A cooperative organization is an association of persons, usually of limited means, who have voluntarily joined together to achieve a common economic end through the formation of a democratically controlled organization, making equitable distributions to the capital required, and accepting a fair share of risk and benefits of the undertaking.
The following are the characteristic features of a cooperative organization as a form of business organization:
- Voluntary Association
A cooperative society is a voluntary association of persons and not of capital. Any person can join a cooperative society of his free will and can leave it at any time. When he leaves, he can withdraw his capital from the society. He cannot transfer his share to another person.
- Spirit of Cooperation
The spirit of cooperation works under the motto, ‘each for all and all for each.’ This means that every member of a cooperative organization shall work in the general interest of the organization as a whole and not for his self-interest. Under cooperation, service is of supreme importance and self-interest is of secondary importance.
- Democratic Management
An individual member is considered not as a capitalist but as a human being and under cooperation, economic equality is fully ensured by a general rule—one man one vote. Whether one contributes 50 rupees or 100 rupees as share capital, all enjoy equal rights and equal duties. A person having only one share can even become the president of cooperative society.
Capital of a cooperative society is raised from members through share capital. Cooperatives are formed by relatively poorer sections of society; share capital is usually very limited. Since it is a part of govt. policy to encourage cooperatives, a cooperative society can increase its capital by taking loans from the State and Central Cooperative Banks.
- Fixed Return on Capital
In a cooperative organization, we do not have the dividend hunting element. In a consumers’ cooperative store, return on capital is fixed and it is usually not more than 12 p.c. per annum. The surplus profits are distributed in the form of bonus but it is directly connected with the amount of purchases by the member in one year.
- Cash Sale
In a cooperative organization “cash and carry system” is a universal feature. In the absence of adequate capital, grant of credit is not possible. Cash sales also avoided risk of loss due to bad debts and it could also encourage the habit of thrift among the members.
- Moral Emphasis
A cooperative organization generally originates in the poorer section of population; hence more emphasis is laid on the development of moral character of the individual member. The absence of capital is compensated by honesty, integrity and loyalty. Under cooperation, honesty is regarded as the best security. Thus cooperation prepares a band of honest and selfless workers for the good of humanity.