Values and Principles (Part 2) (1992)

This document has been made available in electronic format
by the International Co-operative Alliance (ICA)
October, 1992
(Source: Co-operative Values in a Changing World (1992) 

                       VIII.   VALUES AND PRINCIPLES
(PART 2)

3.3.    Democratic management
The experienced problems of democracy are deep-rooted and
cannot be approached by reformulations of the Principles.
One main type of problem, however, was clearly anticipated 
by the ICA Commission of 1963, the change of the co-operative 
structures at secondary levels of organization, and the resultant 
difficulties in developing a democratic management. The 
Commission left the problems to the future with the very general 
and open statement in the Report on Co-operative Principles, "In
other than primary societies the administration should be 
conducted on a democratic basis in a suitable form".
The Commission was quite right in its forecast; the most
difficult problems from a democratic point of view have
emerged in connection with those applications. These are
constituted by a combination of new methods for capital
formation, transformation of the society form to joint-stock 
companies, and integrated structures within federalistic 
models. Which applications are `tolerable' from an essential 
and co-operative principle point of view? I have discussed 
such issues at some length in chapters IV, V and VI and 
formulated some preliminary judgements. I cannot do more, 
since we are in the middle of the process, and the systematic 
analyses of the experiences are lagging behind. In the future 
there is a need to clarify this Principle in order to give a better
indication of the appropriate applications (see recommendation 
1 in chapter VI). I am not ready to undertake such a task for 
the time being.
There is, however, one weakness of the existing Principles 
which should be handled immediately - the participation of 
employees. That aspect of democracy is not dealt with in the 
existing Principles. Since this will become more important in 
the future democratic perspectives, the second Principle ought 
to include a statement, saying that:
-  Co-operative organizations should take steps to include 
   employees in the democratic management. 
I have discussed these issues at some length in chapter IV. 
3.4.    Modest revisions
I look upon those revisions as quite well-based and as
quite easy to introduce without changing the traditional
character and structure of the existing Principles. There
are, as seen, many more problems in relation to the
Principles but, frankly, I do not think that one or the
other formulation of the Principles can be of much help.
What counts are the deeper aspects of the co-operative
way, such as the commitment to, and the understanding of,
the co-operative essentials and the will to search seriously 
for appropriate applications. When these preconditions are 
there, even very simple Principles will be enough.
Nevertheless, I will take one more step in the discussion
of recommendations before the revision of the Principles. 
4. Value-oriented and rule-oriented Principles
In the Rochdale society we can already observe both the
more value-oriented and more rule-oriented character of
the Principles. The first paragraph of its statutes included 
some deep and far-reaching statements of the co-operative 
way, as well as some very concrete rules for current work 
(Appendix 1 in chapter II). The latter became the point of 
departure for the ICA Commission from 1931 and, in fact, 
the Principles of 1937 were not much more than simple 
revisions of those Rochdale rules.
The Commission of 1963 built on that tradition and
considered the Principles "as those practices which are
essential, that are absolutely indispensable, to the
achievement of the Co-operative Movement's purpose" 
(p 160). To some extent this is a problematic statement. 
Is it possible, that principles can be practices? Are not
principles the guidelines for practice? This might be playing 
with words, but has been debated throughout the history 
of Co-operative Principles. Anyway, Principles which 
will aim to achieve the Movement`s purpose must:
(i) Be efficient as guidelines in the contemporary society,
(ii)Properly reflect the co-operative values and purposes, 
     i.e. the essence of Co-operation.
These two demands on the Principles might be difficult to
combine in times of rapid environmental change, as we
have clearly experienced in recent decades. In order to
become efficient in the first aspect (i), the Principles
have to be revised quite often, otherwise they will run
the risk of becoming "old-fashioned". On the other hand,
such Principles also risk losing their universality and
becoming too marked by contemporary practice. However,
Principles which are very much formulated in terms of
values, almost as declarations, risk becoming too far
removed from reality. 
The balance between (i) and (ii) has been much discussed
in co-operative contexts since at least the 1920s. One
line of discussion strongly emphasizes that the
Principles should have the character of (i), i.e. as
"essential rules for practice". The understanding of the
underlying values should be encouraged through various
forms of education. The other line of discussion believes
that the essential and eternal character already present
in the formulation of the Principles should be
demonstrated more clearly, and the more practice-oriented
aspects should be outlined in supplementary functional
and operational rules. This is what many co-operative
organizations have already been doing, for instance in
programmes of action with general preambles about the
essence of Co-operation and with rules, statutes and
by-laws for the more practice-oriented guidelines. 
The existing Principles reflect a combination of (i) and
(ii) above. The first set of Principles from 1937 were
strongly characterized by (i), but the revision in 1966
brought them closer to (ii). They became more universal
and closer to the values. So what is the standpoint for
the revisions of the Principles for the future? More
`rules' again, or more `values', as was the tendency in
the last revision?
4.1.    Two kinds of Principles
I have come to the conclusion that we should take a
further step in the direction taken by the 1966
Commission and bring the Principles explicitly closer to
the values. This, however, presupposes a supplement with
rules or essential practices. This supplement should also
be given the status of Principles.
My standpoint is based on the following experiences:
-  During recent decades the world co-operative sector
has become more pluralistic than ever, both regarding 
types of co-operative and contexts of development. 
It is no longer as consumer dominated as before, nor 
as European-dominated. This pluralistic pattern seems 
set to become even more emphasized in the future, as 
more new co-operatives are established - and established 
in new areas of activity.
-  The changes in the co-operative environment have
become more rapid, although more in some contexts
than others. The implications are different for different 
types of co-operative. So, the need for revisions of 
rule-oriented Principles varies and there will be problems 
if such Principles are not revised often enough.
-  The problems with the Principles and their relations
to practice seem to be connected partly to too few
essential interpretations. Of course, some changes
of the Principles cannot solve such problems, but
might at least contribute towards more essential
-  For the future, it is more important to have
Principles which do not close the door to new lines
of co-operative development that are co-operative in
essence. Principles should be universal enough to
embrace as much as possible of world co-operative
development and practice. It would be a failure in
the global perspectives, if restrictive Principles
were to give us "several co-operative worlds". On
the other hand, it must be possible to distinguish
between true and false co-operatives.
Such considerations have made me ready to take the
standpoint in favour of the more general and essential
orientation in the formulation of the Principles. During
my preparatory work, however, I have met objections to
such an approach. The fear that such Principles will
weaken the co-operative identity has been especially
emphasized; this school of thought believes that such
Principles run the risk of destroying the practicability.
It has been argued that the special merits of the Principles 
have been their simple and straightforward rule character. 
Everybody could put these into practice, and it is not even 
necessary to understand the value backgrounds; because 
in applying the Principles the values will also be induced.
I agree on that to some extent. On the other hand, I have
the impression that the practicability of the Principles
can be paid due attention to by special rule-oriented
supplements, as, in fact, is the usual practice. And I
doubt that the Principles in themselves really have the
importance for  practical applications that these arguments 
seem to indicate. There is always a need to explain and 
supplement the Principles by practical rules in a concrete 
situation. That is my experience in dealing with and giving 
advice to new co-operatives. The Principles are there in the 
background, but will soon be transformed into practical 
rules. So, I do not consider these objections as obstacles 
to a revision according to more essential-oriented 
formulations of the principles. Instead, I think that the 
demand for universality in this more pluralistic situation 
must take precedence, while selectivity can be applied to 
more practical principles.
4.3.    Basic Principles and Basic Practices (Rules)
To conclude, at the ICA level the Co-operative Principles
must be kept at a relatively high level of universality
(and perhaps abstraction) when stating the essence of
Co-operation. The Principles must be universal enough to
embrace all essentially true co-operative  organizations,
but at the same time selective enough to identify the
co-operative way and to serve as basic guidelines for
practice. The Principles must be both close to the essence 
of Co-operation and workable for the promotion and 
defence of the true co-operative way in practice. 

