Lecture Presentation for PFCCO

1. Governance and
Management of
Cooperatives
Part 1
By: Josefina B. Bitonio, DPA
IGPS – LNU
Dagupan City

2. MC 2015-09 | Revised Guidelines
Implementing the New Training
Requirements of Cooperative Officers

3. 1. Board of Directors;
2. Secretary;
3. Treasurer;
4. Election Committee,
5. Audit Committee;
6. Ethics Committee;
7. Mediation and Conciliation Committee;
8. Other Committees created by the General
Assembly and BOD; and
9. General Manager or Chief Executive
Officer.
Section 2.
Scope. This
Memorandum
Circular shall
apply to the
officers of the
cooperative
regardless of
type and size,
such as:

4. Section 3.
Required
Trainings for
cooperative
officers
CATEGORY OF COOP TRAINING COURSE # Hours
Micro-cooperatives –
cooperatives with total assets of
3 Million and below
Fundamentals of Cooperatives 8
Governance and Management
of Cooperatives
8
All other cooperatives with total
assets of more than 3 million
Fundamentals of Cooperatives 16
Governance and Management
of Cooperatives
16
Additional trainings for officers
of cooperatives engaged in
savings and credit with at least
Five Million Pesos
(Php5,000,000.00) worth of
deposit liabilities based on their
latest Audited Financial
Statement
Financial Management 8
Risk Management 4
Credit Management 4

5. Section 4. Period of
Compliance. Coope
rative officers shall
complete the
trainings within the
half of their term.
Section 5. Optional
trainings for cooperative
officers. Cooperative
officers shall endeavor
to undergo additional
appropriate trainings
such as but not limited
to the following:
• Financial Management
• Policy Development
• Leadership and Values Re-Orientation
• Conflict Management
• Strategic Planning and Management
• Orientation on Labor and Other Related Laws
• Records Management (Financial/Non-Financial
Transaction)
• Cooperative Standards
• Investment and Banking Procedures
• Basic Accounting for Non- Accountants
• Internal Control including Inventory System
• Cooperative Standards
• Audit Management
• Rules Formulation
• Human Resource Management
• Effective Communication Skills
• Entrepreneurship and Business Mgt. Skills
• Basic Computer Literacy

6. Part - 1
GOVERNANCE & MANAGEMENT COOPERATIVE 16
GOVERNANCE PRINCIPLES AND PRACTICES 4
1) Principles & Practice of Good Governance in
Cooperatives
Including Definition, Benefits, Characteristics of Good
Governance, the Governance Architecture, Preventing
Abuses in Coop Governance
2) Board-Manager Relationship
3) Cooperative Structure
Duties and Responsibilities of Officers
4) Managing Successful Meetings
OPERATION AND MANAGEMENT OF COOPERATIVE 4
5)Importance of Financial Mgt, Human Resource
(Personnel Management), Marketing, Production or
Technical aspects
6) Allocation and distribution of net surplus
7) Overview of Ethical Standards in Cooperatives
8) Performance and Measurement (balance scorecard)
Jo Bitonio
Speaker 1

7. The cooperative enterprise (CE) is
recognized already for decades as an
organizational form that can address socio-
economic problems, respond to societal
needs, overcome market failures and ease
problems for customers, members and
society (Cheney et al. 2014; Costa et al.
2012; Storey et al.2014). Scholars
recognize that the cooperative model
contains elements of social
entrepreneurship, social enterprises and
hybrid organizations (Doherty et al.2014).
Introduction

8. Additionally, the International
Labour Organization recognizes
the relevance of CEs “as
important in improving the living
and working conditions of
women and men globally as well
as making essential
infrastructure and services
available even in areas
neglected by the state and
investor-driven enterprises”
(ILO,2017).
More than 12 % of humanity is
part of any of the three million
cooperatives in the world.
Cooperatives contribute to the
sustainable economic growth with
1 billion members across nearly
100 countries They have a global
turnover of 2.2 trillion USD and
providing jobs and work
opportunities to 280 million people
across the globe. (ICA,2020).
A growing co-operative
presence?

