A New Era for Co-ops and the Implications for Co-op Legislation

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    This document has been made available in electronic format
         by the International Co-operative Alliance ICA 
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                         June, 1995

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          A New Era for Co-ops and the Implications
                    for Co-op Legislation
             (with Focus on European Union and
                    Developing Countries)
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                    by Hans-H. Muenkner*


Introduction

Is there a new era for co-operatives, as the topic given to me
implies? Does this topic refer to changes which have already
occurred or those expected after the revision of the
Co-operative Principles of the ICA in 1995?

Already now a new era for co-operatives has started in the
former socialist countries with the reorientation of the
Marxist-Leninist model of State- and party-controlled
co-operatives serving as transmission belts for the
dissemination of socialist ideology, for the transformation of
private property of means of production into co-operative
property and working within a centrally planned economy, to
private autonomous co-operative societies operating in a
market economy.

Also in the developing countries, a new era for co-operatives
has begun with the implementation of structural adjustment
programmes, which aim at cutting down government expenditure
by reducing Government's involvement in economic affairs,
dissolving government structures like para-statal trading
organizations and marketing boards and trimming down staff of
government services. All this has direct effects on the work
of co-operatives and is seen by some as a chance for, by
others as a threat to co-operative development.

The question of whether there will be a new era in the EU
countries is more difficult to answer. It appears that
co-operatives in Western Europe have come to a crossroad,
where the decision has to be taken whether to proceed with the
trend to view co-operative societies mainly as co-operative
enterprises, largely emancipated from their membership base
and to assimilate co-operative enterprises progressively to
the company model, or whether to break this trend and to
stress the typical features of co-operative societies,
emphasizing their character as self-help organizations,
belonging to and patronized by their members, organized in an
association which owns and controls the co-operative
enterprise.

The advocates of the trend to assimilate co-operatives to
companies claim that co-operatives adhering to historic
co-operative principles cannot survive competition in the open
market. Those propagating a stronger co-operative profile
distinguishing co-operatives and their enterprises more
clearly from the company model claim that in order to survive,
co-operatives have to develop their own strategies, fight with
their own weapons and use their membership base as a source of
strength. It is hoped that the revision of the Co-operative
Principles of the ICA will give co-operatives a stronger
profile of their own and guidelines for their development.

In the following, it will be discussed what are the prospects
of co-operatives in the EU countries to enter a new era of
their development, what will be the chances of co-operatives
in the developing countries to survive in the new environment
created by structural adjustment and what will be the
implications for co-operative legislation.

Co-operative Legislation in EU-Countries

Before starting the discussion, it is necessary to point out
that the co-operative movements in the EU-countries are very
diverse, that they have different historical roots, operate in
different social, economic, legal and political settings and
that, accordingly, general statements valid for all
co-operatives cannot be made1. The trends described in this
part of the paper refer mainly to large co-operative societies
(both in terms of membership and volume of business) serving a
broad spectrum of members (e.g. co-operative banks, consumer
co-operatives), while smaller co-operatives or those serving a
clearly defined group of members (e.g. farmers', craftsmens',
retail traders' co-operatives) follow these trends to a lesser
degree or not at all.

There are countries having a general co-operative legislation
for all types of co-operatives (e.g.Germany, Austria, Spain)
leaving co-operative societies with a great margin of autonomy
to make by-laws suitable to their needs, while other countries
have detailed legislation for each type of co-operative
society (e.g. France) and still others have no co-operative
legislation at all (e.g. Denmark).

Trends in Co-operative Development 

In the EU countries the trends are:

-    to form larger co-operatives at primary level by
     amalgamation,

-    to strengthen the position of the board of directors by
     giving directors more autonomy to manage the co-operative
     enterprises (thereby reducing the influence of the
     members on business policy),

-    to improve the professional qualification of board
     members by recruiting external professionals to serve as
     directors on the board,

-    to strengthen and stabilize the capital base of the
     co-operative enterprises (although the share capital of
     co-operatives is by definition variable),

-    to broaden the economic basis for co-operative
     enterprises by carrying on business not only with members
     but also with non-members.

