Organizational Structure Of

Organizational Structure of a Co-operative Contents 1.Organizational Structure of Co-operative Institutes 2. Meetings 3.Board of Directors 4. Chairman 5.Distinguishing factors of Co-operatives

1.Organizational Structure of Co-operative Institutes With 70% of the population engaged in agriculture of which majority of them being poor,the co-operative movement in India was more or less confined to agricultural credit thusforming the oldest and the mist important forms of cooperative movement. The credit co-operatives can be classified as either 1.Agricultural credit co-operative 2.Non-agricultural credit co-operative Agricultural Credit Co-operative The first co-operative legislation in respect to credit was the co-operative credit societyact 1904. The society was then known as Agricultural Co-operative Credit Society, whichengage themselves mainly in the disbursement of credit to their members, following theReiffeisen pattern of organization. Agricultural Credit Co-Operative Structure 1.Short term and medium term: It is basically a 3-tire system with primary creditsociety at village level, central cooperative banks at district level and also the statecooperative banks at the state level. (They are also the APEX banks)2.The long-term agricultural co-operative structure: is of 2-tires. The primary co-operative land

More Notes and Projects and Resources for BMS and MBA students available at http://www.ManagementParadise.com : The TRUE Voice of Management Students

development bank at sub-divisional level and the state cooperative land development bank at state level. 3.Short term and medium term co-operative credit: It’s a 2tire system with primary co-operative credit society at the village level affiliated to the district central co-operative bank which is also APEX co-operative bank. Features:

A.A village is to be the limit for societies membership and area of operation. B.Members must know each other personally and admit no new member whom they don’t trust. C.The local members on voluntary basis carry out administration of the society. D.Liability of members is unlimited. E.All profits to be carried in the visible reserve fund. F.Loans to be given to members for definite objectives. Non Agricultural Credit Co-operative Society I.Short term credit: Duration is 12-15 months and is provided for meeting the seasonalagricultural purchase of manure implements seeds etc. The credit is provided at thebeginning of the season and is collected after the harvest is sold. This is known ascrop loan. II.Medium term: Loans ascending from 15 months to 5 years for purchasing farmanimals, carts and other heavy implements. It is also given for digging wells, land orconsolidation of land holdings. III.Long Term: Loans granted for a period of more than 5 years to make permanentimprovements of land declaiming waste lands, tube wells, purchase of tractors etc.Such loans are to be repaid within 20 years maximum. The short and medium termloans are provided by the agricultural credit societies but co-operative landdevelopment banks provide the long-term loans. Urban Co-operative Banks The urban co-operative banks are co-operative banks, which are situated in the urbanareas. They play an

important role for the benefit of small industrialist, trader, middleclass population etc. The Role 1.They organize and bring together middle and working class population in urban andsemi-urban areas and inculcate in them the habit of thrift and self-help and acquaintthem with the elements of banking principles. 2.Mobilization of savings and fulfilling the needs of finance for rural, industrial and other development functions. 3.Providing credit on reasonable terms to protest them from exploitation by the hands of moneylenders and unscrupulous agency. 4.To make available essential banking facilities to remote areas and to provide experienced and effective leadership to the co-operative movement. Dual Statutory Control The urban co-operative banks are subject to a dual statutory control of:  The Registrar of the co-operative society (state government)  The RBI Co-operative Banks are governed by the respective state co-operative act and also thebanking regulation act 1949. Matters such as registration of banks, approval of theamendments of the byelaws, amalgamation and division of banks, explosion ofmembers, appointment of an administrator, audit, and liquidation etc., fall within thestatutory jurisdiction of the registrar under the provision of the co-operative law. Matters like issue of banking license, banking transaction and business, supervision,policy matters fall within the statutory authority of the RBI under the provision of theBanking regulation act 1949.