9. 1) Principles & Practice of Good
Governance in Cooperatives
Including Definition, Benefits,
Characteristics of Good
Governance, the Governance
Architecture, Preventing Abuses
in Coop Governance

10. The term 'co-operate' means "to
work or act together"; "to be of
Assistance or be willing to assist. The
theory underlying co-operation is that
weak individuals are enabled to
improve their individual productive
capacity and consequently their
moral and material position by
combining among themselves and
bringing into this combination a
moral effort and a progressively
developing realization of moral
obligation.

11. Co-operation is rooted in a common
recognition by the participants of the
desirability of improving their condition and
general agreement among them as to how that
improvement can best be effected. The
principle of co-operation is as old as human
society; it is the basis of domestic and social
life. Any co-operation effort is ultimately the
group instinct in man, which enables him to
live together, work together and help each
other in times of stress and strain.

12. • Good governance is a pre-condition for
sustainable economic growth.
•Governance is, to put it simply, all about
how to run a business. And good
governance is about running a successful
business. It's about people and
performance, policies and processes,
rules and regulations.
• It's the same for co-operatives, but with
a good twist. Co-ops exist to serve the
needs of their members. And they're
founded on a set of values and principles
which set the agenda for a different, fairer,
and better way of doing business. So
good governance has to encapsulate
those fundamental elements as well.

13. The values, which are articulated by the ICA in a
statement in 1995. The values statement further
articulates values of personal and ethical behavior that
cooperators actualize in enterprises. They describe the
kind of people cooperators strive to be and
the traits they hope to encourage through
cooperation.

14. Cooperatives are based on basic
values and principles. Cooperative
values are general norms that
cooperators, cooperative leaders and
cooperative staff should share and
which should determine their way of
thinking and acting.

15. AUTONOMY AND
INDEPENDENCE
EDUCATION, TRAINING
& INFORMATION
COOPERATION AMONG
COOPERATIVES
CONCERN FOR
COMMUNITY
DEMOCRATIC MEMBER CONTROL MEMBER ECONOMIC PARTICIPATION
VOLUNTARY AND OPEN
MEMBERSHIP
SELF-
HELP
SELF-
RESPONSIBILITY
EQUALITY
HONESTY OPENNESS
SOCIAL
RESPONSIBILITY
DEMOCRACY
CARING FOR
OTHERS
SOLIDARITY
Co-ops Principles are practical applications of co-op values
Co-op / Ethical values are the foundation of the co-op principles
EQUITY

16. The word ‘governance’ is from the Latin
“gubernare” – to steer (a ship). And that’s
what a governing body does. Governing an
organization isn’t the same as running it day-
to-day.
1) Definition and Practice of Good Governance in
Cooperatives
A
changing
agenda Each domain of governance - the state, the
private sector and civil society - has a unique
role in promoting sustainable human
development.

17. Governance”
and “Good
Governance”
Good governance is,
among other things,
participatory, transparent
and accountable. It is also
effective and equitable.
And it promotes the rule
of law. Good governance
ensures that political,
social and economic
priorities are based on
broad consensus in
society and that the
voices of the poorest and
the most vulnerable are
heard in decision-making
over the allocation of
development resources.
Governance has three legs:
economic, political and
administrative. Economic
governance includes decision-
making processes that affect a
country's economic activities
and its relationships with other
economies. It clearly has major
implications for equity, poverty
and quality of life. Political
governance is the process of
decision-making to formulate
policy. Administrative
governance is the system of
policy implementation. 11
Encompassing all three, good
governance defines the
processes and structures that
guide political and socio-
economic relationships.
Civil society, lying
between the individual
and the state,
comprises individuals
and groups (organized
or unorganized)
interacting socially,
politically and
economically -
regulated by formal
and informal rules and
laws.