In the case of credit co-operatives turned into co-operative
banks these trends are reinforced by banking regulations,
requiring co-operative banks to comply with the law governing
all banks, whereas credit unions, which are savings and credit
co-operatives working deliberately outside the banking law,
have to comply with typical co-operative limitations, (e.g.
limitations of size of membership and of business with
non-members) and have their own law and their own supervisory
authority2.

Effects of These Trends on Co-op  Legislation

The trend to amalgamate into larger units is favoured by
amendments of the co-operative legislation (e.g. in Germany,
provisions simplifying and facilitating amalgamation by
transfer  and allowing amalgamation of two or more
amalgamating societies to form a new one3.

The existing system of vertical integration, created to enable
small, locally- rooted co-operatives, working close to their
members and in a size of business within reach of their
members, to benefit from being part of a large and powerful
network, becomes less important for the large societies, but
cannot be financed exclusively by the smaller and weaker
societies.

The trend to strengthen the position of the board of directors
by increasing its autonomy vis-a-vis the members in general
meeting is partly caused by the trend to create larger
societies, partly due to the fact that co-operatives are no
longer working in niches where they alone offer services to
their members, but in an open market, where commercial firms
are offering the same services to customers (including
co-operators) as the co-operative enterprises (e.g. small
loans and other banking services for low-income groups,
consumer goods of good quality at a reasonable price).

In German co-operative law, the powers of the board of
directors are described with the same words as the powers of
the board of a company:

"The board shall direct the affairs of the co-operative
society in its own responsibility, it is bound to respect the
provisions of the law and of the by-laws"4. An earlier
provision requiring the board also to respect decisions of the
general meeting was deleted in 1973.

Greater autonomy of the board of directors can only be
achieved by limiting the powers of the members in general
meeting, for whom the co-operative law usually provides for
the following key powers which cannot be removed or delegated:

-    to make and amend by-laws,


-    to decide on the annual returns and the distribution of
     surplus at the end of the financial year,

-    to remove office-holders from office,

-    to decide on amalgamation, division and dissolution of
     the society.

Another power of the members usually to be found in this list
is to elect the board of directors. This power is also
contained in the German Co-operative Societies Act (section 24
II) but may be delegated, e.g., to the supervisory committee,
which is usually done.

In other words, the members remain in control of the basic
financial matters of their co-operative, if they are
sufficiently informed and qualified to make their own
well-founded judgement rather than rely on what is proposed by
the board - which is usually not the case, especially in large
societies.

This leads to another trend to recruit professional managers
to serve on the boards of co-operatives from outside the
membership group. Where the co-operative law prescribes that
only members can serve on the board (e.g. section 9 II of the
German Co-operative Societies Act) they have to become members
in order to be eligible for service on the board, without
being "genuine" representatives of members' interests, as the
lawmakers intended to achieve by this provision. In other
countries like Belgium, the Netherlands and the United Kingdom
it is left to the by-laws of each society to make such
provisions.

A combination of external professionals and honorary member
representatives on the board and an appropriate division of
tasks between them would combine the advantages of the two
approaches.

Where only professionals are serving on the board, e.g. in
many German co-operative banks (meeting a requirement of the
Banking Act, KWG), the members' interests are given priority
at the board level only, if the professionals so decide. 

This means that the economic requirements of the co-operative
enterprise (institutional efficiency) usually rank before and
are seen as a precondition for member-promotion. This may lead
to an "emancipation" of the co-operative enterprise from the
co-operative group and in the last analysis to a detachment of
the co-operative enterprise from its membership base.

Once the election of professionals is legally permitted and
has taken place, such development towards co-operatives
without co-operators cannot be prevented by law, but only by
the attitude and co-operative spirit of the professional board
members. This underlines the importance of co-operative
education and training of co-operative managers on top of
ordinary management training.
Growth of the co-operative enterprise usually goes together
with an increased demand of capital to finance the growing
co-operative enterprises, and to invest in the most advanced
technology. To reach or maintain high market shares may
require more capital than the members are able or willing to
provide in terms of share capital, member loans, deferred
payment of patronage refund or reinvestment of undistributed
surplus.