G.Meetings 1.General Body Meeting: It is the general meeting of the shareholder after the registration of the co-operative. It isobligatory on the part of the society to hold its first general meeting within 3 months afterthe registration of the society. It is the duty of the chief promoter to convene such ameeting. If the chief promoter fails to do so it shall be called by any person authorized todo so by the registrar. Agenda for the First Meeting: A.Election of a president for the co-operative. B.Admission of new members. C.Receiving statement of accounts and reporting all transactions entered into by the promoter’s upto 14days before the meeting. D.Constitution of a provisional committee under regular election is held. E.Any other matter as decided by the chair. 2.Annual General Meeting (AGM): These meetings are held annually to enable the members who are the real owners toexercise ultimate control over the affairs of the co-operative. In the case of the cooperative the interval between 2 Annual General Meetings shall not exceed 15monthsunless extended by the registrar. Procedure: 1.The meeting shall be convened by the secretary under intimation to the registrar who may depute his representative to attend. 2.The meeting shall be presided over by the president or a member who will be elected to preside in their absence. 3.The secretary shall read out the agenda for the meeting and the items of discussions.

4.Voting can be undertaken for any particular cause, which will be conducted by the president. 5.If all items in the agenda cannot be finished on the same day, the meeting may bepostponed to a suitable day not exceeding 30 days or as decided by the memberspresent. 3.Extra Ordinary General Meeting (EOGM): Extra Ordinary General Meeting may be called at any time by the chairman or by a majority of the committee and has to be called within 1 month. It is called when: a.A requisition in writing of 1/5th of the members of the society or by that number of the members mentioned in the byelaws. b.At the instance of the Registrar. c.At the instance of the committee of the Federal Society of which the society is a member. F.Board Of Directors: (Democratic – through election)

Functions 1.Admission of new members and allotment of shares. 2.Approval for transfer of shares. 3.Preparation of guidelines for the conduct of the operation as per byelaws, rules and acts. 4.Approval of annual budget and its submission to general body. 5.Sanction of the expenditure for the management in the allotted budget. 6.Ensuring maintenance record and its submission to the registrar. 7.Raising resources for managing the day-to-day affairs.

8.Sanctions of investment of funds. 9.Appointing staff and agencies. 10. Appointing sub committees or exclusive committee and delegating necessary powers to them. 11. Electing the chairmen amongst themselves. Relations between Board Of Directors and the Executives The Board Of Directors are elected representatives of the members who are the realowners of the organization. The main function of Board Of Directors is policyformulation and deciding the overall objective and goals of the organization. Theimplementation or execution of the policies is carried out by the managerial hierarchylead by the general manager. The duties of the Board Of Directors are to see that thepolicies formulated are implemented properly. But many times it happens so that theBoard Of Directors interference in day to day functioning of the executive due towhich conflict situation is created as the executive feels that they lack in independentdecision making capacity and have been treated as mere clerks. The Chairman of the Board has to perform a crucial function of co-ordination becausehis main task is to provide necessary guidance and also to give the executiveautonomy in the implementation of the decisions by the board. Steps to control/handle conflicts 1.The board while taking decisions on policy matters should involve the chief executive. 2.The executive and the board should hold combine meetings for mutual understanding and respect. 3.The board should consider practical difficulties of the executive.

4.The objective of service to the members should be given prime focus. 5.The Chairman should achieve co-ordination between the professional and the nonprofessional group. 6.The executive should not keep the Board Of Directors in dark while implementing decisions. Responsibility of the Board Of Directors/Managing Committee 1.It should be cost conscious. 2.All members should be given equal opportunity to discuss and voice their views. 3.Decision taken should be collective and no members must be allowed to jeopardize the decisions. 4.Decisions taking should be with full consent and proper understanding of the problem. 5.The Board Of Directors should be responsible towards: a.Responsibilities towards Employees b.Responsibilities towards Consumer c.Responsibilities towards Government d.Responsibilities towards Shareholder e.Responsibilities towards Environment f.Responsibilities towards Society G.Chairman The chairman is responsible for the overall management and guidance to the co-operatives. He performs all such duties and exercises all such powers as may beconfined on him by the respective state co-operative act. His role is most crucial as heperforms the leader of the top management, which is the board of directors. The powers of the Chairman:

