mutual and the broader social economy in
Accountability
How co-operatives are accountable
to their members, and others, on their financial and co-operative performance.
What is critical to this is members expecting
accountability and the co-operative formally committed to accountability.
Accounting
Accounting is the identification, collection,
classification, recording and reporting of the financial data of a
co-operative. The accounting elements are assets, liabilities, equity, revenue
and expenses. SEE Assets, Expenses, Equity, Liabilities and Revenue.
Accounting - policies
These are the policies decided by a
co-operative in establishing, preparing and reporting on its financial status.
Accounting - ratios
Accounting ratios are financial shorthand for identifying
and measuring the progress of a co-operative e.g. return on total funds
employed, net profit percentages, return on shareholder funds, gross profit %,
working capital ratio and liquidity ratio.
Accounting - records
Accounting records are established
and maintained to enable day-to-day financial control of the co-operative and
facilitate the preparation of annual accounts e.g. payment of any annual
subscriptions, payment of accounts. Accounts Payable
This is money that is owed to
suppliers for goods and services purchased by the co-operative.
Accrual Method of Accounting
Revenues and expenses are counted
during the time they are earned.
Acculturation
Refers to the
process of learning and adapting to a new culture.
Act in good faith
The decisions taken by a board and
director must not be for personal benefit.
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Antigonish Movement
The Antigonish
Movement was initiated by the Extension Department at
(1) The supremacy of the individual.
(2) Social reform must come through
education. (3) Education must begin with the economic. (4) Education must come
through group action.
(5) Effective social reform
involves fundamental changes in social and economic institutions.
(6) The ultimate objective of the
movement is full and abundant life for everyone in the community.
The Antigonish
Movement inspired the development of the National Catholic Rural Movement and
the YCW Co-operative Movement in
Arneil, S.F.
Foundfation President of
Australian and South Pacific Con Federation of Credit Union Leagues. Accountant and
author. Author of Forming and running a Credit Union (1971) and Secrets
of the Boardroom: The Credit Union Director in the Eighties (1980).
Action Decisions
A decision about what action is to
be undertaken. It results in action of some kind.
Active membership
Members are required to actively
participate in the primary activity or activities of the co-operative. The
Rules must establish active membership criteria. While the
Co-operatives Act requires members of co-operatives to be active e.g. payment
of an annual subscription, purchasing goods and services from the co-operative
and supplying goods and services to the co-operative. Active membership
is fundamental to co-operative philosophy and principles. If members do not
continue to be active users of the co-operative, then, they will lose their
membership as
provided for in the Rules and the
Co-operatives Act 1996. Active membership has two dimensions - economic and
political. SEE Primary Activity or Activities.
Admission to membership
The Rules of a co-operative
establish who can be members of the co-operative. Co-operatives have to provide
certain information to a person intending to become a member – a copy of the
rules, a copy of special resolutions applicable to the member and a copy of the
last annual report.
Agendas
The agenda for meetings lists the matters to be discussed
at a meeting. Agendas need to be developed by Chair and management. Agendas need
to be clear and succinct with supporting written material that is circulated
and received sufficiently prior to board and committee meetings. Board
documents should be comprehensive and include recommendations. Agenda documents
should be tabulated or indexed. Sufficient time should be allowed for board
discussion of the agenda.
Altruism
Refers to an
individual, group or organisation willing and/or able
to make a sacrifice benefits for themselves for other individuals, groups or organisations.
Amendments
Amendments are based on inserting,
adding or striking out words, phrases and/or sentences from a motion without
contradicting the motion. An amendment must be relevant to a motion, not be
inconsistent with a motion or revive an amendment already rejected. SEE
Robert’s Rules of Orde Revised Renton, N.E. Guide For Meetings and Organisations
Volume 2 Meetings, The Law Book Company Limited, 1994
Annual General Meetings
The main meeting for members held
by the co-operative each year. An annual report and financial reports are presented,
directors elected and rules changed. A common problem for AGM’s
and SGM’s is the dominance of the board and/or
management because they come better prepared with a more detailed knowledge of
the issues. Annual Reports are useful for marketing a co-operative and for
assessing its performance. For directors and members it is equally relevant to
ask about the report – whether it could be made more interesting and
understandable, is the report clear
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and concise, how does the report
compare with other annual reports, should the report have a theme and how clear
is the analysis of the co-operative’s situation. Cooperatives are required to
lodge with the Registrar an annual report within 28 days of an Annual General
meeting. This is to include the co-operative’s accounts and list in a form
provided by the Registrar the directors and principal executive officer.
Apathy
Apathy can be a problem for any co-operative – a lack of
interest from members participating in the affairs of the co-operative. It is
important to understand the contributing factors to member apathy e.g. blockages
to member participation, the willingness of managers and boards/committees to
involve members, geographical and regional differences and processes for
engaging members. The challenge is to make involvement interesting e.g. genuine
elections to the board, full and informative annual reports, an interesting
guest speaker, organising regional meetings, and a
film and encouraging members to ask questions and respond thoughtfully. SEE
Active Membership.
Arizmendi, Jose Maria (1915-1976)
Founder of the Mondragon Co-operative Movement. First co-operative ULGOR was
established in 1956.
Assessing Commitment
Assessing the
commitment of co-operators to co-operative values and principles and their
application to a commercially viable co-operative.
Asset Based Development
Refers to a business strategy based
on the recognition that tangible assets are the key to self-sufficiency and
independence – land, buildings and a dedicated income.
Asymmetric Information
Describes the situation where individuals and groups in a
co-operative have different information and this influences the willingness and
ability of individuals to participate in the co-operative e.g. between
executive and non-executive directors and the board and management, the board
and members and managers and members. SEE Co-operative Democracy and
Co-operative Education
Audit
The audit is the process of checking the accounts of a
co-operative – checking whether the accounts agree with the records and comply
with legal and professional standards. The board should have access the audit
report and there must be adequate time for the board to consider the audit.
Audits can verify financial conditions, verify cash and security, verify accounts receivable. Investigate internal control
procedures and investigate plant property accounts. This would enable the board
to consider any necessary remedial actions or changes. Consideration could also
be given to the auditor attending the meeting or being contactable during the
board meeting. REFER Mahoney, Rosemary K Annual Audits Board Responsibility,
USDA Rural Development, CIR 41, 1995
Audit Committee
Large co-operatives sometimes
appoint Audit Committees. Audit Committees discuss the nature andscope of audits, review audits and the major findings of
the audit.
Auditing
Auditing is the review of the
financial records and performance of the co-operative.
Auditor
The person or
accountancy firm appointed by the co-operative to check its accounts. The auditor has a right to access
the books of the co-operative and to require any officer of the co-operative to
give the auditor information, explanations and any assistance required by the
auditor. An officer of a co-operative has a responsibility to provide any
information, explanation or assistance required.
Australian Friendly Societies Association
Peak body for friendly societies throufhout
Australian Prudential Regulation
Authority (APRA)
APRA is astatutory body
responsible for the prudential regulation of banks, credit unions, building
societies, insurance companies, friendly societies and superannuation funds. APRA web site
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Australian Unity
A friendly society formed in 1993
with the merger of the ANA Friendly Society (1871) and Manchester Unity (1840)
Australian Unity Web Site
Authorisation
Financial transactions should be properly
authorized before they are initiated. This could include, forinstance,
who is authorized to sign cheques and who is
authorized to make purchase orders.
B
Balance
Sheet
A balance sheet shows the financial
position of a co-operative at a point of time. It shows the Assets and
Liabilities and the difference between these.
Bank Financing
Obtaining debt financing from a
financial instiutution. An important
source of finance for businesses including co-operatives. Most bank
lenders, however, may not understand or agree with co-operative values and
principles.
Base Capital Plan
A co-operative determines the
amount of equity a membershould contribute based on
current volume of business by members.
Benchmarking
Describes a process for
co-operatives to assess their performance by comparing it to the performance o
f other co-operatives and business in a similar industry and of a similar size.
Board
The board is elected by members to
manage the affairs of the co-operative and
acts on behalf of and is accountable to
the members. Ultimate accountability to members is vested with the board of
directors. The board defines the co-operative’s objectives, policies and goals,
protects the co-operative’s assets, keeps members informed, reviews the
co-operative’s operations and employs management. The manager of the
co-operative is appointed by and accountable to the board. Behavior at every
meeting will respect every individual in the room. Each member will be
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Overall goals and objectives How to achieve goal and objectives Selection of manager Selection
of staff (if any) Manager evaluation Staff
evaluation |
allowed to speak at the time indicated by
the chairperson, without interruption.
Time for debate of issues will be allowed following the
speaker completing the tabling of their issue(s). A board can delegate day to
day management but it cannot delegate its responsibility to the members for the
management of the co-operative. The board needs to determine what significant
information it needs to be assured of sales operation, what standards it
expects of management to maintain in terms of this information and then decide
what policy is to be given The board should adopt a formal statement on its
role. to the manager. REFER: Meyer, Tammy M Understanding Co-operatives Who
runs the co-operative business? Board of Directors, USDA, Co-operative
Information Report 45, Section 5, October 1997, 4pp
Board –
and managers
The relationship between the board
and the manager is fundamental to good governance in aco-operative.
Is there a clear understanding of the role and responsibilities of the board
and staff. It is important to have a clear
understanding of this relationship.
Operations are the delegated responsibilities of managers.
The manager should
be required to submit proposals and recommendations when a matter requires a board decision. Directors are not managers. A critical issue is how directors involve themselves in the affairs of a co-operative. Directors do, however, have an obligation to seek the information and knowledge they need to discharge their responsibilities. Managers, therefore, need to respect the rights of directors to seek information and criticise. It is also critical that written job descriptions clearly articulate and detail the responsibilities of the manager. A key issue for any board is how it assures itself that the co-operative operates at all levels an effective program of management selection, appraisal and development. Are managers being adequately compensated and what is the criteria for adequate compensation. If a board losses confidence in the manager, then, there is an obligation to discharge the manager. Difficulties in board and manager relationships could be because of 1. lack of
Board -
committees
The appointment of board committees
that are delegated to undertake activities and/or decisions on behalf of the
board will depend on the workload of the board. The terms of reference of
committees need to be established.
Board -
compensation
Co-operatives need to decide
whether there will be any financial compensation for directors. The answer
depends on the size of the co-operative and the amount of work undertaken.
Board -
control
The board is responsible for
controlling the operations of a co-operative. How it does this critically
depends on its understanding of this role, its ability to obtain reports from
management for informed decision-making and its analysis of the co-operative’s business e.g. stock,
trading, capitalization, liquidity, credit, earnings power, sales and efficiency.
Board -
decisions
In making decisions it is important
for the board to be satisfied that all ideas have been heard, that the board
has access to the information necessary to a decision, that additional
information is either available not available and/or relevant, that the impacts
of decisions are clearly understood, that there is no point in taking the
discussion further and that the board is ready to make a decision. Directors
have an obligation to respect board decisions - even if they disagree with
those decisions. Directors represent the whole membership. Directors should
bring their concerns and those of the membership sector or geographical area
that they represent to the board. Once the board has made a decision, however,
directors should support the decision. Once the decision has been made,
directors should not publicly disagree
with the decision. This is
inappropriate because it both undermines the board and the co-operative. A
director who decides to publicly criticize a board decision should resign as a
director. A former director has every right to oppose board decisions – without
revealing the nature and content of board discussion in the process of making
those decisions.
Board responsibilities
Oversight of the co-operative
including its control and accountability processes, appointing and removing the
manager or Chief Executive Officer, reviewing and ratifying risk management
policies and strategies, monitoring the performance of management, approving
and monitoring major capital expenditure, approving and monitoring financial
reporting, monitoring the co-operat6ive’s values and principles and member
education and involvement.
Board –
size
The Rules provide for the size of the board – the number
of directors. There is no ideal size or limit to the number of directors.
