German legislation with special emphasis on co-operative groups

Abstract

In this paper the author investigates the limits set by co-operative legislation to preserve the special character of co-operatives on the one hand and to allow adjustment to presumed and real needs of the global markets on the other, using the German case. It is argued that co-operatives like any other enterprises are free to form groups and super- structures and to co-operate with other enterprises in any lawful form and that they can use the tool box developed for economic co-operation among enterprises by investor-led firms, as long as this does not contradict the main and only legitimate purpose of co-operative societies, which is to promote the interests of their members by service relations. Many of the provisions of conventional co-operative laws, made to preserve the unique character of co-operatives as self-help organisations of their members are seen by professional managers as burdens of the past to be removed, if co-operatives are to survive as enterprises, even with a low co-operative profile. The author suggests that preserving a clear profile as member-oriented and member-controlled organisation may be the competitive advantage, which – together with special rules of doing business the co- operative way – will allow co-operatives to succeed as stable and reliable poles of local development in our rapidly changing environment, dominated by highly mobile and largely anonymous conglomerates. The analysis is carried out in three steps: • Autonomy of co-operatives to co-operate, federate or network is described as a matter of freedom of association more than of co-operative legislation. • A closer look is taken at the tool box developed for co-operation among enterprises and general as well as legal issues related to practical use of these tools by co-operatives and their federations are discussed. • The author comes to the conclusion that not all forms of economic co-operation designed by investor-led organisations are in conformity with the special character of co-operatives. It is argued that co-operatives cannot strengthen their position in the market by levelling or even eliminating their unique profile and their internal propelling forces, namely member-commitment and member-support. By approximation to companies and by abandoning the co-operative model, such co-operative enterprises lose their reason for being and demutualise assets accumulated by generations of members. They may possibly survive as “employees’ enterprises” but not as a co- operatives. The current problems within the integrated system of German co-operative banks are illustrated by translation of a relevant article from the German press, reproduced as an annex.