18. Worldwide Governance Indicators

19. Philippine Performance for the Past Five Years
Indicator 2012 2013 2014 2015 2016 2017
Voice and Accountability 47.89 48.83 52.71 51.23 51.23 48.77
Government Effectiveness 58.77 59.24 61.06 57.21 51.92 51.92
Control of Corruption 35.07 43.60 40.38 39.90 36.60 39.90
Rule of Law 38.97 42.25 43.75 43.27 39.42 37.02
Regulatory Quality 51.66 50.24 52.40 52.40 53.85 55.77

20. Philippine vs. ASEAN Performance for the Current Year
Country
Voice and
Accountability
Government
Effectiveness
Control of
Corruption
Rule of
Law
Regulatory
Quality
Brunei 22.66 84.13 75.00 74.52 75.48
Cambodia 15.76 25.48 8.65 13.46 32.21
Indonesia 50.74 54.81 48.08 40.87 51.92
Lao PDR 4.43 38.46 15.87 18.27 25.48
Malaysia 34.48 76.44 58.17 64.90 74.52
Myanmar 23.65 13.46 32.21 16.83 19.23
Philippines 48.77 51.92 39.90 37.02 55.77
Singapore 41.38 100.00 97.60 96.63 99.52
Thailand 21.18 66.83 42.79 54.81 59.62
Vietnam 10.84 52.88 31.73 55.77 36.54

22. Good
Governance
Accountability
Transparency
Responsibility
Effectiveness
& Efficiency
Consensus Oriented
Participation
Follows Rule
of Law
Equitable and
Inclusive
Eight Major Characteristics of Good Governance
Source: United Nations Economic and Social Commission for Asia and the Pacific

24. • Participation by both men and women is a
key cornerstone of good governance.
Participation could be either direct or
through legitimate intermediate
institutions or representatives. It is
important to point out that representative
democracy does not necessarily mean it
would consider the concerns of the most
vulnerable in society in decision-making.
Participation needs to be informed and
organized. This means freedom of
association and expression on the one
hand and an organized civil society on the
other hand
Participation

25. • Good governance requires fair legal
frameworks that are enforced impartially. It
also requires full protection of human rights,
particularly those of minorities. Impartial
enforcement of laws requires an independent
judiciary and an honest and incorruptible
police force.

26. •There are several actors and as many
viewpoints in a given society. Good
governance requires mediation of the
different interests in society to reach a broad
consensus on what is in the best interest of
the whole community can achieve this. It
also requires a broad and long-term
perspective on what is needed for
sustainable human development and how to
achieve such development goals. This can
only result from understanding the historical,
cultural, and social contexts of a given
society or community.

27. Equity and inclusiveness
• A society’s well-being depends on
ensuring that all its members feel that
they have a stake in it and do not feel
excluded from the mainstream of society.
This requires all groups, but particularly
the most vulnerable, to have
opportunities to improve or maintain their
well-being.

28. Effectiveness and Efficiency
• Good governance means that
processes and institutions produce
results that meet the needs of society
while making the best use of resources
at their disposal. The concept of
efficiency in good governance also
covers the sustainable use of natural
resources and the protection of the
environment.

29. Accountability
•Accountability is a key requirement of good
governance. Governmental institutions and the
private sector and civil society organizations must
be accountable to the public and the institutional
stakeholders. Who is responsible to whom varies
depending on whether decisions or actions are
internal or external to an organization or
institution. In general, an organization or an
institution is accountable to those affected by its
decisions or actions. Accountability cannot be
enforced without transparency and the rule of
law.

30. Transparency
• Transparency means that decisions
are taken, and their enforcement is
done according to the rules and
regulations. It also means that
information is freely available and
directly accessible to those affected
by such decisions and their
enforcement. It also means that
enough information is provided and
easily understandable forms and
media.

31. Responsiveness
• Responsiveness. Good
governance requires
institutions and processes to
serve all stakeholders within
a reasonable timeframe.

32. Benefits of Good
Governance
• The views of minorities are taken into
account.
• That the voices of the most
vulnerable in society are heard in
decision-making.
• It is also responsive to the present
and future needs of society.
• It assures that corruption is
minimized .
• To ensure sustainable human
development.

33. Good Governance allows a
Cooperative to establish who its
members are, who has power and
how they should exercise this power
in the entity through the governance
mechanisms: the Members'
Assembly, the Board of Directors, the
Supervisory Board, and those
responsible for the Cooperative's
management.