Issues to be considered in determining the size of the board include the volume
of work, making decisions expediently, the size of the co-operative, the
geographical spread of the membership, the member interests to be represented,
the skills necessary and available, the cost based on numbers, required board
standards, debate quality, factionalism and board efficiency. Whatever the
initial size of the board, subsequent general meetings of the co-operative
could consider and determine whether or not to increase or decrease the number
of directors. REFER
Board Meetings
Board meetings can be effective or
ineffective. This depends primarily on:
The
Chairman’s role in facilitating board efficiency and effectiveness.
The commitment of all directors to
understanding and discharging their responsibilities.
The role of the
CEO/Manager in preparing and presenting thorough reports. The distribution
of these reports before meetings. The willingness of
directors to read reports before meetings.
Board -
frequency
Boards should meet as often as
possible consistent with effective and efficient decision-making and
legislative requirements. The Co-operatives Act requires boards to meet at
least once every three months. REFER: Co-operatives Act.
Board -
performance
An effective board is essential for all co-operatives. The
effectiveness of the board is enhanced by qualified and experienced
individuals, cohesion and trust between the board and management and board
orientation and training. Boards need to address four basic questions: What arethe board’s strengths? What are the board’s weaknesses?
How well are the directors carrying out their duties? and
How can the board improve its performance? Issues to be covered include
policies and planning, finance, relationship with management, member relations
and co-operative values and principles. SEE Resource Book Resource 10 Map Your
Board’s Performance and Resource 1 Indicators of a Well-informed Board in Co-opAdvantage Developing Directors of Co-operatives,
Co-operative Federation of Victoria Ltd, 2001
Board –
procedures
Because of its small size compared with a meeting of
members, meetings procedures at a board meeting can be more flexible e.g. Chair
participates in debate, motions do not necessarily have to be seconded, alternative affirmative and negative speakers may not be
required. Decisions, however, have to be recorded either through the formal
adoption of resolutions or the Chair summarising the
issue and a decision.
Board meetings - quorum
Each co-operative has to determine
a quorum for board, committee and general meetings consistent with legislative
provisions.
Bonus shares
Trading co-operatives may authorize
in their Rules the issue of bonus shares to members subject to conditions
required under legislation.
Bookkeeping
Bookkeeping is the regular recording
of the transactions of the co-operative e.g. salaries paid and cheques received.
Brady, Edwin James (1869-1952)
Author and
journalist.
Books included Australia Unlimited (1918) about primary industries in
Brainstorming
This is a problem-solving technique at meetings. The idea
is for members, directors and/or staff to generate ideas without criticism and
judgment e.g. “we’ve tried that” and “it won’t work.” The ideas can be anything
– about problems, causes and/or solutions. People are invited to contribute
ideas and these are recorded in full and not paraphrased. No criticism or
comment on the ideas is allowed. Evaluation of the ideas is subsequent to and
not during the meeting.
Break even
Refers to a co-operative whose income just covers its
costs. A profit is not generated.
Bridging Finance
Short-term funds provided to bridge the gap between the
need for funds and securing a long-term loan.
Budgets
Budgets are statements of expected results expressed in
numerical terms – planned receipts and expenditures over a period of time
particularly over a 12 month period. A critical responsibility of boards is to
adopt and monitor realistic budgets. In establishing a budget, it is critical
that the board does not endorse unrealistic revenue targets and expenditure
cuts that ignore adequate resourcing costs such as
technology requirements. A cash budget can identify the possibility of future
liquidity problems in the short term – a shortage of funds at a particular
point of time.
Business Consultants
From time to time co-operative will require and employ
various consultants to provide financial, marketing, feasibility study and
other services. When necessary appropriate independent professional advice
should be sought on a as required basis. It is
important, however, to develop guidelines on the use of consultants. It is
crucial to understand that the role of consultants is to advise and educate –
not make policy. Consultants do not necessarily agree with and/or understand
the nature of co-operatives and, therefore, their advice may not recognize this
difference. Cooperatives should understand that the experience of and views of
consultants about co-operatives provide a critical framework for their
consultancy advice.REFER Part 111 Appendix C Tips From the Experts in The Co-operative Start Up Manual, 2001
Business Judgement
Rule
Business Judgement Rule refers
to whether or not directors meet the statutory requirements of duty of care and
diligence. A decision must be made honestly and is not a totally irrational
decision for the director to make. What is relevant to this, therefore, is the
director has made a judgement in good faith for a
proper purpose, the director does not have a material personal interest in the
subject matter, the director has taken steps to be informed of the subject
matter that the director believes to be appropriate and that the director
rationally believes that the judgement is in the best
interests of the co-operative.
Business Plan
A business plan is a written document that outlines the
resources and proposed strategies for a co-operative – sales projections,
marketing strategies, key personnel and organizational structure. The business
plan is the key document for the management of a co-operative and is necessary
for use in applying for funds and is used to assess the co-operative’s
progress. The business plan enables the co-operative to clarify its goals and
these are compatible, identify the resources necessary to achieve these goals
and idewntify the strategy necessaru
to achieve these goals. An incomplete or over optimistic plan will be useless
for managing the co-operative and securing funding. The key contents of a business
plan will include a business description, a market analysis, products and
services, marketing strategy, operations, management and organization and
financials. A business plan is never perfect. Its development and
implementation is influenced by misjudgment, miscalculation, poor skills and
inadequate understanding and communication. It has to be seen as a dynamic and
evolving document. REFER Part 111 Appendix A Business Planning in The Co-operative Start Up Manual, 2001
C
Capacity Notes
A loan to
co-operative from members.
Capital
The capital requirements of a co-operative depend on the
business activities and the industry. Capital can be in two forms – owned
capital and loan capital. Owned capital is the share capital contributed by members
and any surplus from trading transferred to reserve funds. Loan capital is
capital borrowed from members or other sources that has to be repaid on demand
or at a definite date in the future. Capital is used for four basic purposes –
fixed assets, investments, current assets and expenses. Capital can be a
problem for co-operatives if members do not have an incentive to supply
capital. Proper capitalization is essential if members are to continue to
benefit from their co-operative. If members want to continue to control the
co-operative, then, they will have to continue to provide the necessary
capital. Sources and types of capital are various and include bank financing,
member shares, unallocated equity, suybordinated
debt, base capital plan, capacity notes, compulsory share contribution schemes,
retained patronage refunds, issue of bonus shares out of profits, members’
retirement funds, revolving equity plans or revolving capital retains,
revolving loans and co-operative capitalization units.
Capitalism
An economic system based on the
private ownership and control of business with control based on property/wealth
i.e. the number of shares owned.
Capital Shortfall
Refers to the capital shortfall of a co-operative when
capital expenditure is necessary to modernize equipment and/or invest in new
areas and the co-operative does not have the necessary capital.
Case Studies
Case studies are summaries and
assessments of co-operative experiences are important for co-operatives to
learn from these experiences. Case studies are important in helping us learn
about the history and experiences of co-operative.
• o 1:
Co-operative Purchasing – Local
Government
Co–operative Purchasing Services
Ltd. – a co–operative established by local
government. Author: Ian Holden Date: August
2000
• o 2:
Co–operative Energy
Co–operative Energy Ltd. Author:
David Griffiths
First published: April 2001 Revised:
February 2004
· o 3: Co–operative Pastoral Agent
Victorian
Producers’ Co–operative Company Limited – a co–operative that failed and why. Author: John Gill
Date: December 1998
• o 4:
Co–operative Retailing
Warrnambool Co–operative Society Ltd.Author: Grame Charles
Date: September 2003
· o 5: Co–operative Fibre
Australian Alpaca
Co–operative Limited Author: Australian Alpaca Co–operative Limited.
Date: January 2003
• o 6:
Co–operative Herd Improvement
Gippsland Herd Improvement Co–operative Ltd.
Author: Gippsland Herd Improvement Co–operative Ltd.
Date: January 2000
• o 7: Co–operative Telecommunications North East Telecommunications
Co–operative Ltd.
First published: July 2003 Revised: 19
December 2003
No 8: Co–operative Timber
SMARTimber Co–operative Ltd. Author: Gib Wettenhall. Date: July 2003
• o 9:
Co–operative Pigs
Primeat Co–operative Ltd. Author: David
Griffiths and James McKenzie First published: November 2003 Updated: February
2004
• o
10: Co–operative Purchasing
Farming United Farmers Co–operative
Company Limited Story
Paper presented at Co–operative
Federation of WA Inc Conference, 25 September 2003 Author: Rod Madden
Date: September 2003
· o 11: Co–operation Maleny
Co–operatives and the “Triple Bottom
Line” The co–operative movement in
Date: September 2003
• o
12: Co–operative Hotel
Devenish Community Hotel
Co–operative Ltd. Author: Graeme Charles First published: May 2001 Revised:
February 2004
• o
13:
• o
14: Co–operative Pea
Peagrowers Co–operative Ltd. Author: Graeme
Charles. First
published: May 2001 Revised: February 2004
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Cash flow
Refers to a
co-operative’s actual receipts and expenditure over a period of time.
Casting vote.
This is when the Chairman has a
second or casting vote if the decision of a meeting is equal i.e. four votes
each. It is sometimes the convention that if a second or casting vote is
necessary it should be to maintain the status quo and against change.
Catholic Social Theory
Key themes identified by the Catholic Church in response to
issues based on biblical orientation and reflections. Between 1947 -53 Catholic
Bishops issued a series of social justice statements on industrial relations,
education, foreign policy, migration, agriculture and socialisation.
Chairperson
The chairperson must ensure that the board acts
effectively and efficiently. The Chairperson can be appointed by the board or a
general meeting as provided for in the Rules. The Chairperson presides at board
and general meetings, ensure that the agenda for
meetings is adequate and act as a spokesperson for the cooperative. The Chair
should make decisions within the board’s reserved scope of authority. Is there
a clear understanding of this reserved scope of authority? The Chairperson’specific responsibilities include board
participation in establishing the co-operative’s strategy, ensuring the board
establishes appropriate policies accountabilities and limitations to guide
management, ensuring the board has access to timely and relevant information
for effective and efficient decision-making, ensuring an adequate reporting
process to the board, facilitating board discussions, maintaining a productive
relationship with the CEO/Manager and representing the board’s views. REFER
Bosch, Henry Conversations Between Chairmen, Australian
Institute of Company Directors, 1999
Chief Executive Officer SEE Manager
Coady, Father Nichael
(1882-1959)
A founder of the Antigonish Movement in
Code of Ethics
A statement adopted by a co-operative,
or any other business, establishing standards of performance and behavior to
which the co-operative is committed to observe in its policies and practices.
The content of a code of ethics could include conflicts of interest,
confidentiality, fair dealing, compliuance with laws
and regulations, encouraging the reporting of unlawful and/or unethical behaviour, disclosure policies and procedures, co-operative
abuse and co-operative values and principles.
Cole, G.D.H. (1889-1959)
Labour party activist, journalist and
political writer whose books included A Century of Co-operation and The British
Co-operative Movement in a Socialist Economy.
Collateral
Marketable
properties which a borrower pledges as security for a loan.
Community
A community can be variously
defined and based. It can be a geographical community or it can be a community
of common interest e.g. parents of children in child care centres,
Aboriginals/Koories are communities of common
interest.
Community Buyout
Communities relying on essential
services that are about to close get together to purchase and operate these
services e.g. bank, pubs, shops and post office.
Community Development
The process of develo0ping the
capacity of a community. Community development, however, has to be bottom-up. Top-down community
development is not community development.
Community Economiuc Development
The component of
community development that has a focus on economic development and viability. Community economic development, however,
has to be based on community institutions such as co-operatives.
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The Co-operative Dictionary |
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Co-operative Federation of Victoria Ltd |
Companies
A business owned and controlled by investors committed to
maximizing the return on their capital investment. Investor control is usually
based on the number of shares owned. Investor owned companies are capital
driven.