For the ICA it is crucial to develop such a concept of
Principles. I do not think that it is possible to combine
these two basic demands in the same Principles; the
situation for co-operative practice is too pluralistic
and too full of nuances. Instead, I do think that the 
ICA in its further revision needs to develop two kinds 
of Principles:
1) Basic Co-operative Principles: these should aim to
    clearly express the universal essence of Co-operation 
    by formulations close to the essential basic values 
    (ideas, ethics and principles), which I have identified 
    in chapter II, and identified the essence of in chapter 
    VII section 2.2). These should be considered as more 
    long-term in character.
2) Basic Co-operative Practices (Rules): these Principles 
     should express the basic practices and rules for practice 
     which are appropriate and co-operatively acceptable in 
     the contemporary society. These should be consistent 
     with the Basic Co-operative Principles, but should 
     specify the essence more concretely and selectively. 
     These are probably best worked out in order to suit the
     various branches of the co-operative sector.
In this preliminary context, it is useless to discuss the
formulations of Principles according to (1) and (2),
because this is quite a formidable task requiring special
skills. In addition, some of the existing Principles need
only be reformulated. 
This is as far as I can go in this report. I am not ready
to formulate the sentences from the above values which
should constitute those Basic Co-operative Principles. 
4.4.    Improved criteria for true co-operative applications
This is not a unique recommendation. Many co-operative
organizations are already approaching the co-operative
values and principles in this way in their programmes of
action etc. A good illustration can be seen in the report
from the Credit Union Uniqueness Committee.