1.To conduct and regulate the proceedings in the meeting. 2.To decide the priority of the speakers. 3.To regulate their speeches. 4.To order and conduct poll.. 5.To exclude certain matters from the minutes if they are irrelevant or detrimental to the society. Duties of the Chairman 1.To see that the meeting is duly and properly constituted in accordance with the rules and regulations 2.To see that the business is conducted in accordance with the agenda unless willing changed by the members. 3.To maintain order and discipline in the meeting. 4.To act impartially. 5.To accept valid demand for election and make arrangements for it. 6.To declare the meeting closed. 7.To ensure that correct minutes are entered by the secretary in the minute book and to sign them.

1.Distinguish between Co-operative Organization and Joint Stock Company 1. Definition: Co-operative Organization – This is an association of persons who have come together on a voluntary basis to promote their economic interest. 2. Basic Objective: Co-operative Organization – The primary objective of a co-operative society is to

provide basic or essential service to its members. Profit earning is a secondary motive. purely commercial organization. 3. Minimum Members Co-operative Organization – A minimum of 10 adults are required to form a cooperative organization. for a Pub. Ltd. Company minimum 7 members are required. 4. Share List Co-operative Organization – It is always kept open for new members. A person can become a member of the society by purchasing a share. Co-operative shares are not sold beyond their face value and hence they are not subject to speculation. . Thus shares of a company are subject to speculation and normally the face value and market value differ. 5. Voting Rights Co-operative Organization – They are based on the principle of ‘One Man One Vote’. Share One Vote’. 6.Transfer of Shares. Co-operative Organization – Shares are non-transferable. A member of the society can withdraw his capital by giving a notice. of the company. Shares are freely transferable in the market. 7.Distribution of Surplus Co-operative Organization – Co-operative provide a certain amount of Interest on Capital. Surplus is not distributed in proportion to the capital contribution. The return to the members are called as ‘Bonus’

. 8. Privileges Co-operative Organization – The basic objective being service they enjoy lot of incentives from the Government and also have exemptions from Income Tax, Registration Fees, Stamp Duty etc. 9.Area of Operation Co-operative Organization – Generally co-operatives operate in a limited area such as a Town, Locality, Tribe etc. . 10. Members Interest Co-operative Organization – Members take personal Interest in the working of the society. of the company. 11. Capital Holding Co-operative Organization – An individuals holding is generally limited. Dividend on a share cannot exceed 12% of the net profit of the current year. 12. Management Co-operative Organization – Election by democratic process. Management is responsible to the members. 13. Financial Resources Co-operative Organization – They are limited because they don’t have the capacity to raise and borrow funds. . Co-operatives – Formation is not as easy as it is an association of people. Co-operatives – It is governed by the Maharashtra State Co-operative Society Act 1960.

Co-operatives – It has to be registered . Co-operatives – Minimum number of members is 10. Co-operatives – Liability is Limited Co-operatives – The identity is separate. . Co-operatives – It does not come to an end by the death of any of the members. Co-operatives – Not more than 12% of the net profit can be distributed as bonus.

Role of State Government The responsibility of making co-operative movement a success is with the respective state government because co-operative is included in the state subject list. Co-operative Department 1.Co-operative Education and Training: The department helps in the training anddevelopment of members. The various co-operative schools and colleges have beenstarted in Maharashtra. Eg. Pune, Nagpur, Satara etc. The Training of highest cadre of personnel is provided by the Vaikuntbhai Mehta National Co-operative Management Institute at Pune. 2.Financial Assistance: Direct financial assistance is provided by the co-operative department to the cotton mills, sugar factories, cooperative banks and co-operative unions in the way of: a.Purchase of shares of co-operative societies.