Competition
In general describes a situation when anybody who wants to
buy or sell has a choice of buyers or sellers.
Competition policy
Refers to government policy and how it is to be regulated
about competition e.g. the structure of industry and the behavior of companies
and co-operatives. In
Compulsory share contribution schemes
Members arerequired
to invest in shares on the basis of their patronage. This requirement can be
specified in the Rules of the co-operative.
Conflicts of interest
A co-operative board must ensure that conflict of interest are identified consistent with the
Rules and co-operative legislation. SEE Minutes – declaration of interests
Consensus
A process for
group to make a decision by agreeing on a course of action. A
– minority vote. A consensus
decision does not mean that everyone thinks it is the
best decision or that it will work.
Consensus decision-making depends on common
values, group process and conflict
resolution skills, a commitment to the group and
sufficient time.
Consultants
SEE Business Consultants
Consumer Sovereignty
The notion that
it is the preferences of consumers that determine what goods are provided and
purchased.
Contingent
Liability
An obligation that does not become
enforceable until a specific event occurs e.g. a gurantor of a loan only has to meet the guarantee if the
borrower defaults.
Contract
A legal agreement
between two or more parties.
Co-op Digest
A newsletter that
was published by the Co-operative Federation of Victoria Ltd.
Co-operation
The act of
voluntarily working together to achieve mutual benefits.
Co-operative
A voluntary organization of people
formed for the purpose of meeting their common needs through mutual action and
democratic control. The primary purpose of a cooperative is to seek economic
benefits for its member owners.
Co-operative Capital
The capital of a co-operative is the servant not the
master of the co-operative. This is because co-operatives are member-driven
whereas investor-owned companies are capital-driven. It is the members who
control the capital of a co-operative and how surpluses are distributed.
The idea of a society organized
according to co-operative principles and practices.
Co-operative Democracy
Members not only control their co-operatives but their control
is exercised democratically through one member one vote, electing their
representatives, managers and employees accepting that co-operatives belong to
their members. As co-operatives get larger and/or older, there is a need to
continuously develop and reinforce their democratic structures. If
co-operatives develop the business and neglect democracy, then, the
co-operative character of the business will cease to exist. While individual
circumstances differ, the following specific circumstances could individually
or collectively undermine co-operative democracy – an ageing membership, a
long-term manager that dominates the board, managers who neither
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understand nor support co-operative values and principles,
the absence of an ongoing co-operative education program, a board of directors
that is not subject to election challenges, a board of directors that is
committed to demutualization, a proportionately growing membership not involved
in the formation of the cooperative, an increasingly geographically dispersed
membership and an increasingly heterogeneous membership.
Co-operative Development
Refers to a
process of economic and community development based on cooperative philosophy
and practice involving the expansion and development of cooperatives and the
co-operative movement.
Co-operative Education
The critical purpose of
co-operative education is to reinforce co-operative values and principles and
the sense of common goals among members and encouraging innovation and
adaptation. Co-operative education should be a continuous process for members,
managers and employees. Ongoing co-operative education is essential to
maintaining, strengthening and developing the co-operative character of
co-operatives. Education programs to inform co-operative directors, managers,
employees and members and others of the principles and practices of
co-operation and the skills needed to effectively operate a co-operative e.g.
the purpose of cooperatives, the history of co-operatives, the structure of
co-operatives, the nature of co-operative democracy and the co-operative
principles. Co-operatives are more likely to succeed when members understand
their responsibilities to co-operative principles and practices. Co-operative
education can be provided in a number of ways – booklets, research reports,
newsletters and magazines, videos, workshops and courses. REFER Learning
Circles, Session 1 The Big Picture, Session 2 Getting Down to Essentials,
Session 3 Development Paths for Directors and Resource Book Resource 3
Co-operative values and principles in Co-opAdvantage
Developing Directors of Co-operatives, Co-operative Federation of Victoria Ltd,
2001
Co-operative Employees
Employees in a co-operative have the same duties and
rights as employees in public and investor-owned enterprises. It is critical
that co-operative employees understand and accept that the members own the
co-operative and that service to members is the primary function of the
co-operative. They have, however, a specific responsibility to understand the
purpose and objectives of the co-operative.
This includes understanding the importance
of member relations, the role of cooperatives and public understanding of
co-operatives.
Co-operative Failure
All co-operatives need to be aware of how and why
co-operatives fail as cooperatives. This is not to be confused with economic failure.It refers to when cooperatives cease to practice
co-operative values and principles. REFER Part One Why do Co-operatives Fail? ( p 15) and Keeping it Co-operative, Check List ( pp 15-16) in The
Co-operative Start Up Manual, 2001 and Why do co-operatives fail as
co-operatives? http://www.australia.coop/why–fail.htm
Co-operative Federation of Victoria Ltd
The Co-operative Federation of Victoria Ltd is the peak
body for co-operatives in
Co-operative Fiction
Fiction books and
short stories with co-operation and co-operatives as a theme.
Co-operative Formation
The process of
forming a co-operative. REFER Part One Where do I start? Eight basic steps for starting a
co-operative in an ideal world (pp 11-14) in The Cooperative Start Up Manual, 2001
Co-operative Governance
Based on the OECD’s definition of corporate governance,
co-operative governance is the set of relationships between the co-operative’s
management, its board, its members and other stakeholders. Co-operative
governance also provides the structure through which the objectives of the
co-operative are set and the means of attaining those objectives and monitoring
performance are performed. Cooperative governance is different from the
governance of investor-owned and public enterprises. Good co-operative governance
should provide proper incentives for the board and management to pursue
objectives that are in the interests of the co-operative and members and should
facilitate effective monitoring, thereby encouraging the co-operative to use
resources more effectively. OECD Principles of Good Corporate Governance, June
1999
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Co-operative Law
Acts and/or regulations by
parliament referring to the structure and operations of co-operatives usually
dealing with the structure, Rules, registration and regulation of
co-operatives.
Co-operative Legislation SEE Co-operative Law.
Co-operative Managers
Managers who are
employed by co-operatives. REFER Manager
Co-operative Management
Co-operative management is different from management in
public and investorowned enterprises. The
co-operative culture of a co-operative makes extra and unique demands on managers
in a co-operative. The challenge is to integrate cooperative values and
principles into the business and the board and manager have a critical role in
integrating these values and principles. Tensions between members and managers
and boards and managers can arise if there is not a common understanding of
co-operative management and the integration of co-operative values and
principles. The successful integration of co-operative values and principles
can give co-operatives a competitive advantage. SEE MOCA Davis, Dr. Peter
Managing the Co-operative Difference: A survey of the application of modern
management practice in the co-operative context, Cooperative Branch,
International Labour Office, 1999 Meyer, Tammy M
Understanding Co-operatives Who runs the co-operative business? General Manager
and Employees, USDA, Co-operative Information Report 45, Section 6, October
1997, 4pp
Co-operative Movement
The collection of business enterprises that are committed
to co-operative principles and practices and whose ownership and control lies
with its members. There is debate on the nature of this movement and, in
particular, the extent that cooperatives and co-operative sectors are separate
and not committed to a practice of co-operation between co-operatives.
Co-operative Party
Formed in 1919 as a result of a
decision by the UK Co-operative Congress. The objective was to secure independent
co-operative representation in Parliament and local government and educate
people in co-operative principles that will lead to cooperative political
action.
Co-operative Principles
Co-operatives follow seven principles of co-operation
established by the International Co-operative Alliance (ICA). The most recent
formulation of these was by the
Co-operative principles –
autonomy and independence
4th Principle: Autonomy and
Co-operative principles – co-operation
between co-operatives
6th Principle: Cooperation among Cooperatives serve their members most
effectively and strengthen the cooperative movement by working together through
local, national, regional and international structures. Examples of cooperation
between co-operatives could include:
Regional intercom-operation Sectoral interco-operation
Commercial interco-operation
Co-operative principles – co-operatives and the community 7th Principle: Concern for Community. Cooperatives work for the
sustainable development of their communities through policies approved by their
members.
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Co-operative
principles – education, training and
information 5th Principle:
Education, Training and Information. Cooperatives provide education and training for their members, elected
representatives, managers and employees so they can contribute effectively to
the development of their cooperatives. They inform the general public –
particularly young people and opinion leaders – about the nature and benefits
of cooperation.
Comment: Education and training within
co-operatives is essential. It is more than just encouraging use of the
co-operative by members. It means members understanding the complexity of co-operative
principles and practices. It also means, however, that the members of the
co-operative have the skills to fulfill their responsibilities.
Co-operative principles – democratic member control
2nd Principle: Democratic Member Control. Cooperatives are democratic
organizations controlled by their members, who actively participate in setting
their policies and making decisions. Men and women serving as elected
representatives are accountable to the membership. In primary cooperatives
members have equal voting rights (one member, one vote) and cooperatives at
other levels are also organised in a democratic
manner.
Comment: The members of co-operatives
ultimately control their co-operative democratically. It is a right and an
obligation of members to be actively involved in their co-operative.
Co-operative principles – employees
The co-operative needs to determine whether or not
co-operative employees should be expected to have an understanding of
co-operative principles.
Co-operative principles – member economic participation
3rd Principle: Member Economic Participation. Members contribute equitably to,
and democratically control, the capital of their cooperative. At least part of
that 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 surpluses for any or all of the following
purposes: developing their cooperative, possibly by setting up reserves, part
of which at least would be indivisible; benefitting
members in proportion to their transactions with the cooperative; and
supporting other activities approved by the membership.
Co-operative principles – voluntary and open membership
Ist Principle: Voluntary and Open Membership. Cooperatives 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.
Comment: Individuals and organisations
voluntarily decide to form co-operatives. People cannot be forced to form
co-operatives. They must understand and agree with the purpose and nature of
co-operatives – and not just go along with the eloquence and charm of a leader
who supports co-operation. Membership of co-operatives is open
consistent with the specific purposes and capacity of a cooperative. Voluntary
and open membership does not mean that membership should be open to everyone
who applies for membership.
Co-operative Council of
The Co-operative Council of Australia is the peak body for
co-operatives in
Co-operativesUK
The peak body for
co-operatives in the
Co-operatives
Co-operative values
ICA Statement on the Co-operative Identity
Definition A co-operative 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. Values 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. The cooperative principles are guidelines by which cooperatives put
their values into practice. REFER Section 1 The Big
Picture and Resource 3 Checklist for co-operative values & principles
Resource Book Co-op Advantage Developing Directors of
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Co-operatives, Co-operative Federation of Victoria Ltd,
2001 and Part 111 Appendix B Co-operative Principles and Ideals in The Co-operative Start Up Manual, 2001
Co-operativism
The ideological
advocacy of co-operative values, principles and practices.
COPAC
Committee for the Promotion and Advancement of
Co-operatives http:// wwwcopacgva.org/
Corporate Social Responsibility
The idea that investor owned companies
have a corporate social responsibility and need to examine and improve
their corporate social responsibilities – their social, environmental and local
impacts on individuals and their communities. There is debate, however, as to
whether or not a capital-driven company can consistently aim for social
responsibility when this is necessarily subordinate to profit.
Cost effectiveness
The achievement of results in the
most economical way – using resources to produce a result at the lowest
possible cost.
Cost of sales or cost of goods solved
The direct cost of producing an
item or providing a service by a co-operative without including overhead costs.
Credit Care
An initiative in
the 1990’s by the Commonwealth Government and CUSCAL to assist rural and remote
communities to secure access to financial services in response to bank
closures.
Credit Rating
An estimate of the
credit worthiness of a co-operative.
Credit Risk
The degree of risk calculated as
involved in providing a loan to a borrower.