It might be easier to approach the delicate issues of
co-operatively acceptable and unacceptable practices at
the ICA level. For the time being this is confused, which
is a problem for the ICA. But if the various co-operative
branches, for instance through the ICA specialized
organizations, take the responsibility of carefully working 
out the Basic Co-operative Practices (appropriate and 
essential co-operative practices and rules) in their 
respective sectors, the situation will be improved. This
needs recurrent analyses of experiences in relation to
the Basic Co-operative Principles. These Principles will
always be supplemented with branch-based definitions of
the true co-operative applications and consequently give
the ICA, and the world co-operative sector, a more
differentiated and realistic concept to authoritatively
distinguish between good and bad lines of co-operative
development. This will be necessary in the future so as
to defend, and to promote, the co-operative identity.
5. Recommendations for revision of the Principles
I have discussed the background experiences for the
revisions of the Principles with regard to two levels of
ambition in those revisions.
The least ambitious aim should be to keep the main
structure and character of the existing Principles and to
make just a few changes where absolutely necessary. My
recommendations are:
-  The Principle of limited interest on capital should
    considered and formulated in a more flexible way.
-  The methods of capital formation should be
    explicitly introduced as a Principle.
-  The Principle about democracy should be supplemented
    by a statement about the employees` participation in
    co-operative democratic administration.
-  The need for a proper degree of independence should
    be emphasized by a new Principle.
I have also discussed the need to more closely examine
the democratic problems in connection to the co-operative
organizational experiences at secondary level in order to
be able to make some supplementary statements to the
Principle of democracy.
Turning to the higher ambition for the revision of the
Principles I recommend: 
-  That the existing Principles should be divided into
    two types of Principles, Basic Co-operative
    Principles and Basic Co-operative Practices.
-  That the Basic Co-operative Principles should be
    formulated so as to more explicitly express the
    universal essence of Co-operation.
-  That the Basic Co-operative Practices should be
    based on the various co-operative branches and
    should concretely express the essence in terms of
    practices and rules for practice.
I have identified the essential value basis for the Basic
Co-operative Principles but have not, in this report,
made recommendations about the formulations of the
sentences, which should constitute the Basic Co-operative
Principles. This needs some more time, and is the task
for a specialized group to discuss in more detail. 
Appendix A: 
The ICA Co-operative Principles
1.  Membership of a co-operative society should be
     voluntary and available without artificial restriction or 
     any social, political, racial or religious discriminations, 
     to all persons who can make use of its services and 
     are willing to accept the responsibilities of membership.
2.  Co-operative societies are democratic organizations.
     Their affairs should be administered by persons elected 
     or appointed in a manner agreed by the members and 
     accountable to them. Members of primary societies 
     should enjoy equal rights of voting (one member, one 
     vote) and participation in decisions affecting their 
     societies. In other than primary societies, the 
     administration should be conducted on a democratic 
     basis in a suitable form.
3.  Share capital should only receive a strictly limited
     rate of interest, if any.
4.  Surplus or savings, if any, arising out of the
     operations of a society belong to the members of
     that society and should be distributed in such a
     manner as would avoid one member gaining at the
     expense of others.
     This may be done by decision of the members as
a)   By provision for development of the business 
      of the Co-operative;
b)   By provision of common services; or
c)   By distribution among the members in proportion
      to their transaction with the society.  
5.  All co-operative societies should make provisions
     for the education of their members, officers, and
     employees and of the general public, in principles
     and techniques of Co-operation, both economic 
     and democratic. 
6. In order to best serve the interests of their
    members and their communities, all co-operative
    organizations should actively co-operate in every
    practical way with other co-operatives at local,
    national and international levels. 
(From 1966)