34. The Wheel of Good Governance
The wheel of good governance
To help with your governance, the
key areas of governance
that should be in place within a
thriving co-operative businesses.
They are:
•Purpose
•An effective board
•Operations, and processes by
Staff
•Performance and roles
•Members and participation
Ref: What is good governance?
| Co-operatives UK

35. Preventing Abuses in Coop Governance
Good Governance Issues
Accountability
Directly or indirectly acquiring or turning any business opportunity which ought to be
available to the Cooperative to your own or someone else’s advantage.
Board interference in management duties. Management decisions may cause a conflict of
interest.
No accountability to the general assembly, officers & employees, established strategic
direction, achievement of targets, prepared plan, and budget, monitored mgt’s
implementation of approved policies.
Transparency No report
No voting procedures result in mistrust of counting and disclosing votes
No minutes of formal recording and deliberations during meeting/GA
No audit or no deliberations of the report of the external and internal auditors
No evidences of transparency process
No transparent relations
No full knowledge of information and results
No regular, honest communication of coop’s activities with members, regulators & the
general public in the spirit of full disclosure
, financial statements are not compliant with generally accepted accounting principles & local
regulatory standards and should be available to members
Another bias is when some officers sanitize records and provide a one-sided story of
situations. Such scenario violates the essence of transparency in cooperative governance.

36. Good Governance Issues
Equitable and inclusive No sense of belongingness/representativeness
No representation of varied groups during GA
Fair and equal treatment of members/groups
Favoritism in policy applications like misconduct
Biased in hearing conflicts
Responsibility Lack of understanding on the functions of the Board from that of management staff often leads
to miscommunication if not confusion resulting in that overlapping of functions
Lack of understanding on the functions of the Board from that of management staff often leads
to miscommunication if not confusion resulting to that overlapping of functions
Willfully and knowingly vote for or assent to patently unlawful acts, or who are guilty of gross
negligence or bad faith in directing the affairs of the Cooperative or acquire any personal or
pecuniary interest in conflict with their duties as Directors, officers, or committee
No established the condition that facilitates collective decision making.
No sharing of governance practices
No separation of duties and responsibilities between officers and management
No policy of involvement in the community
No formal strategic planning and management processes
No clear understanding of the actual duties, responsibilities, accountabilities and liabilities of
the Board of Directors as a body and as individual Directors
Delayed and often fragmented decision-making process
Inactive and not engaged Board of Directors
Lack a commitment or awareness of the need to develop cooperative management and
generally do not recognize the crucial leadership role in defending cooperative purpose and
values

37. Good Governance Issues
Effective & Efficiency
Abuses on the use of resources: Remuneration, Transportation, Communication, Travel, Training
Entertainment
Excessive spending for non-earning assets (building, cars, computers etc.)
No efficient channel to transmit information, receive criticism and suggestion
No analysis on exposure to risk which may affect the whole system in the cooperative
Irregular distribution of net surplus
High operational cost
Decrease profits
Decrease sales/interest on loans
Increase of receivables
loan delinquency
No rotation on directors, and compliance officers
Struggling to provide benefits, e.g., health-disability-life insurance, and retirement plans
No knowledge, experience and training of Directors are not business related
Lack of policies and procedures that are needed to sustain operations and promote long-term
viability
Traditional product, good and services offered
Duplication of services and functions within the cooperative movement because
cooperative organizations are not emerging and consolidating fast enough to match
their competitive environment
Most primary cooperatives operate as the low value-added link in their industries’
supply chain.
The absence of a substantial degree of entrepreneurial spirit or culture leading to
missed opportunities and lack of innovation.

38. Good Governance Issues
Consensus Oriented With stronghold leadership or management
The concentration of powers to some officials reduces the ability of the
remaining officials to act.
The emergence of a set of varied interests of members causes conflict.
No collective action
Lack of mutual trust
No volunteerism in action
Too many meetings and discussions without anything getting resolved
No strengthening of the associative bond that were the basis of cooperative
establishments
Rule of law Do not follow rules, policies and guidelines of the cooperative
Presence of conflicts between officers and management or management and
members.
Non compliance to the submission of mandatory reports.
Non compliance to statutory reserves and other relevant financial standards for
financial institutions.
There are no regular annual external audits & changing the auditor at least
every 3-5 years in a competitive bidding process.