Credit Union Foundation of
Established in 1971 to provide
development assistance to credit unions to the neighbouring
countries of
CUSCAL
Credit Union
Services Corporation of Australia Ltd – the peak body for credit unions
throughout
Current Assets
Things that are
purchased for day to day use in the business and any amount still owed by
customers.
D
Database
An organised collection of information.
Debt Capital
This is the money borrowed with a
legal liability to repay funds under stated interest rates, terms and conditions.
Debt capital can be short-term and long-term.
Decision Tree
A method of analysing different decisions and the different
consequences.
Declaration of Interest SEE Conflict of Interest
Demand-pull
Co-operatives create a demand for
its products and services through advertising, promotion and incentive schemes.
Deming, W. Edwards
An
internationally renowed management consultant who
developed a comprehensive philosophy for management that embraces quality and
productivity.
He identified 14
points as the basis for transforming
industry – create constancy of purpose towards improvement, adopting a new
philosophy, cease dependence on inspection to
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achieve quality, end awarding
business on the basis of price, improving constantly system of productivity and
service, institute on the job training, institute leadership, drive out fear, break
down barriers , eliminate slogans and targets, eliminate work standards,
eliminate management by objectives, remove barriers to pride of workmanship by
employees and managers, education and self-improvement and transforming
everybody’s job.The two books about his pohilosophy are Out of Crisis (1982) and The New Economics
For Industry, Government, Education (1993)
Democratic Control
Democratic control is an issue for
all co-operatives. For large co-operatives it is an increasingly significant
issue – how to maintain co-operative democracy with business and organizational
growth. For large co-operatives the Annual General Meeting (AGM) represents the
minorities who attend – not the majority who do not attend. The challenge for
large co-operatives is to develop a workable democratic structure that
facilitates maximum member control over policies. Members elect directors,
change the rules of a co-operative and approve or reject board reports. The
ability of members to exercise democratic control is critically determined by
members being informed.
Demutualisation
Refers to the decreased use of mutual organizations to
provide services and produce goods and the conversion from mutual to investor ownership.The beginning of demutualization of a
co-operative is when the co-operative has lost its cooperative identity and
what distinguishes it from investor-owned companies.
Australian resources: www.australia.coop/cooperative demutualisation.htm
Depreciation
Amortization of assers
that lose value over a period of time e.g. buildings, equipment and machinery.
Deputy Directors
Co-operatives have the option of
appointing deputy directors. In its Rules a cooperative may provide for Deputy
Directors. Deputy Directors can act as a deputy for a director who is absent from
a meeting. The Rules have to provide for the term of office, vacating and/or
removal from office and remuneration of the deputy. SEE Directors
Differentiation
The recognition that co-operatives are distinctly
different in their purpose and structure from private and public enterprises.SEE:
Directors
Directors have duties of stewardship, financial
management, planning and evaluation and communication. Directors must put the
interest of the co-operative before their own. They must not misuse the
co-operative’s property or condone illegal or improper acts. Directors of
co-operatives have a unique duty and responsibility of representing the members
as users of the co-operative and ensuring that the co-operative functions for
the benefit of the user-members. If directors are unable and/or unwilling to
put in the time necessary to be a director, then, they should either not stand
for or resign from the board. Free riders lessen the co-operative’s democracy
and stability. In Prudential Standard Board Composition APRA has said that
individual directors must be fit and proper. In explaining this, APRA has
suggested that this involves considering: (a) the person’s integrity in the
conduct of business activities and reputation within the business and financial
community; (b) the person’s and experience relative to the duties involved; and
©) the person’s business record and other business interests, as well as
financial soundness and strength. Fitness, then, is focused on the competencies
of directors. Propriety, then, focuses on the integrity and suitability of
individual directors. REFER Session 2 Getting Down to Essential and Session 3
Development Paths For Directors in CoopAdvantage
Developing Directors of Co-operatives, Co-operative Federation of Victoria Ltd,
2001 and Bpsch, Henry Conversations With a New
Director, Australian Institute of Company Directors, 1997
Directors and Managers
Avoiding conflict between the board and the manager depends
on each knowing the difference in their respective roles, respecting each
other’s different roles and accepting each other’s roles. Conflict occurs when
either or both the board and management don’t know or understand and/or accept
the separate and divisible roles. Managers, however, must be able and willing
to provide answers to questions asked by directors e.g. whether plans support
objectives, whether manager explanations are satisfactory, whether predicted
trends and forecasts have been achieved, whether recurring problems have been
identified and what has been proposed and undertaken. Directors are dependent
on managers raising operational and policy issues and
seeking board advice. At board meetings questioning of managers is integral to
manager accountability.
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Directors - and
business consultants SEE Business Consultants
Directors casual vacancies
The board has the authority to fill
casual vacancies.
Director kits
It is useful for directors to be provided with Director
Information Kits. These could include a copy of the Rules, an organizational
chart, the policy manual of the cooperative and a description of director
duties and responsibilities. SEE Resource Book Resource 18 What to put in the
Board Manual or Website in Co-opAdvantage Developing
Directors of Co-operatives, Co-operative Federation of Victoria Ltd, 2001
Directors – election
The Rules of a co-operative must provide for the election
of directors consistent with co-operative legislation.
Directors – independent
SEE Independent
Directors
Directors – and members
The board should regularly review all aspects of membership
including the number of members joining and leaving the co-operative, the
number of members attending general meetings, the number of members attending
workshops, contested elections for the board and the number of members
participating in elections. REFER Session 2 Getting Down to Essentials in Co-opAdvantage Developing Directors of Cooperatives,
Co-operative Federation of Victoria Ltd, 2001
Directors – nomination
The Rules of the co-operative have
to provide for the process of nomination, qualification, removal, renumeration and term of office of members for election as
directors consistent with co-operative legislation.
Directors – recruitment
The recruitment of directors should be based on capacity
to work as part of a team, open-minded in approaching issues and making
decisions, knowledgeable about co-operatives, able and willing to protect
sensitive and confidential information and decisions and preparing for and
attending all board meetings. Director recruitment is an important issue for all
directors – encouraging members to stand for the board to replace existing
directors. Does the co-operative have a plan to identify and recruit new directors.
Directors – training
The issue of training for directors of co-operatives is
critical but not what is not always recognised
is the need for co-operative specific director training. In the
Discrimination
Treating one or more members of a
specified group unfairly compared with other people.
DotCoop
.Coop provides co-operatives with distinct competitive
advantages. It is a new toplevel internet domain.
.Coop went live on the Internet on January 9 2002. Registration opened to all
co-operatives worldwide on January 30 2002.
Due Diligence
An investigation to confir4m that
the financial statements and others prepared by a co-operative are true and no
material facts are omitted.
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Duty of Care
A director has a duty of care. Refers to a constant and
earnest effort and to demonstrate competence expected of a reasonable person in
focusing on both members and creditors. Directors must act with due care, skill
and diligence. Directors must trust managers to act appropriately but also must
act if inappropriate practices are suspected. Section 180 (1) of the
Corporations Law requires that directors must exercise their powers and
discharge their duties with the degree of care and diligence that a reasonable
person would exercise if they: (a) were a director or officer of a corporation
in the corporation’s circumstances and (b) occupied the office held by, and had
the same responsibilities within the corporation as, the director or officer.
E
Economic Democracy
Democratic
ownership and control of the economy.
Education
SEE Co-operative Education.
Elections
Election requirements and procedures
need to be clearly stated in the Rules. A co-operative should consistently
review its elections – the number of vacancies, how many candidates stand for
election, whether elections are contested and how many members vote. REFER
Co-operatives Act 1996 Part 9 Management and Administration of Co-operatives
Division 1 The Board
Employee
Employees are appointed by and responsible to managers.
Board members should not attempt to manage employees. This would only create
confusion and uncertainty. SEE Co-operative Employee
Employer
An individual, company,
co-operative or government that pays an employee to work for them.
Employment
Refers to
individuals being paid to work for somebody else.
Equipment and vehicles
Register should be established and maintained and
equipment and vehicles should be kept in working order and up to date. Policy necessary regarding responsibility of employees and
procedures if equipment lost and under what circumstances.
Equity
Equity is the money a co-operative
acquires for acquiring assets without assuming a legal obligation to pay it
back at a stated time and under stated conditions. SEE Member Equity
ESOP
An employee share ownership plan
developed by investor-owned businesses primarily that allow significant
employee ownership and participation in the business (not necessarily control).
Emergency Procedures
Every co-operative has a duty to
minimize risk, have an emergency response plan and the necessary resources.
Entrance fee
This is a payment a co-operative may require its members
to pay. An entrance fee is a payment for admission and it is not refundable
unless admission is refused.
Equity
Equity is the financial stake contributed by members to a co-operative.
Refers to the residual value of a co-operative. This
value is determined by deducting total liability from total assets. Equity
includes shares issued and reserves.
European Union (EU)
Establiushed in 1957 by the
Treaty of
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Evaluation – board
The process of a board evaluating
its performance.
REFER:
Evaluation – managers
The process of a
board evaluating the performance of the manager. REFER: Rapp, Galen W Appraising
Manager Performance, USDA Research Report 136, 1994
Expelling members
The process of
expelling members from a co-operative as provided for in the Rules and
consistent with co-operative legislation.
Expenses
Refers to the
cost of running a business – a net decrease in assets or increases in
liabilities resulting from operating activities. Examples of expenses include
salaries and wages, depreciation, rent, energy costs, cleaning, repairs and
maintenance, production and marketing costs.
External Environment
Describes the external environment to the co-operative
e.g. legislation and regulation and political policies.
F
Factoring
The taking
ownership of a co-operative’s debts. The factoring company buys the debts at a discount.
Feasibility Study
It is important to understand what is and what is not a feasibility study. Initially, therefore, a report
that claims to be a feasibility study is not necessarily so. The claim to be a
feasibility study depends on meeting certain criteria as to what constitutes a
feasibility study.
The purpose of a feasibility study is to enable a decision
to be made on the viability of a proposed co-operative. A feasibility study is
not a business plan and it is important to understand the differences between a
feasibility study and a business plan. A feasibility study provides the
information and analysis to enable a decision to be made on the viability of a
proposed co-operative. The business plan follows the feasibility study and is
developed if viability is indicated. The business plan is the blueprint for
implementation of the co-operative business. A good feasibility study must
encompass all of the following:
·
The context for and justification for the co-operative business.
• The market potential for the co-operative business -
including a demand and competitor analysis.
• Technical characteristics and specifications for the
co-operative business. Capital requirements for the co-operative business.
·
Sales plan and revenue expectations.
·
Projected operating costs and net revenue.
• Financial plan for the co-operative business – including
the member equity contribution.
A study that does not encompass all of the above is not a
genuine feasibility study and should not be called a feasibility study. Any
“feasibility” analysis and conclusion, therefore, is political - rather than
economic. Otherwise, decisions based on bogus “feasibility” studies have little
economic merit.
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Issue Good
Feasibility Bad
Feasibility |
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Business Options |
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Clear analysis of the
character, benefits and limitations of each option e.g. ownership control and
ownership obligations. |
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Imprecise and selective
analysis of the options and a selective analysis of benefits and limitations
for each option. |
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Co-operative Risks A clear analysis of the risks An emphasis of business Co-operative of the co- risks
and a denial of or operative option Risks and limited analysis of the co how these impact on the operative risks e.g. active business option. membership
and member equity. |
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Business Risk analysis A clear analysis of the A selective and superficial Business business risks for analysis of the business each Risk analysis
option. risks
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The differences between a good and
bad feasibility study can be illustrated by these examples:
There are, then, two key issues to be understood by any
co-operative:
What is the
purpose and nature of a feasibility study?
Do those undertaking
the feasibility study understand its purpose and nature? What is a co-operative
feasibility study?
www.australia.coop/e %20feasibility
study.htm
Fiduciary
Duty
This requires that directors acting in good faith
honestly, exercise reasonable care and skill, act in the best interests of the
co-operative and understand their fiduciary
responsibilities.
