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Democratic Governance and Member Capital Stakes in Cooperatives

This short paper begins by noting that presently governance has been one of the most talked about topics for academics, policy makers, executives, development professionals, corporates, and bilateral and multilateral aid/assistance organisations. It further points out that like many social constructs, governance also has multiple meanings and definitions. This paper attempts to review the literature on democratic governance at the cooperative level and its relationship with members’ capital stakes.

The basic argument set out by the authors is that there is a close positive relationship between the extent of member capital stakes in a cooperative, the extent of member participation in the decision making processes, the quality of services provided by the cooperative and hence their patronage and the performance of the cooperative and member satisfaction.

The hypothesised relationships suggest that if the members have higher capital stake in the cooperative, they are likely to take more interest in the decision making processes influencing the cooperative to provide services that are relevant and useful to the members, which will result in greater patronage of such services. This in turn, it is said, will improve the performance of the cooperative and result in member satisfaction.

The paper provides basic evidence from the literature on Indian Cooperatives, including evidence from dairy cooperatives and from multi-purpose cooperatives. It ends with two strategies for mobilising funds that emerged from an analysis of the cases – the appendix to the paper sets out in details the cases of a cooperative located in a resource poor region (Mulukanoor) and the fund raising strategies of Achanta cooperative.