In this case, the "classical" provisions contained in
co-operative legislation to ascertain that capital plays a
limited role in co-operatives, namely:

-    shares to be held by members only,
-    combination of share contributions with members'
     additional limited or unlimited liability for debts of
     the co-operative society,

-    limited transferability of shares,

-    refund of share contributions upon withdrawal at par
     value,

-    indivisibility of reserves,

-    limited return on paid-up share capital,

-    restrictions on investment of the funds of co-operative
     societies for the purpose of capital gains are seen as
     obstacles in the way of co-operative development in terms
     of growth and market shares.
Several measures have been taken by the European lawmakers
acting on the initiative of co-operative apex organizations,
to give co-operative enterprises better access to more sources
of capital, without turning the co-operative society into a
joint stock company (an almost impossible task).

One method used for this purpose is to make co-operative share
capital more attractive by:


-    detaching the shares from additional personal liability
     of the members,

-    allowing to offer a stabilized dividend on paid up-share
     capital (similar to interest but still being a kind of
     dividend)5,

-    making individual shares in excess of the minimum
     shareholding withdrawable without affecting membership6,

-    allowing staggered minimum contributions to share capital
     in proportion to business done with the co-operative
     enterprise or to the use made of co-operative facilities
     by the respective member7,

-    giving members a claim on part of the accumulated
     reserves of the society in case of termination of
     membership under certain conditions to be laid down in
     the by-laws8.

In addition to these rather "conventional" modifications of
the co-operative law, which are not prescribed for all
co-operatives, but for which co-operatives may opt in their
by-laws, the French, Spanish and Italian lawmakers have added
other possibilities which co-operatives may adopt in their
by-laws, namely:

-    to broaden their membership base by a new category of
     "investor-members" who are persons interested in
     investing some capital in the co-operative society
     without having the intention to use the services or
     facilities of the co-operative enterprise (former
     members, employees, relatives of members but also
     institutions like mutual insurance associations,
     professional bodies, semi-public organizations, chambers
     of commerce or agriculture etc.). These investor-members
     are given a preferred status with regard to dividend on
     share capital as compared to "genuine" members9.

-    In Spain, the investor-members, once admitted, have the
     right to vote and to be elected to serve on the board of
     directors, but there are limits set in the law fixing a
     percentage of the total membership and of the share
     capital beyond which the investor-members may not grow10.

-    To issue co-operative investment certificates, which
     members and non-members can acquire.

-    These certificates do not convey membership rights but
     only rights to a dividend, if the society is turning out
     a surplus. The holders of such investment certificates
     represent their interests in special meetings to be held
     before the general meeting and elect representatives who
     are entitled to attend the general meeting of the
     co-operative society. This is a special form of a
     non-voting preferred share, which may even be sold at the
     stock exchange11 or to issue participation certificates
     (ttres participatifs) on which a partly-fixed and
     partly- variable remuneration is promised12.

-    In France, a co-operative society may provide in its
     by-laws to issue preferred non-voting shares to members
     and non-members. If the promised remuneration of the
     preferred shares is not paid during three consecutive
     years, the holders of such shares obtain voting rights13.

With this wide range of innovations regarding instruments to
raise more capital, the co-operative society is moving closer
to the company model, making concessions to investor-members
and holders of investment certificates or participation
certificates, which gives them preferred treatment over
"genuine" members, as far as their capital contribution is
concerned. However, despite all these "adjustments" the
co-operative does not reach the vigour of the original company
model with its unlimited access to the capital market.

These new instruments for strengthening the capital base of
co-operatives are also contained in the draft European Union
Co-operative Law14, according to which all financial
instruments valid in the State in which the European
co-operative has its registered office, may be used15.
Accordingly, the new forms of raising capital for co-operative
enterprises could be applied even in a country where they are
not permitted under national co-operative law by forming a
European co-operative with a partner society in a country
where these instruments are allowed.

It is open to doubt whether these new instruments will provide
the expected additional funds without affecting the character
of co-operative societies as organizations in which capital is
serving people rather than dominating them, without making
concessions to the power of capital and without levelling the
profile of co-operative societies.

The last item on the list is business with non-members. It is
argued by professional managers of large-scale co-operative
enterprises that business with non-members is needed to keep
the co-operative enterprise competitive and to earn sufficient
income to cover the increasing operating costs. Accordingly,
the provisions in co-operative law prohibiting or limiting
business of co-operative enterprises with non-members are
considered to be obstacles in the way of co-operative
development16.