Financial Control See Financial Management.
Financial Management
Financial management is the
effective deployment of resources (cash, labour and
materials) expressed in money terms. Financial management is how a co-operative
analyses and interprets its financial statements.
Financial Participation
Refers to practices that provide
financial incentives and rewards for employees e.g. profit sharing,
productivity sharing and employee share ownership.
Financial Planning
The process of
evaluating financing and investing opportunities for a co-operative including
consideration pf future performance and financial consequences.
Financial Ratio.
The process of
dividing one financial statement item by another. Ratios focus on specific
relationships.
Financial Records
Keeping records of business transactions serves basic
purposes – how much is owed from customers and for how long, how much is owed
to suppliers, identify GST owed, record stock, identify what is selling and
what is not and identify current and future cash flow situation.
Financial Reporting Standards
The standards imposed by
legislation and accounting bodies on what financial records should be
maintained and what should be shown in account statements.
Financial Reports
The purpose of financial reports is
to generate information for decision-making by members of a co-operative and by
interested parties external to the cooperative. The board should receive
financial reports on a regular basis that are understandable, accurate and
timely. These financial reports need to compare the results for the year to
date compared with budget and the previous year. Financial reports are critical
if directors are to measure and monitor the co-operative’s progress and
achievements. It is critical for the board to insist on regular financial
reports to monitor and determine the co-operative’s financial health. SEE
Balance Sheet and Profit and Loss Accounts.
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Financial Year
The financial year of the
co-operative as provided in the Rules and consistent with co-operative
legislation.
Fixed Assets
The purchase of things you mean to keep and use for a
long time.
Fixed Capital
Fixed
capital is the funds that are invested in buildings and equipment such as
equipment, furniture and vehicles.
Fixed Costs/ Expenses
Fixed costs are those costs that are incurred whether
or not the co-operative does any business. These could include rent, insurance
and interest on capital.
Forecasting
Predicting how many units of service or product will be
sold over a period of time and at what cost to the co-operative.
Formation meeting
The foundation meeting of a co-operative. SEE Co-operative Formation.Cooperative
formation resources www.australia.coop/cooperative formation.htm
Free Riders
Free riders are members or directors who contribute
nothing or very little to a cooperative and/or the board and benefit
from the contributions of others. This creates
a
free rider problem.
Friendly societies
Formed from the mid 19th C to provide sickness, medical
and death benefits for members and their families. Today friendly societies in
G
Gearing
The debt/equity ratio of a
co-operative.
General Manager SEE Manager
Gilmore, Mary Jean (1865-1962)
Authorand journalist. Between 1895-1898 was a
member of the New
Goals
The co-operative's vision and mission - what the
co-operative wants to achieve by going in what direction.
Good Faith
Refers to the duty of directors to act in good faith. A director is required to act for the benefit of the
co-operative and not harm the co-operative to further the individual interests
of individual directors. Directors must not be in a position where their duties
as a director and their individual interests do not conflict. Disclosure of interest by individual
directors are critical.
Good Will
An intangible that enables a business to operate beyond
the normal or basic rate of profit earned by similar businesses. The factors contributing to this could include:
co-operative values and principles; the reputation of the co-operative; member
involvement and satisfaction; the quality of the co-operative's products and
services; the quality of employer and employee relationships.
Grievance procedures
The Rules of a co-operative must set out grievance
procedures for dealing with any disputes between a member and another member or
a member and the cooperative.
Gross Income
The sales income of a co-operative
before expenses, depreciation and taxation.
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History
Co-operative history is the history of co-operation and
co-operatives. The importance of co-operatives knowing about their own history
for this has shaped their identity. REFER Resource 5 Co-operative History
Resource Book CoopAdvantage Developing Directors of
Co-operatives, Co-operative Federation of
Honesty
SEE Fiduciary Duty
I
The peak body for co-operatives
throughout the world. The
The
Idea Decision
An decision about an idea without
specifying specific action.
Independent Directors
Co-operatives have the option of recommending
to general meetings the appointment of independent directors if this is
provided for in the Rules of the cooperative. The benefits and limitations of
having independent directors needs to be carefully
considered. A benefit of independent directors is to provide the cooperative
with expertise and qualifications that are not otherwise available within the
co-operative’s membership. While independent directors are independent of the
co-operative in not being members, this does not mean that their views are
independent. SEE Directors REFER The Board Koinzan, Steven D The Role of Outside Directors, National
Council of Farmers Co-operatives NICE Conference,
July 2000 and Peterson, H. Chris The Role of Outside Directors, National Council of Farmers Co-operatives
NICE Conference, July 2000
Interest Cover
A ratio to assess
whether a co-operative has the ability to repay its loan commitment.
Internal Environment
Describes the internal environment
of the co-operative e.g. workplace processes, the management culture, the
industrial relations culture and the commitment to cooperative values and
principles. The internal environment can be controlled by the co-operative.
Industrial Relations
The relations between co-operative
management and the workforce in a cooperative including relevant trade unions.
Insurance
Insurance is the payment of an agreed amount to an insurer
who undertakes to make payments if certain events occur. Board needs to ensure
that there is adequate liability insurance to cover board members and staff.
Internal Controls
Internal controls refer to those
policies and procedures implemented by a cooperative to safeguard assets, to
deter and/or detect fraud or other irregularities, facilitate efficient and
effective operations and ensure events and transactions are properly recorded
and accounted for. Internal controls are important to ensure the co-operative
complies with statutory and regulatory requirements. Internal control
procedures would include each cheque requiring two
authorized signatures, approval of overtime by a supervisor and daily cash
register counts. The board and management should regularly review internal
control systems.
International Co-operatives
Co-operatives that operate on an
international basis with operations and/or trading in more than one country.
Inventory
Manufactured
available stock that has not been sold.
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Investor Owned Companies
The primary owned characteristic of an investor-owned
company is investor ownership. The primary purpose is to make a profit for its
investors.
ILO
International Labour
Organization www.ilo.org
Investments
Things which gain
value or earn income.
Issue-based
participation
Refers to management involving
employees in decision-making in particular issues e.g. tecvhnological
change, occupational health and safety and equal employment
opportunity.
J
Joint Consultation
Refers to
management of a co-operative seeking the views opf
employees and taking these into account in making decisions.
Joint Venture
An association of two or more participants
carrying on a specific economic operation, enterprise or venture.
K
Kaqgawa, Toyohiko
(1888-1960)
Educator, social
reformer, labor organiser, co-operative leader and
author.
Key performance
indicators
These are developed to enable a co-operative to
realistically measure its performance. KPI’s could
include employee turnover, absentee records, performance reviews, profitability
ratios, liquidity ratios, solvency ratios and grievance reports.
Kibbutz
Name for
collective agricultural and/or industrial settlements in
L
Lane, William (1861-1917)
Socialist and journalist. Founder of the New Australia and Cosme utopian settlements in
Leasing
A co-operative taking out a lease (the
lessee) pays a number of instalments over an agreed
period of time to the financier (the lessor) who
retains ownership of the asset e.g. printer, photocopier and motor vehicle.
Legislation
Co-operative legislation is
critical to defining and protecting the co-operative difference. REFER Session
1 The Big Picture and Resource Book Resource 2
Co-operation Act in Co-opAdvantage Developing
Directors of Co-operatives, Cooperative Federation of
LETS
Refers to Local Exchange Trading Schemes – community
networks where individuals and organizations exchange goods and services
without the use of money.
Leverage Ration
A measurement of
a co-operative’s outstanding debt relative to its equity. It is also known as the
debt=to-equity ratio.
Liabilities
Refers to the
amounts arising from past transactions which the co-operative is obliged to pay
eventually e.g. employee entitlements such as accrued annual, longservice and sick leave, bank loans, payable taxation,
bank overdraft and accounts payable to creditors.
Liquid assets
Cash and property
that can be quickly and easily converted into cash.
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Liquidity
The total value of assets that are readily convertible to cash.
Local Co-operatives
Co-operatives that operate in a
defined geographical area serving a local community.
Load Management
Describes how a co-operative seeks to control its usage of
energy. Load management may be in liason with energy
suppliers.
Lodgement of Annual Report
The legislative requirements for
lodging copies of the annual reports of co-operatives with the Government.
M
Management
A decision-making role in a
co-operative – directing operational policies and practices.
Management contracts
The board should develop a
contractual agreement with the manager and specify how performance management will
apply to the contract. A critical issue for management contracts is management
compensation.
Manager
The manager is appointed by and accountable to the board.
The manager is responsible for defining operational or management level
objectives goals and policies, selection of employees and preparation of
budgets. Managers of cooperatives need to recognize that there is no
distinction between the co-operative “business” and the co-operative’s
“values”. Management in a co-operative must be subordinate to co-operative
values. If this does not occur, then, it is unlikely that there will be a
distinct co-operative management. If co-operatives use management methods and
techniques inconsistent with co-operative values, then, they will undermine the
co-operative purpose. Without this understanding and insistence, the
co-operative board and management will assume the desirability and necessity of
profit maximization and adhere to
conventional management. Managers must learn to accept that a board may make a
decision that varies from the recommendation of a manager because the board was
not persuaded by the manager’s reasoning. Board decisions must be supported
irrespective of any reservations the manager may have about those decisions.
The manager must support the decision as if it was his or her own. The manager
must be able and willing to provide information and recommendations that enable
the board to make an informed choice and decision – and not manipulate the
board decision through selective reporting.
Manager Appointments
Formal letters of appoointment
should be given to managers or CEO’s. These letters should include the term of
appointment, the powers and duties of the manager, remuneration and expenses,
superannuation arrangements, indemnity and insurance arrangements, continuing
co-operative education arrangements and the protection of co-operative values
and principles.
Manager recruitment
A co-operative’s manager must have the technical skills
necessary for an effective management style. For a co-operative, however,
co-operative governance, cooperative business issues and organizational styles
are also critical factors. A manager of a co-operative must be willing to not
only work with members but enjoy working with members. Sometimes, co-operatives
and their boards perceived the co-operative to be in a “turn around” situation
and are tempted, therefore, to commit themselves to recruiting outside the
co-operative and, indeed, from outside the co-operative movement. An outsider,
however, may have an adverse impact on the existing co-operative culture and
management. The issue about internal candidates, however, is that they do not
have the broad and general management experience of outside managers. The board
has to be clear and confident that it can find the right person. If the board
is not confident, then, it should get assistance from a recruitment specialist.
It is important, however, that the recruitment specialist understand the
co-operative’s needs and priorities. Key ingredients for a CEO/Manager interview:
a previous CEO/Manager should not be involved; questions that cannot be
answered with a yes or no;encouraging
applicants to use their own knowledge in responses and questions about “what
if”
Managerialism
The threat of managerialism has
been identified within the co-operative movement as the process of managers
within co-operatives undermining co-operative values and
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principles by using their knowledge and power
to promote and facilitate privatization and demutualization and their own
enrichment. SEE Managers
Marketing
Marketing is getting the right goods or services in the right
quantity to the right place at the right time profitably. Marketing needs to be
based on what factors that could influence a customer to buy a product or
service. Issues relevant to the consumer could include – price of the good or
service, the quality of the good or service, the way in which a product or
service is provided and follow-up service provided to purchasers of goods or
services. The marketing of a co-operative should not only be based on the
co-operative’s products and/or services but also on the nature of the
co-operative itself. SEE Marketing Our Co-operative Advantage
Marketing Contracts
An agreement
between a member and a co-operative to market the member’s products through the
co-operative.
