Cooperative corporation

Ike Señeres

PARDON my ignorance, but I used to think that a cooperative is not a corporation. The common thinking nowadays is that only the companies that are registered with the Securities and Exchange Commission (SEC) could be considered as corporations, and the companies that are registered with the Cooperatives Development Authority (CDA) could not be. As a matter of fact, only those that are registered with the SEC are referred to as “companies,” as if those that are registered with the CDA are not. Over at the Department of Trade and Industry (DTI), they will not allow businesses to affix the word “Company” to their business name, not unless they are registered with the SEC. It goes it goes without saying that the DTI will also not allow cooperatives to affix the word “Company” to their business names.

I think that the most reasonable way to resolve this issue is to say that a cooperative is a special corporation, and that is why it is registered with the CDA, and not with the SEC. For all intents and purposes however, it should not be treated like a second class corporation, because it is truly a bona fide corporation, except for its democratic form of governance. Unlike a regular corporation wherein stockholders would have as many votes as the number of shares that they hold, the stockholders of the special corporation (the cooperative) could only vote once, following the “one member one vote” rule. To put it another way, the system of governance of a regular corporation is not democratic, because members could vote more than once, because of their financial capital. On the other hand, the governance of a special corporation (the cooperative) is democratic, because more weight is given to their social capital.

Not that I would want to digress from this topic, but a Barangay could also be considered as a public corporation, because its registered voters could vote in the Barangay General Assembly(BGA), in the same way that stockholders could vote in a Stockholders Meeting. Just like in a cooperative however, the “one member one vote” rule is applied, thus making the voting in the public corporation (the Barangay) more democratic than that of a regular corporation. What is not very clear however is whether or not the Commission on Elections (COMELEC) could make the local voter’s list available to the Barangay, so that only the registered voters could vote in the BGA. By the way, there appears to be no law that prohibits the Barangays from sponsoring the creation of local cooperatives.

To now go direct to the point, there should be no argument anymore that a cooperative could be managed like a corporation, except in the way that the Chairman and Directors are elected. For that matter, there should also be no argument in the appointment of officers, because the rules and regulations should be the same in the case of both the regular corporations and the special corporations (the cooperatives). Not that I would want to trivialize this issue, but the bottom line here is the political will of the stockholders. If the stockholders of the cooperatives would allow themselves to be swayed by a small group of undeserving leaders, that is really up to them to give up their own democratic rights.

Under normal conditions, a small investor would have no voice in a regular corporation. Even if he could have a vote or two to cast in a Stockholders Meeting, his vote would be drowned out by the votes of the majority owners who would have more votes than he has. In contrast, a small investor in a special corporation (the cooperative) would have the same one vote as the majority owners, because of the “one member one vote” rule. Perhaps not known to many, it is possible for one man to be the majority owner of a cooperative, except that he could only have one vote, just like the other members. In theory, only those who are socially oriented would agree to this, equation, and that is where social capital comes in.

It is a known fact that there are many people who would like to help other people get out of poverty, but they are also not inclined to part with their money without expected returns. As I see it now, investing in a cooperative is the best way for these good people to help others, because that way, they would not just get back their money, they would also get returns in terms of rebates and dividends. In that sense, investing in a cooperative is better than investing in a regular corporation, because the latter would only give dividends and not rebates. The other advantage of a cooperative is that it has a built-in market of loyal customers, something that a regular corporation does not have.

As our country enters the era of Asean integration, it is now mandated to adopt the rules of good corporate governance, including the adoption of standardized accounting and auditing rules. Because of that, it would be good for the cooperatives to also adopt these rules, if only to take advantage of the fact that the cooperatives could also be managed like the regular corporations. If that is done, there would be a better chance to remove corruption and inefficiency within the cooperatives. In relation to that, it would also become possible to remove the practice of appointing the family members and personal friends of directors as officers, even if they are not qualified.

There are many definitions of social capital, but one definition is that it is the non-monetary value of skills and talents that members could contribute to the success of a cooperative. Unlike a regular corporation where only the rich stockholders could make money, every stockholder of a cooperative has the opportunity to make money, by working together and cooperating with each other, which is what cooperativism is all about. In theory, if more cooperatives would become richer, more members would also become richer, hence more people would get out of poverty. Only social capital could make this happen because in truth, social capital has more value than financial capital.

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