On the other hand, where members and non-members are offered
the same services and facilities at the same conditions and
where patronage refund is replaced by dividend on share
capital, there are no incentives to become or remain a member
of such a co-operative society.

Often, the requirements for admission to membership are
lowered, so that membership becomes almost a formality (low
minimum share contribution, no personal liability). In this
case members practically turn into simple customers of the
co-operative enterprise.

>From the purely economic point of view it is argued that all
these modifications of the co-operative law are necessary to
allow co-operative managers to manage the co-operative
enterprises as efficiently as their competitors, to provide
the necessary capital where they can find it, to offer best
possible services to those who want to use them.

>From the co-operative point of view some of the options
offered by the lawmakers to co-operative societies to adopt in
their by-laws are clearly in contradiction to co-operative
principles. By these amendments the lawmakers have put up
signboards pointing in the wrong direction.

If these trends continue, co-operative enterprises will turn
gradually into manager-dominated "employees' enterprises" with
the professional directors acting as trustees for the members
and customers as well as for the shareholders and investors.

Unlike in companies, these co-operative trustees will not be
controlled by powerful shareholders, as long as co-operatives
retain their rule: one member - one vote, or will use a
moderate system of proportional voting and exclude the rule
"one share - one vote".

A New Era for Co-operatives 

A new era for such co-operatives could start, if the trend to
assimilate co-operative enterprises to companies would be
reversed by going back to the typical co-operative profile, by
showing this profile rather than hiding it, by making use of
the typically co-operative advantages against their
competitors like:

-    having a membership base with active members who are
     better "customers" than non-members,

-    being locally rooted, having lower transaction cost due
     to better knowledge of local conditions and effective
     two-way communication between members and the
     co-operative management,

-    offering exclusive services and incentives to members
     which activate members to use the co-operative services
     and facilities and which attract other persons to become
     members,

-    being integrated into a vertical system of co-operatives
     at regional, national and international levels, which
     allow to combine the advantages of manageable size and
     closeness to the membership base on the one hand with the
     advantages of large-scale organization on the other.

In order to put this new trend into practice, it will be
necessary to make adjustments to the internal organization and
external performance of co-operatives by not making use of all
possibilities offered in the co-operative laws but only of
those which strengthen the profile of co-operatives as a
special form of self-help organizations, e.g. a new law in
Belgium of 1991 requiring all registered co-operative
societies to decide whether to work with unlimited liability
of their members for the debts of the society or to limit the
liability of their members to their share contribution and be
treated very much like a company17.


It will be necessary to take deliberate measures to activate
the advantages of the co-operative form of organization rather
than trying to overcome presumed weaknesses, which
co-operatives are said to have as compared to companies. In
the long run, co-operatives will not become stronger by
introducing new rules borrowed from a different model (i.e.
the company). This means:

-    to pay equal attention to the co-operative enterprise and
     to the co-operative group (i.e. the association of
     members financing, controlling and using their joint
     enterprise),

-    to invest in broadening and strengthening the membership
     base by making deliberate efforts to recruit new members
     and activate existing members18,

-    to stress members' role as a stakeholder and not as a
     simple customer and nominal shareholder and to call upon
     members to contribute, if more capital is required to
     keep the co-operative enterprise strong,

-    to make membership more attractive by offering exclusive
     advantages for members only and keeping business with
     non-members low, at less favourable conditions. An ideal
     instrument to accomplish this is patronage refund, which
     for instance could also be used by co-operative banks as
     a refund on interest paid for loans or as an additional
     payment for interest received on savings19,

-    to readjust the organizational structure of co-operatives
     by providing for better chances for active member
     participation, e.g. by supplementing meetings of
     delegates in societies having a large membership, by
     section meetings with real powers to decide matters of
     local concern locally and the right to elect
     representatives for the meeting of delegates and other
     committees20,

-    to set up two-way information and communication channels
     and intermediate organizational structures like
     sub-committees, councils with meaningful tasks and
     responsibilities, introducing voting by letter and
     decisions by referendum21,

-    to insist on genuine member representatives serving on
     the board, working together with professional management
     on the board or outside the board, thereby changing the
     style of management from largely uncontrolled trustees to
     democratically-controlled advocates of members'
     interests,

-    to introduce new methods of planning and measuring
     member-oriented efficiency of the co-operative enterprise
     by means of promotion plans and promotion reports, both
     submitted to and approved by the members in general
     meeting. This would allow to make member-oriented
     efficiency an item to be covered by annual audit22,

-    to give a minority of members the right to call for a
     special management or performance audit if they feel that
     their interests are ignored by management.