Co-operatives and members have a built-in interest in the success of marketing
contracts. It is important, therefore, to give consideration to the design of
marketing contracts and what is appropriate will depend on the specific
co-operative. A marketing agreement should contain all the general rights and
obligations of members and the co-operative including
- delivery
obligations of the member, warranties as to quality, service guarantees. accommodating all members fairly, well-defined payment
arrangements, method of calculating payments. duration
and termination provisions. defaults and remedies and
dispute resolution
Marketing Our Co-operative Advantage
Marketring Our Co-operative Advantage is
based on co-operatives identifying their competitive advantages because they
are co-operatives and marketing the advantage of doing business with a
co-operative. The concept has been popularized by Tom Webb of Global
Co-operation Consulting. Marketing Our Co-operative Advantage (MOCA) is based
on a belief that there is an enormous opportunity to be had by co-operatives if
their marketing reflected their pride, not only in the particular products and
services they sell, but in who they are as co-operatives. In any transaction to
meet our needs, the transaction should be different if it is based on
co-operation. Marketing is no different. The co-operative nature of the
transaction is its strongest value added. Co-operative marketing programs based
on marketing
the co-operative advantage are the “hi Neighbour”
campaign of Cabot Creamery Co-operative, Touchstone Energy - The Power of Human
Connections of electric cooperatives and America’s Credit Unionse
People are Worth more than Money.
Marketing Environment
A co-operative exists in a
marketing environment - demographic, economic, technological, natural, political,
legal, cultural and competitive.
Marketing Plan
A marketing plan is a core component of a business plan.
The marketing plan covers what products and services will be provided by the
co-operative and whether there is a market for these products and services.
This includes having the right proiduct in the right
place promoting to the right people at the right time at the right price.
Market Promotion
Activities concerned with promoting
sales including personal selling, exhibitions, trade shows, advertising and
sponsorship.
Market Failure
Refers to the failure of the market
to either provide needed goods or provide goods that are unaffordable and not
accessible.
Market Forces
The forces of
supply and demand that determine what happens in the market.
Market Research
Market research is used by
co-operatives to gather an analyze the market in which
a co-operative is or plans to provide goods and services. Market research
enables a co-operative to identify the potential demand for a product, who
might buy the product or services, the possible preferences of the market that
could result in changing the products and/or services. Market research can be
of two kinds – secondary market research and primary market research. Secondary
market research is research that is compiled and analysed
from existing data. Primary market research is the collection of original
information and data e.g. through observation techniques, surveys and focus
group meetings.
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Market Segmentation
Market segmentation is breaking
down a market intoi groups and/or segments including
geographic, socio-economic, income, benefits sought, life style, usage and
brand loyalty.
Market Share
A co-operative’s or its products
portion of the total market for that product. The share of a
market held by a co-operative ands competing companies. The share
depends on the definition of the market.
Market Structure
The number of enterprises in a
market, the type of enterprises and their market share.
There needs to be planned efforts to maximize member
attendance at general meetings. Members need to be notified adequately in
advance of the time, date, place and purpose of general meetings. Members
should also be encouraged to raise questions and make comments at general
meetings. If members stop attending meetings and/or asking questions, it is
time to decide how to better inform and involve members. REFER Resource Book
Resource 17 Checklist for effective meetings Co-opAdvantage
Developing Directors of Co-operatives, Co-operative Federation of Victoria Ltd,
2001 and Tucker, Vincent Co-op Guides: Co-op Meetings, Center for Co-operative
Studies, University College of Cork, 1986
Mathews, Dr. Race
Politician and author who has
written extensively on co-operation: Jobs Of Our Own - Building a Stake-Holding
Society (1999), Australia’s First Fabians: Middle Class Radicals, Labour Activists and the Early Labour
Movement (1994), Employee Ownership: Mondragon’s
Lessons for Australia (1987) and Building the Society of Equals: Worker Co-operatives and
the ALP (1983.
Meetings – agendas
The agenda for meetings should be
circulated in advance of meetings to give participants adequate time to review
the agenda. The Agenda should include the title, date, time and place of the meeting;
minutes of theprevious meeting, matters
arising from the previous meeting, oither items to be iscussed and forr information or decision. For Annual and Special
General Meetings the Co-operatives Act specifies
Meetings – Annual
General Meeting
The AGM is the most important
meeting organized each year for members.
Meeting Chairperson
The Chairperson is responsible for starting meetings,
guiding the meeting through the agenda, summarising
any decisions made by the meeting as it goes through the agenda and ensuring agreeement on any action decisions, facilitating the
participation of all participants and making sure that there is a written
record of decisions. Facilitating participant involvewment
includes involving akk participants, encouraging
different views and perspectives and allowing extensive debate if warranted
that is focussed on the issue and making a decision
on an agreed course of action. The Chairperson has to facilitate discussion and
this includes dealing with typical difficulties such as someoine
who extends a discussion beyond the topic under discussion, someone who becomes
muddled and confusion about the issue and what they are saying about the issue,
swomeone rambles on, someone tends to make vague
suggestions that need to be clarified and someone persists in chatting to their
neighbour.
Meetings checklist
Was the meeting necessary? Was the
meeting useful? Are the meetings held at the righjt
frequency? Are the meetings length too short, too long
or about right? Do the appropriate people attend the meetings? Are the agendas
appropriate? Do the participants have the necessary information for informed
decision-making? Is the decision-making process effective and efficient? Is the
meeting room adequate? Is timekeeping satisfactory? How are interruptions and
distractions haqndled? Are refreshment arrangements
adequate?
Meetings – confirmation
Minutes of meetings are subject to
confirmation by subsequent meetings. A motion needs to be moved and seconded to
confirm the minutes by persons who were at the meeting. This is also the time
to propose any amendments to the minutes. Such amendments are to exclusively
focus on inaccuracies in the minutes and not re-debate the merits of an issue.
Minutes can accurately record a decision. An objection to the decision cannot
be the basis for an amendment.
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Meetings – decisions
Decisions are binding and remain in
force until they are formally rescinded. A
new board, therefore, does not have to
confirm the previous board’s decisions. In general, a decision-making process
should be based on an agreed course of action supported by at least a majority.
Geting to an informed decision includes agreement on
the issue or problem that is being examined, if appropriate separating the
issues or problems into categories and agreeing on a sequence for discussion,
identifying and providing known facts relevant to the issues and problems,
participants dioscussiong their interpretations of
the issues/problems and the facts, considering alternative courses of action,
deciding on a course of action and clkearly
identifying who is responsible for following-up the decision.
Meetings – dissent
Members, directors or committee
members overruled by the Chair have a right to request that their dissent is
recorded. Members, however, need to formally request the recording of this
dissent. Dissent does not have to be recorded unless it is formally requested.
Members are also entitled to have their opposition to a motion carried to be
recorded. In both instances a formal request needs to be made for recording
dissent.
Meetings – interruptions
Meetings can be interrupted for the
following purposes – raising a point of order, calling for a quorum, moving the
closure of the meeting, moving that a speaker no longer be heard and moving
that strangers be excluded. The Chair must respect these interruptions and make
a ruling or put the point of order to a vote whichever is applicable.
Meetings – notice of
Meeting notices should include the name of the
co-operative, the type of meeting to be held (e.g. board, annual general
meeting, special general meeting and committee meeting), the date, the time,
the place of the meeting and the business of the meeting including any motions
of which notice has to be given. Notices of meetings should be in plain English
and avoid legal archaisms and repetition and a structure and format that facilitates readability and understanding.
Meetings – procedures
Rules for the conduct of meetings are based on
facilitating adequate and fair participation and clear decision-making.
Meeting Reports
Reports presented to meetings for information and/or
decision should include the following common elements: issue and background -
an outline of the issue for discussion; options - the various options - their
costs and benefits; a recommendation for decision by the meeting.
Meetings – speaking
limits
These are designed to keep the length of meetings within
reasonable bounds. Usually the proposer of motions have a right to speak for the motion and again
before a vote is taken. The Rules of co-operatives should provide for these
speaking limits.
Member Equity
This is the risk capital contribution by members of the
co-operative. As a rule of thumb, however, member equity should finance at
least 50% of the operation of a co-operative. Member equity can be paid-up or
partially paid-up. The issue of equity is fundamental to member ownership and
control. SEE Member Expectations and Equity
Member Expectations
Member expectations of a co-operative must be based on
their use of the cooperative rather than a return on their investment in the
co-operative. If members expect a return on their investment, then, this
creates a basis for co-operative failure.
Members
Co-operatives are created for the
use and benefit of their members. Co-operatives are member driven - owned and
controlled by their members. Co-operatives need to be clear about why
co-operatives need members and what members want from their co-operative. A
primary interest for members is how they benefit from their membership.The
members are those persons or organizations who are eligible to be members
according to the rules of the co-operative. Members have obligations to their
co-operatives. These obligations vary from co-operative to co-operative but
they are based on active membership and include participation in co-operative
meetings, using the co-operative’s services, providing capital and exercising
their voting rights. REFER Session 1 The Big Picture Co-opAdvantage
Developing Directors of Co-operatives, Co-operative Federation of Victoria Ltd,
2001 and Part One What are members’ responsibilities? (p 10), How does a member
benefit from
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a co-operative? (p 10), How do members
make co-operatives work? (p 17) and Member Education (p 18) and Meyer, Tammy M
Understanding Co-operatives Who runs the co-operative
business? Members, USDA Co-operative Information Report 45, Section 4 October
1994, 4pp
Members – age
Co-operatives have the choice of determining in their
rules whether people under 18 can be members.
Member –
applications
Applications for membership are referred to each board.
Boards have a right to refuse membership. Co-operatives must have membership
application forms.
Member –
commitment
Membership commitment is critical to all co-operatives.
Declining member commitment is a concern expressed by many large and
long-established cooperatives. The key to retaining and restoring member
commitment is co-operatives continuously differentiating themselves from
investor-owned companies and ongoing member education and involvement.
Member –
consultation
Soliciting the views of members
about the co-operative including governance, policies, products and services.
Member – control SEE Democratic control
Member –
corporate
Co-operatives need to decide
whether the Rules will provide for body corporate members and decide whether to
impose any restrictions on the appointment of a
representatives by body corporates. REFER Co-operatives
Act Part 4 Membership Division 1 General
Member –
involvement
The ongoing involvement of members
is critical to the viability of a co-operative. Co-operatives need to develop
strategies and processes for member involvement. These could include surveys,
electronic feedback, in store feedback forms, focus
groups, workshops, information meetings,
delegate meetings, committees and task forces, member visits and presentations,
special mailings and social audit reports.SEE Active
Membership
Member – kits
Co-operatives have to have information for new and
potential members. A convenient and organized way to achieve this is through
the development and provision of a membership kit. Membership kits should be
prepared for forwarding and providing to potential members. The kit could
include a brochure about the advantages of membership, a membership application
form, a list of recent activities, a list of future activities, a copy of the
Rules and a copy of the last annual report. Potential members also need to be
advised of any financial obligations of membership.
Member – number
Co-operatives are required to have
a minimum number of members. Co-operatives need to ensure that they maintain
the minimum membership level. Co-operatives are guilty of offences if they
carry on business if the membership has been reduced beyond this minimum
number.
Member – obligations
Members have obligations towards their co-operative – use
the co-operative, provide capital necessary for the co-operative’s operations,
participate in general meetings of the co-operative, participate in selecting
and evaluating directors and being informed about the co-operative. SEE Member
Rights and Member Commitment
Member – records
What information is contained in
membership files, right of members to access and copy.
SEE Privacy
Member Relations
The relationship between members
and their co-operative. A co-operative should empower its members by communicating effectively
with them, giving members access to understandable and balanced information and
facilitating member participation in meetings. This includes consideration of
the use of meetings, a newsletter, electronic communication and a web site. Does and how could the board encourage and provide for member
involvement in the co-operative. Does the board ensure that the
resources are available to promote for member involvement. Does
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management adequately inform the board of
member needs. Does the board have planned member contacts.
