Examkin

Question

Difficulty: HardCooperative Societies: Types, Principles, Features, and Operation

In a registered agricultural cooperative society in Oyo State, Nigeria, a member who contributed 40%40\% of the society's share capital but generated only 5%5\% of its total annual purchases demands voting power proportional to his financial investment and a share of the annual surplus based strictly on his capital contribution. According to Rochdale principles governing cooperative societies, which of the following statements correctly refutes both of his demands?

  1. Democratic control mandates 'one member, one vote' irrespective of shares held, while patronage dividend allocates surplus according to individual business patronage.Answer
  2. B
    Limited interest on capital allows voting power to scale with equity ownership, while the surplus is shared strictly in proportion to factor rewards of production.
  3. C
    Open membership entitles major financial contributors to extra voting rights, whereas dividend payments must be shared equally among all registered members regardless of participation.
  4. D
    Cooperative governance grants voting rights based on total annual purchases, while net profits are paid out as interest on capital proportional to share investment.

Answer

Democratic control mandates 'one member, one vote' irrespective of shares held, while patronage dividend allocates surplus according to individual business patronage.
Cooperative societies operate under established Rochdale principles. Democratic control ensures equal voting rights ('one member, one vote') regardless of shareholding volume, ensuring human equality over financial capital. Furthermore, surplus is distributed as dividend on patronage, rewarding members based on the proportion of trading business conducted with the society during the financial year rather than their capital stake.

Step-by-Step Solution

1
Analyze the member's first demand regarding voting rights proportional to share capital.
Under the Rochdale Principle of Democratic Control, every member of a cooperative society possesses exactly one vote regardless of the amount of share capital contributed ('one man, one vote').
Cooperative societies are human-centered associations, unlike joint-stock companies where voting is tied to share capital.
2
Analyze the member's second demand regarding surplus distribution based strictly on capital contribution.
Surplus in a cooperative society is distributed primarily as a dividend on patronage, meaning members receive financial returns in proportion to how much they bought from or sold through the cooperative.
Patronage dividend rewards active utilization and business loyalty rather than passive capital investment, though a limited, fixed interest rate may be paid on capital.
3
Synthesize the two principles to identify the correct statement refuting both demands.
The statement specifying democratic control ('one member, one vote') and patronage dividend (surplus allocated by business volume done with the society) correctly refutes both claims.
This directly satisfies the Rochdale principles governing cooperative operations.

Key Concept

Rochdale Principles of Cooperative Societies: Democratic Control and Dividend on Patronage
Estimated Time:2m 0s
Rate this question

Topics

Cooperative Societies: Types, Principles, Features, and Operation

More questions from this topic