Most of these measures can be introduced without amending
current co-operative legislation in the EU countries.

The above-mentioned amendments could be useful to turn the
signposts set by the law into the right direction (i.e. to
delete such provisions which authorize co-operatives to adopt
by-laws following company practice rather than co-operative
principles). This would also apply to the draft European Union
Co-operative Law which contains many provisions following the
trend of assimilation to the company model23.

In the words of the ILO Recommendation No. 12724 the task
would be "to detect and to eliminate provisions contained in
laws and regulations which may have the effect of unduly
restricting the development of co-operatives ...through
failure to take account of the special character of
co-operatives or of the particular rules of operation of
co-operatives".

>From State-controlled Pseudo-co-ops in the Developing
Countries to Autonomous Co-ops Based on Self-help - A New Era 
in Developing Countries

In many of the developing countries a new era for
co-operatives has begun with the collapse of socialist
regimes, with the growing weakness of heavily indebted
Governments and with the introduction of structural adjustment
programmes. Since the 1980s Governments are becoming aware
that to view and use co-operatives as development tools and to
supervise co-operatives by government services does not
promote but rather impede co-operative development.

Many Governments can no longer afford to provide promotion,
supervision and audit for a large number of co-operatives free
of charge.

The government agencies for co-operative development are often
overstaffed, underequipped and largely ineffective. Many of
the government powers to control co-operatives, contained in
the co-operative laws, remain ficticious because the
government machinery is unable to make full use of its
statutory powers.

On the other hand there is doubt whether co-operatives which
for decades had been operating as monopolists in a planned
economy, will be able to survive, if they suddenly have to
work independently on a liberalized market. Co-operative
enterprises created articificially from above by external
intervention without having a membership base usually become
"dormant" or have to be wound up, if the external support is
withdrawn.

The examples of the credit union movement and of informal
groups prove that there is a capacity to form and develop
successful self-help organizations with local talents and
local funds without government control, if the administrative
and legal environment permit.


Accordingly, while many State-supported and State-controlled
pseudo-co-operative structures may collapse in a climate of
de-officialization and de-regulation, the chances for the
development of autonomous co-operatives based on self-help of
their members will be enhanced by democratization,
liberalization of economic activities and greater respect of
the human rights of freedom of association, protection of
private property and guaranteed access to the courts.

In the new era of co-operatives in the developing countries,
co-operators will be treated as adults who are responsible for
their own decisions and who have the chances to succeed but
also run the risk to fail, when entering into business.

The question of who will fill the gap created by the
withdrawal of the State, needs still to be answered. Who, if
not the State, will provide co-operative promotion, education,
training and audit, if the co-operative movement institutions
are not (yet) strong enough to do so. Could non-governmental
organizations or foundations carry out this work? A solution
to these problems would be found more easily, if the
Government would opt for a strategic withdrawal, rather than
to cut its support from one day to another. But experience has
shown that it is not sufficient to do this in form of a vague
promise. What is required is a clear, public commitment with a
fixed timetable.

Implications on Legislation

These changes will make it inevitable to revise the current
co-operative legislation thouroughly.

The new, reduced role of Government will have to be reflected
in the co-operative law by maintaining only such government
powers which will have to be carried out permanently, i.e.:
-    registration of co-operatives and keeping of the
     register,

-    monitoring the compliance with the law in form of a
     strictly normative control, based on annual returns to be
     submitted to the registry,

-    control of the proper conduct of audit (super-audit),

-    the right to carry out enquiries on application of
     members, board members or creditors of co-operatives and
     on own motion of the supervisory authority in emergency
     cases,

-    control of liquidation of dissolved societies.

The formation procedures for co-operatives will have to be
reconsidered, giving applicants the right to have a new
society registered, if all requirements set out in the law are
met. Pre-registration audit carried out by the registration
service could be limited to formal criteria: minimum number of
members, submission of all necessary documents, duly signed
etc., leaving the assessment of future viability to
co-operative institutions and NGOs (i.e.making a viability
statement of an authorized organization one of the documents
to be submitted to the registration service before
registration). This is for instance done in section 11 II (4)
of the German Co-operative Societies Act, but also in the
co-operative laws of Singapore25 and Zambia26, to mention two
examples.