Member Retirement Funds
Retention of funds in proportion to
members level of trade. Funds are distributed when
member retires from the co-operative.
Member -
rights
These are the rights members have
as members of co-operatives – attend general meetings, elect the board, be
elected to the board, ask for a general meeting, see and receive copies of the
rules and the annual report and inspect their accounts with the co-operative.
The rights and responsibilities of members to participate in meetings should be
clearly communicated. Special interest groups in the cooperative should also
be given the opportunity to voice their opinions at general meetings. It is important
that members support their co-operative. Taking their ownership responsibility
seriously, however, also means being willing to ask tough questions and offer
their own ideas. SEE Member Obligations
Member Shares
The shares that a
member must take up to be a member. In a shareholding cooperative, members are required to
purchase a minimum number of shares.
Member -
subscriptions
For a co-operative with an annual subscription, it is unrealistic
to expect that members will automatically forward their subscription each year.
A notice should be forwarded to each member together with an invoice. It may
also be useful to include self-addressed envelopes with invoices. Unpaid
subscriptions need to be followedup and this could
include by telephone. Not following-up could give members the wrong impression
– that they are not important, that it is not a priority and that the
co-operative is inefficient.
Member –
surveys
Member surveys are a useful way of securing the views of
members. It is important, however, that surveys are statistically valid and
objective. The anonymity of surveys also allows members to comment when they
would not publicly.
Member –
termination and expulsion
The co-operative’s Rules must include provision for the
termination and expulsion of members.
Members and demutualisation
In considering proposals for the
demutualization of a co-operative members need to
satisfy themselves whether there are options to demutualization such as
structural and operational changes. The co-operative principles are central to
this consideration and the impact demutualisatrion
would have on user ownership, control and benefit.
Members – values
The co-operative needs to decide
whether or not to establish and maintain a wellrun
program to inform members of the advantages of the co-operative way of doing
business. SEE
Mergers
Boards may sometimes consider that merger with other
co-operatives is necessary. Withheld and/or inaccurate information will only
create controversy, anger and negative perceptions and suspicions. Members need
to be informed about why a merger is necessary, what it will achieve and how it
will impact on the co-operative.
Middle Way
Refers to co-operatives as a middle
way of enterprise organization and development as a middle way between public
and private ownership. SEE Social Economy
Minutes
Minutes of meetings are the permanent records of meetings.
They provide records of appointments and policy decisions. They provide documentary
evidence for audit purposes and inform members not able to attend meetings.
Minutes – accessibility
The accessibility of minutes depends on whether the
minutes are for a board, committee or general meeting.
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Minutes – accuracy
The
minutes of meetings are a permanent record that provide
documented evidence of decisions and appointments. This is why their accuracy
is important.
Minutes – and members
Minutes of
general meetings must be available for inspection by members. Cooperatives may
also distribute the minutes of general meetings to members. This is practical
for small co-operatives. Minutes of board and committee meetings may be
available for inspection if provided for in the Rules. REFER Co-operatives Act
1996 Part 8 Voting Division 4 Meetings
Minutes – confirmation
Minutes
are the permanent record of meetings. It is important, therefore, that minutes
are confirmed at subsequent meetings of the board, committee or members.
Minutes – content
Minutes of meetings should at a minimum record the date of
the meeting, the time of the meeting, location of meeting, name of chair, names
of those present and apologies, who chaired the meeting, any rulings made by the
chair, all motions including mover and seconded, the results of votes taken if
agreed, the names of any person abstaining, any decision taken on each proposal
and a list of reports and documents considered at the meetin
and the time, date and location of thenext meeting.
Minutes – declaration
of interests
Disclosure
of interests is a critical obligation for participants in meetings. Conflicts
of interest are inevitable and, therefore, conflicts are not a problem. What is
a problem, however, is if directors and managers do not declare, acknowledge
and respond appropriately to conflicts of interest.
Minutes of previous meetings
Subsequent meetings must confirm
the minutes of previous meetings.
Minutes – promptness
Minutes of meetings should be
prepared and distributed as soon as possible after board/committee meetings.
Minutes should be issued within days of meetings to provide quick feedback on
board/committee decisions at the meeting. The sooner minutes are prepared after
a meeting, the more likely the minutes will be
accurate.
The co-operative’s stated purpose and reason for being -
identifies the cooperative’s values and desired fture.
It addresses three issues - who the co-operative serves, whaqt
the co-operative provides and how this is provided.
Having established a mission
statement, it is important to be clear as to whether the mission statement is
appropriate for the organization and whether the policy decisions and services
reflect and/or reinforce the mission statement.
A clear statement of what a
co-operative hopes to become – a clear basis for the integration of
co-operative values and principles.
MOCA
Marketing Our Co-operative Advantage All co-operatives have
a responsibility to market their co-operative’s advantages – to contribute to
their member and public education by facilitating a understanding of
co-operatives as a familiar and credible model and raising and maintaining
awareness of the possibilities for co-operatives in their communities. The
marketing strength of co-operatives is their co-operativeness.
Motion
A motion is a proposal that is put
to a meeting for debate and decision. A motion should be specific and
unambiguous. It may incorporate an explanation as a preamble to the motion
itself. There are broadly two types of motion – a main or substantive motion
and a procedural motion. SEE Substantive Motion and Procedural Motion and
Resolution REFER
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Motion – rejection
The Chair can reject a motion or amendment that is
inconsistent with the Rules, disrespectful wording, substantially restating a
resolution and /or is the opposite of a resolution.
Mutualisation
Refers to the
increased use of mutual organization to provide services through the
establishment of new mutuals or the conversion of
public and private enterprises to mutual ownership. In the
Mutuals
A term used to describe businesses
owned and controlled by their members. In
N
• ational Catholic Rural Movement
Formed in 1939
with B.A. Santamaria as its Secretary. Publisher of
Rural Life.
• ational Co-operative Bank
A co-operative bank providing
banking services for co-operatives in the
• ational Co-operative Business Association
The National Cooperative Business
Association (NCBA) is the national peak body for co-operatives in the
U.S. 48,000 co-operatives and their
120 million members.
• ational Co-operatives
Co-operatives
that operate in more than one State. Bonlac Foods Limited is an
example of a national co-operative.
• ational Rural Electric Co-operative Association
The peak body for
electric co-operatives in the
• ational Rural Utilities Co-operative Finance
Corporation A
financing organisation for co-operative utilities in
the
• ational Telephone Co-operative Association
The peak body fror co-operative aand
independent telephone utilities in the
• egative cash flow
The situation when a co-operative’s
expenses are greater than its cash income.
• et income
Income left to a co-operative after
expenses, depreciation and taxes.
• et worth
The difference
between the liabilities and assets of a co-operative.
• ew Generation Co-operatives
Refers to a new form of
agricultural co-operative in
– closed membership, tradeable
equity shares linked to delivery rights and large upfront capital investment
by members. New generation co-operatives in the
Membership – the
right to vote and purchase equity shares.
Equity – allocates delivery rights to the co-operative and raises the capital
necessary for the co-operative.
Preferred – allows the co-operative
to involve investment from non-producers. Preferred shareholders generally do
not vote except in certain circumstances.
• ominal value of shares
Rules of a co-operative must state the nominal value of
shares that members may be required to purchase.
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·
on-trading
co-operatives
Co-operatives in
• ot-for-profit
A term used to describe businesses that do not distribute
profits but seek to generate a surplus.
· umber of directors
Co-operatives need to decide how many directors will
comprise their boards. In considering this the relevant issues include what
experience and skills are required on the board, what interests need to be
represented on the board and the complexity and size of the co-operative.
O
Objectives
The ends towards
which activity is aimed. Objectives are based on goals. They are short-term and practical -
identifying what needs to be done to reach a goal.
Open membership
Membership of co-operatives is open
to all persons who meet the qualifications as defined and detailed in the rules
of the co-operative.
Organisational Structure
A co-operative’s organizational structure should be
consistent with the co-operative’s mission and objectives. The organizational
structure should also clearly indicate the respective responsibilities of
members, the board and management. In particular, the organizational structure
should clearly indicate the scope and nature of member control. Members also
need to be aware of their responsibilities for approving changes in the
organizational structure and why changes are being proposed and their relevance
to co-operative growth and member benefit. Organisational
structures and charts need to be well document and defined so that everyone in the
co-operative can recognize the point of authority and decision. REFER Session 1
The Big Picture and Resources Book Resource 6 Business
Structures in CoopAdvantage Developing Directors of
Co-operatives
Outcome
The impacts of what a co-operative does e.g. improving
health services and providing affordable housing.
Output
What a co-perative
does e.g. provide health services and housing.
Overdraft
Describes
financial institution allowing a co-operative to spend more money than is in
their account.
Over-investment in fixed assets Perponderance of fixed assets.
Over-investment in receivables
Perponderance of debtors and receivables in
current assets.
Over-investment in stock
Low stock
turnover. Preponderance of stock in current assets.
Owen, Robert (1771-1858)
Established New
Lanark Mills and New Harmony settlemenmt in
P
Patronage-based capitalization
The co-operative decides how much
equity a member should invest based on their volume of business with the
co-operative. Needs member understanding and support. Links member use and investmernt.
Performance appraisal
Performance appraisal is a tool for assessing performance
of boards, managers and employees.
Performance Improvement
Performance Improvement is when the
board and the manager or the manager and employees work together to identify
opportunities for improving performance
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– specific
improvements, how these improvements will be measured, what training will be
provided and a timetable for achieving the improvements.
Performance – managers
There are various aspects that need to be considered in
appraising the performance of managers. Integral to this appraisal are the
aspects that reflect and reinforce cooperative philosophy and practices
e.g. using services of and involving
members on committees and programs, promoting adherence to co-operative
philosophy and values, maintaining effective relationships with co-operatives
and keeping in close contact with members to get their advice and support and
keep them informed and to improve their understanding of co-operative affairs.
REFER Rapp, Galen W. Appraising Manager Performance, USDA, Research Report 136,
1994
Performance plans
The plans established between a
board and a manager and managers and employees a statement of what is to be
achieved in an agreed time period, performance indicators for each objective,
the appropriate factors that will be considered in assessing each indicator and
the expected performance standards.
Performance reviews
Boards should be committed to continuous improvement –
assessing their individual skills and abilities and potential areas for
improvement and the performance of the board including its effectiveness and
efficiency. The essential elements for performance reviews are job
descriptions, standards of performance, evaluation forms and appraisal
interviews.
Planning
Planning is based on achieving a
co-operative’s goals and objectives and involves collecting information,
synthesizing the information, evaluating the information and developing a plan
of action with required resources and anticipated outcomes. Planning, however,
must be dynamic and not static.
Point of information
A point of information is raised at a meeting REFER
Renton, N.E. Guide For Meetings and Organisations
Volume 2 Meetings, The Law Book Company Limited, 1994
Point of order
A point of order is raised at a meeting about alleged
irregularities in the conduct of a meeting and requires the Chair to make a
ruling e.g. the absence of a quorum, that a speaker no longer be heard, that
strangers be excluded and that the meeting close. REFER
Policy
Policies are general statements or undertakings that guide
or channel the decisions of members. Policy is the responsibility of the members
and the board. The manager is responsible for carrying out the board’s
policies. The manager cannot set policy but his or her advice will assist the
board in the development of policy. Care needs to be taken that the manager
does not develop policy through default because of board neglect. Policy should
be reviewed periodically to ensure policy is being implemented by management
and changing conditions that might require policy changes. Policy has four
basic dimensions - formulation, determination, execution and control.
Policy making
A board needs to be wary of either
through its own default or management hijack surrendering policy making to the
manager.
Poptel
A
Postal ballots
Co-operative determine through
their Rules whether or not to allow for postal ballots. REFER Co-operatives Act
Schedule 1 Matters for which Rules must make provisions Co-operatives Act 1996
Schedule 3 Co-operatives Regulations 1997
Price
The amount charged and paid for a
good or service.