39. Good Governance Issues
Participation Inactive participation in the meeting.
No economic participation like patronizing the services of the cooperative.
Do not follow policies.
No participation in consultation meetings/AGAs
Non monitoring results of operation
They are not voicing their interest.
No internal mechanisms for participation
Lack on interest to participate/passive participation
Inactive committees
No exchange of ideas and opinions
No strategic partnership among cooperatives through Fed/ union which is essential
in maximizing resources and minimizing costs
Coop management practices in some cooperatives are still very reactive
and less participative
low technological innovations
Reliance on extensive government support

40. Prevention
Cooperatives should re-examine their roles and cope with
the challenges around them.
•Develop Code of Governance and Ethical Standard to be
observed by the members, officers and employees of the
cooperative subject to the approval of the BOD and
ratification of the GA and Monitor compliance with the
Code of governance and Ethical Standards and
recommend to the BOD measures to address the gap if
any.
•The Board, committees, and officers should understand
and apply the concepts of good governance with the
correct values
• Clarity and delineation of functions need to be understood based on organization structure, functional chart, and manual
of operations that detail job descriptions or responsibilities.
• To secure effective representation and participation of members during GA
• A quality voting procedures fully independent and self-governed in conducting the election of officers.
• A cooperative shall have placed mechanisms favoring participation to bodies CDCs/RCOs/ Fed/Unions/Sectoral/Cluster
Representations – PSR NEDA

41. • Independence of the Audit Committee
• Offices and staff should have access to training to
perform their duties.
• A policy or criteria securing no economic and
functional relationship between officers and the
Audit Committee.
• The participation of members should be
encouraged by establishing an environment and
instruments empowering members to express
themselves and be heard, mainly to develop a
sense of belongingness and the ability to affect the
course of cooperative affairs.
• Establish a channel for imparting information to
members.

42. • Establish mechanisms to clarify members on
activities and results and a favorable
environment to capture members’ criticisms and
proposals.
• Encouraging sectoral leaders who shall serve as
a link between the cooperative and members.
• A well-administered cooperative plan and its
development as well as long-term continuity.
• Adequately introducing innovation and
renovation of administration.
• Policy on a transparent compensation criterion
in line with the financial ability of the cooperative
and remuneration paid for similar official per
category of the cooperative.

43. • Decision of the Board shall override the
individual interests of members.
• Newly elected members shall receive the
information needed for the effective action,
including knowledge of cooperative history,
structure, ACBL. Guidelines, systems,
knowledge of regulating bodies, policies, rules
and procedures, annual reports, minutes,
ordinary meetings, opinions of the external and
internal audit committee, strategic planning, and
detailed economic and financial conditions.
• The cooperative shall have a risk management
policy fully disseminated to the employees of the
cooperative, documenting criteria and
procedures.

46. Merilee Grindle
Harvard Kennedy School
Good governance is
important; it is a condition
that we can hope all the
world’s people can enjoy.
At the same time, there is
much to be understood
about the concept and
about how it is achieved in
practice. Good governance
is important; but like many
other good ideas, it is not a
magic bullet.

47. Six principles have been
recognized b y the Thai
government - these are
Morality, the Rule of Law,
Accountability, Participation,
Responsibility, and Cost-
effectiveness (Economy).
These principles have been
established to support the
well-being of the people and
to assist in the achievement of
the government’s tasks,
making them effective and
worthy.
Thailand, 2010

48. Good practices of
governance bring
contributions to reduce the
challenges of taking
collective decision and
monitoring executive action
and to ensure cooperative
members right, and the
duty, of selecting the future
path of the cooperative.
Brasilla, 2008

49. Best Practices of True
Cooperative (slideshare.net)

50. Management Approaches for
Micro Co-ops (slideshare.net)

51. Management Approaches for
Micro Co-ops (slideshare.net)

52. https://www.slideshare.net/coopj
bb1/management-practices-for-
microcoops

53. Managerial Approaches to Micro
Co-ops (slideshare.net)

54. Management Approaches
for Micro Co-ops
(slideshare.net)

55. Challenges

56. Fighting corruption is not just good governance. It's self-
defense. It's patriotism.
Joe Biden
Our future cannot depend on the government alone. The
ultimate solutions lie in the attitudes and the actions of the
American people.
Joe Biden
My countrymen: we have reached a turning point in our
history. The choice is yours. Shall we venture into this
brave new world, bright with possibilities, or retreat to the
safety of our familiar but sterile past? I am for crossing the
frontier.
Ferdinand Marcos