As every one of us are aware that the very purpose and objectives of co-operatives provide the framework for co-operative corporate governance. Co-operatives are organized groups of people and jointly managed and democratically controlled organizations. The co-operative movement believes in ethical values of honesty, openness, and social responsibility. The seven co-operative principles well known as co-operative Rainbow and therefore the reference to the co-operative principles is very much significant from the view point of corporate governance. The values and principles of both co-operatives and corporate governance has no much difference except the terminology but the basic thought and purpose is common and therefore the principles codes and best practices for boards will become far more attractive and effective once these fundamentals are agreed upon and instituted.

Corporate governance especially in the co-operative sector has come into sharp focus because more and more co-operative banks in India have experienced grave problems in recent times. The banking scenario has undergone sea change subsequent to the Madhavpura Mercantile Co-operative Bank scam. The media has blown up the scam and given it adverse publicity without going in to details of contribution of the urban banks and made it appears as if the entire co-operative banking sector is fraud prone. However, the co-operative should survive as nobody can deny co-operatives cater primarily to lower and middle strata of the society majority of them have manageable area of operation. Therefore the management and the staff have a better feel and familiarity of the environment and the customer. They are therefore, eminently suitable to mobilize domestic savings from still un-covered small saver to build up their resources and promote economic activities of improve the level of income so that they could join the main stream of the society at large.

In our next session we see how co-operative banks strengthen their base through corporate governance.