All government powers to supervise co-operative activities, to
arrange elections, require approval of decisions, to interfere
with the day-to-day management of the society's affairs, to
second government officers to act as managers, to remove
office holders and to replace them by caretaker committees
will have to be deleted.

This would mean to implement recommendations already contained
in the ILO Recommendation 127 since 1966.

New Approaches to Legislation and Development Participative
Lawmaking27

The chance of a new start under more favourable conditions
could be used to make authentic co-operative laws with
participation of the co-operators rather than copying models
from other countries or leaving technicians to draft new
co-operative laws in the seclusion of their offices.

Participative lawmaking means to involve all groups interested
in co-operative legislation in a broad public discussion of
the problems to be solved by co-operatives and of the adequate
legal framework needed to achieve this. The process of
participative lawmaking includes:

-    discussions of practical difficulties encountered when
     operating co-operative societies at local and regional
     level,

-    compilation of comments and recommendations on how to
     improve the situation as food for thought for the legal
     draftsmen,

-    public discussions of a first draft of the law,

-    a national seminar to evaluate the results of the
     discussions at the grassroots and to prepare a second
     draft which could be submitted to the legislative bodies.

This process of participative lawmaking, besides providing
useful information to the legal draftsmen, would have a
tremendous pedagogic effect of making many co-operators
understand that co-operative law is not a set of rules imposed
by the  State upon them, but rather a collection of useful
rules guiding them to avoid problems and to carry out their
work successfuly.

The Foundation Model for Promoting Co-operative Development
Instead of continuing the practice of using government
services for promoting co-operatives with the inherent danger
of politization and bureau-cratization, the establishment of a
co-operative development foundation could be a better
alternative. 

The trust fund of the foundation could be created by a
government donation and by external donors. The proceeds of
the trust fund would serve to finance a nucleus of staff of a
co-operative service centre. Additional funds could be earned
by offering services to co-operatives for which charges would
have to be paid. This would insure that only such services
would be offered that find a market and are worth their price.
The foundation model would solve two problems which so far
have proved to be the main bottlenecks.

Once the trust fund is established, the co-operative service
centre could work on a secured financial basis, would be
independent of annual allocations out of government funds and
could pursue a long-term policy reducing the danger of
permanent administrative and political interference.

The service centre could attract highly qualified and
motivated promoters and would grow according to its
performance and its ability to earn additional income. The
Indian Co-operative Development Foundation (formerly Samakhya)
may serve as an illustration28.

Summary

We are witnessing the beginning of a new era for co-operatives
in the developing countries and in the former Socialist
countries, characterized by the change from State-controlled
co-operatives to autonomous co-operatives being private
self-help organizations of their members.

It is more than a good coincidence that these changes occur at
a time when the ICA considers a revision of the co-operative
principles at its centenary and the ILO plans a revision of
Recommendation 127 propagating to expand its application from
developing countries to all countries29.

At the conceptual level the world-wide new vision of
co-operatives being private self-help organizations of their
members, enabling them to cope with problems of rapid social,
economic, political and technological change, is actually the
original vision that the founder fathers of the "modern"
co-operative movement had in the middle of the 19th century.
In the developing countries and in the former Socialist
countries, this concept of co-operation is new, because it
means to abandon rules, which were imposed on co-operatives
under colonial government or doctrinarian party rule and which
turned co-operatives into development tools in the hands of 
government or of the ruling party.

In the EU countries, a new era of co-operatives means
something different. Many co-operatives have been existing for
decades or even for a century. During their development,
emphasis has been placed increasingly on development of
co-operative enterprises into large, powerful units with a
professional management always ready to react to changes in
the market and to moves of their competitors. The initially
intended active role of membership has almost been lost from
sight or is regarded even as the burden of the past, which
should be removed.

Under such circumstances, a new era would begin, if
co-operative leaders and managers would rediscover that for
co-operatives their membership base is the raison d'tre and,
if deliberately activated, the membership base can be a source
of strength for which competitors envy the co-operatives,
while professional co-operative managers tend to ignore it.

