The Relationship of Membership Voting Policies to Equity Redemption: Grain Cooperatives in Illinois

Abstract

Policies on membership and voting, and their relationship to equity redemption in sustaining, limiting, or terminating a member's control and ownership were examined for grain cooperatives in Illinois. The results showed a high probability, for both cooperatives with an equity redemption program and those with no such program, that inactive and past members would not have voting privileges even though they still retained equity capital in the cooperative. A major percentage of no-program cooperatives received no pressure from members for adopting an equity redemption program. Cooperative managers and boards of directors are responsible for developing membership, voting, and equity redemption policies consistent with established principles of cooperation. The Rochdale pioneers, Nourse [211, Fetrow [151, Bakken [2], Schaars [23], and others, developed at least nine different principles to follow in the operation of a cooperative firm. These include member control, member ownership, limited returns on capital, service at cost, etc. [1, p. 521. Member control is the political decision making process, and member ownership is the equity capital invested by members. Ideally, member control and ownership are held by the same individuals. When members have equity capital in a cooperative, they have an interest in having a say about how it should be organized and operated [1, p. 59]. The problem arises when a member ceases patronizing the cooperative or no longer wishes to be a member. An inactive member, one who ceases patronizing, has an interest in retaining voting rights based on any equity in the cooperative. A member seeking to terminate membership needs from the cooperative a procedure to have this equity repaid in cash before giving up voting rights. This should be done with a formal equity redemption program. However, there are cooperatives where member control and ownership are separate,