Price Discrimination
Charging
different prices to different customers.
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Pricing Strategy
There are three basic pricing strategies - cost plus,
competitor-based and what-themarket-will-bear.
Primary activity (is)
This is the primary activity or
activities of the co-operative. SEE Active Membership
Privacy
The Commonwealth Government’s
Privacy Act introduced new provisions which came into effect on 21 December
2001 and these apply to co-operatives whose turnover exceeds $3 million per
annum. The Act incorporates a set of National Privacy Principles relating to
the collection of personal information, its use and disclosure, data quality,
data security, access and correction, unique identifiers, anonymity, transborder data flows and sensitive information.
Information sheets are available from the Office of the Federal Privacy
Commissioner.
Procedural Motion
A procedural motion is directed at
the conduct of the meeting e.g. closure, proceeding to next meeting, refer the
motion to a committee, adjourn the meeting, tabling of a motion and time
limits. REFER
Producer Co-operatives
Co-operatives owned by producers of
farm commodities or crafts that join together to process and/or market their products.
Profit
The excess of
receipts over expenditure over any period.
Profit and Loss Accounts
A profit and loss account is a financial history of
trading that shows the sale and costs of goods or services provided by the co-operative.
This statement enables a co-operative to determine its profitability – how much
profit/loss was generated from the operations of the co-operative.
Profit Margin
How much a co-operative makes on the sale of its products.
Net profit margin isd net income
divided by net sales. Gross profit margin is gross profit divided by net
sales.
Profit Motive
The desire for
gain as a motive.
Proprietary limited company
A company registered with the
Australian Securities and Investment Commission. The companies must lodge
annual returns. It can be a one person business or have up to 50 non-employee
shareholders.
Proxies
A vote exercised by one person on
behalf of another person.A proxy is when a member
appoints another member to exercise a proxy on their behalf. A proxy is to be
exercised at the discretion of the proxy holder unless specified otherwise.
Public companies
Public companies can have any
number of shareholders and can raise funds by offering shares to the public. It
has to have at least three directors.
Public Interest
Refers to the
good of the general public as opposed to the good of individuals and
enterprises.
Public Relations
A planned program
by a co-operative to promote its services and values. Cooperative
public relations needs to be based on the co-operative difference.SEE Marketing Our Co-operative Advantage.
Purchasing Co-operatives
Associations of
individuals, organisations and businesses who join
together to enhance their individual purchasing power.
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Q
Quadragesimo Anno
The Reconstruction of the Social
Order - Pope Pius X1 1931 encyclical letter on social issues and reconstructing
the social order that infliuenced the Antigonish and YCW Co-operative Movements.
Quality Control
A system for
checking the quality of products, services and procedures.
Quorum
This is the number of directors or members
that need to be present at a meeting
so that business can be legally
transacted at a meeting and decisions made. The rules provide for quorum
numbers. Minimum quorum numbers are provided for in legislation. In the absence
of a quorum, an informal meeting can be held and it has no constitutional
standing. Decisions made at the meeting would need to be ratified to become
valid.
R
Regional Co-operatives
A co-operative
serving a defined region incorporating local communities.
Registered Office
All co-operatives are required to establish a registered
office where the registers of the co-operative are lodged and maintained. If
changing the registered office, the Registrar must be given written notice
within the required time period.
Registers
Each co-operative has to maintain a series of Registers -
members, directors, shhares, loans to, securities
given by, debentures issued by and deposits received, names of persons who have
given loans or deposits to or hold securities or debentures, loans made by or guaranteed
by the co-operative, memberships cancelled and notifiable
interests.
Registration
Registration is basically the
recording of the name, purpose and rules of a
co-operative in a register. This register can
be consulted by anyone. Co-operatives have to register in Victoria.A
registered co-operative means that anyone can consult the register to know the
nature of the co-operative as a legal person.
Registry of Co-operatives
The State Government body responsible for registering and
monitoring co-operatives as required under co-operative legislation.
Reports
Reports for directors or members
should be sufficient to enable directors or members to exercise control at
board or general meetings. What is critical to this process is a board
determining what information it needs to meet its obligations as a board. At a
minimum this involves the board is fully informed of the co-operative’s state
of affairs and the board is satisfied that internal control systems are
adequate. All reports should basically provide a background to the issue, the
findings, the options and a proposal with anticipated costs including
time/dollar costs. Key questions about reports include is the report
dependable, how do we know that it is reliable, can we get more information and
are other figures available.
Reports – correspondence
At a minimum correspondence reports
should provide date of letter received, date when letter received, author of
letter, subject matter of letter, whether a reply has been sent and when and whether
any other action undertaken or to be undertaken as a result of the
correspondence.
Rerum Novarum
The Condition of Labor - Pope Leo X111 1891 encyclical
letter about the condition of labor that influenced the Antigonish
and YCW Co-operative Movements.
Reserve funds
Reserves are the most important
part of the capital resources of a co-operative. Reserves are a cheap form of
capital because the co-operative pays no interest.
Resolution
A resolution is a formal determination of a meeting – a
motion that has been passed. REFER
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Retained Earnings
Refers to the
income that is surplus to costs and is retained at the end of a financial year.
Retained Patronage Refunds
Part of the profits to members is paid
in ordinary shares usually based on patronage.
Revenues
Refers to
increases in assets or decreases in liabilities resulting from operating
activities.
Examples of revenue include donations, grants, bank interest and sales.
Risk
The amount of uncertainty involved in any action – the
variance of possible options. A co-operative has to identify, assess and
monitor risk. A risk profile should be prepared to identify the financbial and non-financial risks for the co-operative.
The co-operative will also need to ensure that it has an adequate risk
management system. REFER Session 2 Getting Down To
Essentials and Resource Book Resource 15 Risk Rating Checklist in Co-opAdvantage Developing Directors of Co-operatives
Risk Aversive
Minimising the risk involved in decisions and
projects.
Risk Capital
Investing capital in new and
untried projects where there is a chance that the capital could be lost.
Risk Management
Risk management is about the need for a co-operative to
ensure that it has the policy and processes necessary to identify, assess and
respond to risk within the cooperative e.g. capital adequacy, compliance risk,
data risk, credit risk, regulatory risk and market exposure.
Established a model for retail
co-operation in
Rules
These govern the actions of the co-operative and are
registered with the government.
Rules – alteration
Alterations to the Rules of co-operative must be approved
by members at a general meeting. Proposed alterations must be approved by the
Registrar before the general meeting. The exception to this is an alteration
passed by the board of the cooperative to give effect to a requirement,
restriction or prohibition imposed under the authority of the Act. REFER
Co-operatives Act 1996
Rural Life
Magazine of the National Catholic
Rural Movement in
S
Santamaria, Bartholomew Augustine
(1915-98)
Catholic
intellectual andwriter who advocated religious andfamily values. Created the Catholic Social Studies
Movement and the National Civic Council. Foundation
Secretary of the National Catholic Rural Movement which advocated co-operation.
Secret Ballot
A system of voting that does not
reveal how anyone voted.
Secretary
All co-operatives have a Secretary.
The Secretary is responsible for preparing agenda and minutes for all board and
other meetings, maintain the registers of the co-operative, sending meeting
notices to directors and members, have custody of the seal of the co-operative,
be familiar with the rules of the co-operative and be responsible for
correspondence. In cases where a co-operative does not employ an Executive
Officer the Secretary commonly carries out those duties normally considered to
be the EO’s responsibility.
Security
Banks usually prefer to lend on
assets rather than cash flow.
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Self-Management
Refers to a business that is controlled
and operated by its employees e.g. worker co-operatives.
Shares
The share capital of co-operatives varies according to the
nominal value of shares. The share capital of a co-operative is fixed in value
as specified in the Rules of the co-operative. The shares may be fully or
partially paid up. If shares are not fully paid up, then, the co-operative has
a readily available source of capital to call on if required. If not fully
paid-up, at least 10% of the share capital has to be paid-up. A co-operative
may have more than one class of shares provided it complies with the
co-operative principles. If authorized by the Rules, members may be required to
take up additional shares. The importance of share capital to a co-operative
depends on the nature of a co-operative and its size and capital-raising
requirements. Cooperatives with shares need to address the issues of bonus
shares, cancellation, purchase and repayment.
Social Aims
Refers to
businesses that have social aims e, g. employment of people with disabilities
and community development. The importance of social aims to a business varies and
depends on the nature of the business and there is debate about the centrality
and/or marginality of social aims. Social aims are central to cooperatives.
Social Audit
A method for examining, measuring and reporting on social
and ethical performance.Social audit refers to the
practice of a business reporting on their policies and actions that socially,
economically and politically impact on society apart from their primary
business. A social audit is a tool for a co-operative to examine its mission,
objects, policies and values.
Social Capital
Refers to the social capital of a communities – the networks of individuals,
organizations and institutions that enable collective action. Co-operatives are
an organized form of social capital. This is not always recognised
by analysts of social capital.
Social Cohesion
The sharing of a sense of common
purpose and of working for a common good while acknowledging and respecting
difference and diversity. Co-operatives depend on social cohesion for their formation and
development.
Social Economy See The
Social Enterprises
Describes types
of business that utilized commercial businesses to serve a social purpose –
combining business efficiency and success with social aims. Ownership and control models
differ. Social enterprises are not to be confused as an extension of the
voluntary sector. Social enterprises aim to be self-sufficient and not grant
dependant. The term includes co-operatives.
Social Entrepreneur
A term used to describe the
initiators and managers of social enterprises. The term can also be broadly
defined as a leader for social change.
Social Ownership
Describes
ownership and control of business based on community rather than investor
ownership – ownership by society rather than investors. The term has been broadly applied,
however, and includes co-operatives and public enterprises.
Spence, Catherine Helen (1825-1910)
Activist for female suffrage,
welfare reform, proportional representation and cooperation. Authored five
novels and two other books.
Stakeholders
Anyone who has a stake in an
enterprise such as a co-operative. Individuals, groups, organizations and
communities that have a particular interest in a co-operative e.g. the workers
who are employed, the community in which the co-operative is located, the
members who supply the co-operative and the customers who purchase from the co-operative.
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Standing Orders
Standing Orders are the rules and regulations
of the board, committee and general meetings of the co-operative. REFER
Start-up capital
The amount of money, resources and property that a
co-operative needs to support it until sufficient income is generated to cover
costs.
Statewide Co-operatives
Co-operatives that operate throughout a State in more than
one region.Co-operative Purchasing Services Ltd is an example of a co-operative that is a statewide cooperative.
Strategic Alliances
One way for a co-operative to achieve its objectives is to
form a strategic alliance with another co-operative or an investor-owned
company. A strategic alliance is an association between people or organizations
that has mutual benefits for both parties. The reasons for forming a strategic
alliance could include access to capital, markets, processing and expertise.
Strategic Plan
Strategic planning is a long-term step-by-step process to use
assets through longterm planning and development. It
differs from short-term or annual planning. Key content of a strategic plan
process are vision, mission statement, external factors, internal factors, strategic
options, choose directions, goals and action. The strategic plan is a series of tasks, who is
responsible for the tasks and when the tasks are to be completed. The board
needs to adopt a strategic plan. While not essential for very small
co-operatives, strategic plans are an important planning tool. Strategic plans
guide management and the board. If there is a strategic plan, this needs to be
reviewed and updated on a regular basis. Strategic plans will need to change
over time to protect and develop the co-operative’s position in the marketplace
and subsequently communicate the rationale to members. REFER Resource 14
Planners Checklist Book Co-opAdvantage Developing
Directors of Co-operatives, Cooperative Federation of
Subordinated Debt
A loan or security that ranks below
other loans and securities in any claims on assets or earnings. Lenders regard it as riskier
because it is subordinated and, therefore, it is usually expensive.