In a period of rapid change with new problems like extremely
uneven distribution of wealth, growing poverty, long-term
unemployment, deterioration of the environment, disintegration
of family structures, people affected by these changes look
for ways and means to adjust themselves to the changing
conditions among other things by forming or joining self-help
organizations. The established co-operatives in the EU
countries as well as co-operatives in other parts of the world
will have to reorient their objectives and to reorganize their
activities so as to meet these new needs of their members.
Otherwise the members will lose interest in co-operatives and
look for other ways and means to cope with their pressing
problems.

This means that the new era for co-operatives would be one of
rediscovering the role of co-operatives as innovative
member-oriented and member-controlled self-help organizations.

It is on the basis of this new (or actually old) spirit of
pioneering in times of rapid change that co-operatives will
have a future. It is the right spirit, not the law that makes
things move. A revised co-operative legislation can facilitate
the work of co-operatives and will help to guide co-operators
to sound practice, however, it will not be a substitute for an
innovative approach to co-operative development. 

On the other hand, restrictive laws can kill initiatives,
create red tape and prevent innovations. Therefore, adequate
co-operative legislation is important but its role should not
be overestimated. 

Denmark, where a strong co-operative movement has developed
with an active, well-informed membership but without special
co-operative legislation can serve as an example to prove this
point. In Denmark, co-operators use the provisions of general
law to design the appropriate legal framework for the
co-operative which they decide to have and use this
co-operative to achieve their objectives.


References

1    Cf. for instance Muenkner, Hans-H.: Die Genossenschaft -
     neutraler Organisationstyp oder Abbild gesellschaftlicher
     Grundauffassungen in Europa?, Schriften zur
     Kooperationsforschung, B. Vortrage Band 21, Tubingen
     1989.

2    E.g. Credit Union Act of 1979, United Kingdom.

3    S. 93s of the German Co-operative Societies Act.

4    S. 27 I of the German Co-operative Societies Act.

5    S. 21a of the German Co-operative Societies Act.

6    S. 67b of the German Co-operative Societies Act.

7    S. 7(2) of the German Co-operative Societies Act.

8    S. 73 III of the German Co-operative Societies Act; see
     also member accounts in the Netherlands and in the UK. Cf.
     Muenkner, Hans-H.: Chancen der Genossenschaften in den
     neunziger Jahren, Veroffentlichungen der DG BANK Deutsche
     Genossenschaftsbank Band 19, Strukturfragen der deutschen
     Genossenschaften Teil IV, Frankfurt a.M. 1991, pp. 118 et
     seq. and other sources quoted there.

9    E.g. in France they may receive 2% more interest on share
     capital than "ordinary" members, Article 4 of Law No.
     92/643 of 1992, governing the modernization of
     co-operative enterprises.

10   According to articles 40, 41 of the Spanish General
     Co-operative Law No. 3 of 1987, 33% of the share capital
     and 20% of the total votes.

11   Articles 19 quinquies and octis, French General
     Co-operative Law No. 47-1775 of 1947 and decree 91-14 of
     4 January 1991 governing the special meetings of holders
     of co-operative investment certificates.

12   Art. 21 of the French Law No. 83-1 of 3 January 1983 on
     the development of investment and the protection of
     savings.

13   Article 7 of law No. 92/643, governing the modernization
     of co-operative enterprises, France.

14   Article 50 of the draft European Statute for Co-operative
     Societies, 1992 SYN 388 of 5 March, 1992. does not
     contain clear limits but prescribes that business with
     non-members may not become the main object.

15   Article 51 of the draft European Statute for Co-operative
     Societies, 1992 SYN 388 of 5 March 1992.

16   The respective provisions were deleted in Germany in case
     of consumers' co-operatives in 1954 and in case of
     co-operative banks in 1973. The Belgian co-operative law
     does not contain any provisions on this subject. The
     French General Co-operative law of 1947 excludes business
     with non-members in principle (art. 1, 3) but allows
     exeptions to this rule in special laws, e.g. in
     agricultural co-operatives: maximum 20% of the total
     turnover. In the UK there are no restrictions contained
     in the Industrial and Provident Societies Act under which
     most co-operatives are registered. However, under the
     Restrictive Trade Practices Act of 1962 with amendments
     up to 1976, agricultural co-operatives doing more than
     30% of their turnover in three consecutive years with
     non-members, will not be recognized as producer groups.
     Under the Credit Union Act of 1979, Credit Unions are not
     allowed to transact business with non-members. The
     co-operative law of the Netherlands does not contain
     clear limits but prescribes that business with
     non-members may not become the main object.