b.To take underwriting c.To allow raising of loans beyond stipulated limit. d.To provide facilities for repayment of loans. 3.Guidance to new co-operative societies: The department provides guidance to newly registered societies and motivates them in their functioning. 4.Administration Expenditure: The co-operative department has the power to frame therules and according to the various laws to help the co-operatives function efficiently.The department issues circulars, directions from time to time to guide the co-operative. 5.Co-operative development also takes over inefficient and economically weak societies and help in the reconstruction process. 2. Registrar The Registrar occupies crucial position in the co-operative system. He is thefacilitator in the implementation of the declared policy of the state-governmenttowards rural development through the co-operative sector. He is the most importantmedia through which a democratic government fulfills the social and economicaspirations of the people. He has also to co-ordinate between the government and thenon-official leadership. He has also to maintain administration realism and thus givecorrect advise to the popular government. The Registrar of the co-operative society executes the cooperative law.  The powers in regard to Formation/Registration, to widening up of co-operatives remain with the Registrar, while the financial help and other assistance is done by the

co-operative department.  The Registrar is assisted by the Assistant Registrar, District Registrar and other officers appointed by the Co-operative Department.  The powers and functions of the Registrar are prescribed by the respected Cooperative Acts. The Government can also delegate some additional powers to the registrar for promoting co-operative movements.

Functions of the Registrar can be divided into: 1.Statutory Functions: The statutory functions of the registrar are to carry out dutiesentrusted on him by the Maharashtra Co-operative Acts 1960. These are registration,amendment of byelaws, audit of Accounts, execution of awards, liquidation processetc. In certain conditions the registrar has the authority t o suspend the management ofthe society for its malpractices in accounts. He also has to see the day-to-day affairsof the society are carried out without hindrances. He is also responsible for thesettlement of disputes between and within societies. 2.Development and Promotional Functions: The co-operative movement has to playan important role in the social and economic development of India. The registrarbeing a facilitator and coordinator of the developmental process, he has to do variousfunctions as a friend, guide and philosopher in relation to co-operative society. Criticisms on the Role of the Registrar The Registrar is being criticized that instead of being a friend, philosopher and guideof societies he has become the inspector general of co-operative police carrying

outfunctions like imposition of penalties, suspension and filling legal charges againstsocieties. Excessive control of Registrar has lead to ill effects like corruption, rivalry between societies, high handedness, beaureacratic delays and redtapism Role of Leadership in Co-operatives 1.Educating the people on co-operative principles. 2.Influencing the masses to form co-operative organization. 3.Organizing the group and explaining to them the objectives and goals of the venture. 4.Motivating the masses. 5.Giving direction to the movement and coordinating and controlling the activities. 6.Explaining a vision to the people and showing uttermost commitment and faith towards it. 7.Reforming the role of a councilor and a troubleshooter. Other problems include: 1.Dependence on external sources 2.Conforming financial assistance through few rich due to favoritism 3. Unemployment 4. Poverty. 5.Lack of Infrastructure 6.Unequal distribution of wealth and resources 7.Low per capita income

8. Casteism 9. Religion fundamentalism 10. Linguistic Conflicts 11. Regionalism 12. Lack of women empowerment 13. Population Explosion 14. Corruption Professionalisation of management is desirable due to the following reasons: (i) Professionalisation will lead to increase in the knowledge and skills of managers as minimum educational qualifications would be prescribed for would be managers. Managerial environment of the future is giving to be more challenging requiring a high degree of Professionalisation from managers. It would no longer be possible to manage successfully with intuition or trial and error. (ii) Professionalisation of management would improve the status and prestige of management career and of managers. It would remove the impression that managers are interested only in maximizing profits for shareholders. (iii) Professionalisation would involve statutory control over managers. Such control will minimize the malpractices like underhand payments to managers, speculation in the company's shares, frauds in practices and management, etc. Managers indulging in such practices will be debarred from practicing management. (iv) Professionalisation will define the duties and responsibilities of managers precisely. A code of conduct would be prescribed. This will improve the ethical environment of business and unreasonable demands on managers would be checked. (v) Professionalisation would speed up management education and training. It would also attract more talented people into management career.