17   Articles 146 et seq. of the law of 1.11.1991. For details
     see Kupers, Wilfried: La nouvelle loi sur les societes
     co-operatives in: KB Magazine, Magazin bimensuel pour les
     entreprises independantes, Brussels, No. 3, 20 February,
     1992, pp. 23 et seq.; see also Muenkner, Hans-H.: Die
     Rechtstypik der Genossenschaft in den Partnerstaaten der
     EG, Institut fur Genossenschaftswesen der Universitat
     Munster, Genossenschaftswissenschaftliche Beitrage,
     Vortrage/ Heft 32, Munster 1993, pp. 30, 31.

18   See for instance: Ringle, Gunther: Akquisition von
     Mitgliedern und Kunden der Genossenschaften, Hamburger
     Schriften zum Genossenschaftswesen 9, Goettingen 1993;
     Bundesverband der Deutschen Volksbanken und
     Raiffeisenbanken (BVR): Leitfaden Mitglieder betreuen -
     Mitglieder gewinnen, Wiesbaden 1991.

19   Cf. Berge, Helmut and Philipowski, Rudiger:
     Zinsruckvergutungen in Kreditgenossenschaften, Marburger
     Beitrage zum Genossenschaftswesen 11, Marburg 1986.

20   For details see Muenkner, Hans-H.: Chancen der
     Genossenschaften in den neunziger Jahren, op. cit., pp.
     104 et seq.

21   Cf. Muenkner, Hans-H.: Genossenschaftliche Identitat und
     Identifikation der Mitglieder mit ihrer Genossenschaft,
     Veroffentlichungen der DG BANK Deutsche
     Genossenschaftsbank Band 17, Strukturfragen der deutschen
     Genossenschaften Teil II, Frankfurt a.M., pp. 215 et seq.

22   See for instance Boettcher, Erik: Die Problematik der
     Operationalisierung des Foerderungsauftrages in
     Genossenschaften, in Zeitschrift fur das gesamte
     Genossenschaftswesen, Bd. 29 (1979), pp. 189 et seq.;
     Muenkner, Hans-H.: Genossenschaftliche Identitat und
     Identifikation der Mitglieder mit ihrer Genossenschaft,
     op. cit., pp. 162 et seq.

23   See for instance Muenkner, Hans-H.: Was bringt das
     europaische Genossenschaftsrecht? Vortrage und Aufsatze
     des Forschungsinstituts fur Genossenschaftswesen der
     Universitat Wien, Heft 17, Wien 1992.

24   International Labour Conference: Recommendation
     Concerning the Role of Co-operatives in the Economic and
     Social Development of the Developing Countries, ILO
     Geneva 1966, para. 10 (1) (a). On the discussion to amend
     this recommendation see: International Labour Office,
     Enterprise and Co-operative Development Department: Final
     Report, Meeting of Experts on Co-operatives, Geneva, 29
     March to 2 April 1993, Annexes, Report 1.

25   S. 8 of the Co-operative Societies Act of Singapore, 1985
     Ed.

26   S. 11 of the Co-operative Societies Act of Zambia, 1970.

27   CF Muenkner, Hans-H.: Participative Law-making: A New
     Approach to Drafting Co-operative Law in Developing
     Countries, in: Law and Politics in Africa, Asia and Latin
     America, 19. Jahrgang- 2. Quartal 1986, pp. 123 et seq.

28   For more details see Muenkner, Hans-H. and Shah, Ashish:
     Creating a favourable climate and conditions for
     co-operative development in Africa, International Labour
     Office, Enterprise and Co-operative Development
     Department, Geneva 1993, pp. 159 et seq.

29   International Labour Office, Enterprise and Co-operative
     Development Department: Final Report, Meeting of Experts
     on Co-operatives, Geneva, 29 March to 2 April 1993,
     Annexes, Report 1.