July 26, 1999
Kisaburo OKAYASU


In the protocol presented at the 49th General Assembly of the Japan Consumer Co-operative Union (JCCU) held in June 1999, the following description was put forth regarding the scandals associated with co-cooperatives such as CO-OP SAPPORO at Hokkaido prefecture, IZUMI CITIZEN CO-OP at Osaka prefecture, and CO-OP SAGA at Saga prefecture.

"A little while ago, we witnessed the confusion of management and scandals that -- even though they involve only a fraction of co-operatives -- has largely damaged the trust placed in co-operative societies. As a result of problems with the co-operatives' methods of operation and the ethical issues affecting top management, it can be said that discontent and distrust of co-op members has surfaced with regard to the daily business operations of management. Moreover, it has become necessary to put up with the delay in setting up a management that corresponds to the scale of the co-operative and the heightened consciousness of the co-op members." (From Chapter 1 (4) The Recovery of Trust in Co-operatives and the Establishment of Sound Co-operative Management).

Since the Tokyo Congress of ICA (1992), difficulties have arisen, not only in the management of co-operatives but also in the area of public trust. In particular, following the above-mentioned scandals that have been occurring these past several years, it appears that three crises are simultaneously advancing in Japan's Co-operative activities. As Dr. A. F. Laidlaw indicated in his report to the Moscow Congress of ICA (1980); Among the crises in the three stages of growth and change through which co-operatives have passed, the first was a credibility crisis, the second- managerial crisis, and the third- an ideological crisis. (Co-operatives in the Year 2000). If he were still with us, how would he have perceived and responded to Japan's present-day situation of co-operative movements?

Dr. A. F. Laidlaw had also voiced the following warning:
"There is a strong tendency among co-operators nowadays to avoid theory and ideology and instead "get on with the business". But this is a mistaken attitude because every organization or institution is built, first of all, on idea and concept of what people believe and are willing to stand for." (ibid. Co-operatives in the Year 2000)

As we respond to his warning, it is necessary to remember that the point of departure towards the "21st Century of Cooperation" will be that of building an organization that has the values to survive very drastic changes in the 21st century. Therefore, I would like to discuss the ensuing issues, with the central theme that a cooperative is a business organization that

stakeholders chose, a business organization whose trust is worth building.

The issues that I chose to address are as follows;

1. A Fresh Start
2. A Sound Management Team with Legitimacy and Ethics
3. The Reliability of Numbers and Data and Its Organizational Climate
4. The Relationship of the Three Parties: Members, Employees and the elected leaders (Directors)
5. The Origin of Solidarity that Supports the Intellect
6. The Values of the Citizens and the Values of the Co-operative
7. Organizational Operations that Reflect the State of the Co-operative
8. The Ultimate Commitment of the Members and Employees of the Co-operative


1. A Fresh Start

"Is a co-operative an organization that can never do wrong, and never lie?"

It was once commonly believed that "a co-operative is an organization that can never do wrong, and never lie." I myself had believed this. Therefore, I decided to build my life with co-operatives and not work for a private business enterprise. I was never alone in this feeling, and I am certain that it is shared by many of the people who work at co-operatives.

Of course, I am not insisting that no mal-practices existed in old days. An incident of embezzlement of 200 million yen, about 16 years ago, had distressed the university co-operatives. And now, quite embarrassingly though, it seems that multiple incidents of embezzlement have occurred this year throughout the nation. Putting aside the question of whether the cases have been publicized, it is a fact that the investigation into embezzlement and the response there in, centered on the directors or executive directors of the co-operative organizations.

Even as discontent was rising due to inadequate service and lack of ability, the belief that "a co-operative is an organization that can never do wrong, and never lie" led to a misplaced trust. It can be said that this led to "the vocal opinion campaign of co-op members."

"Even a co-operative can be guilty of malfeasance and lying"

Today, few people believe that "a co-operative is an organization that can never do wrong, and never lie." Instances of bankruptcy due to manipulation of finances that through window-dressing; the commandeering and profit-taking by full-time executives of the of co-operatives; and the deceptive mislabeling of brands of meat, which is a common practice; etc., are the work of the entire organization -- although more specifically they are the responsibility of the officials and executives. That is why a method of straightforward evaluation of co-operatives was devised. It may be illogical, but the problem is that the suspecting eyes of the world may consider that this is not a singular incident.

Even a co-operative can be guilty of malfeasance and lying, as is evidenced in the above examples. Clearly, co-operative societies are not "organizations that can never do wrong, and never lie." Is it not true that we have been assigned the task of giving a gift to the future in the form of reconstructing a common truth from this and of constructing a new relationship built on trust? When I think of this from the perspective of the public disclosure of information, the relationship of trust that existed until now may have been "a mirage built on sand." Now, there is a need to address this in a positive manner as the definitive time for reshaping a true relationship of trust.

"A co-operative has no need to do wrong or to lie."

When asked why he works for a co-operative, Mr. Simpson -- who is of my generation and the president of University of Connecticut Co-operative -- lucidly answered, "Because co-operatives don't have to lie to their customers." Obviously, "a co-operative has no need to do wrong or to lie." It is thought that this faith, held together by a central core of officials and executives, will become the nucleus that reshapes the co-operative movement.

2. A Sound Management Team with Legitimacy and Ethics

To ensure trust in management activities generally, we can evaluate the health of management accounting, the disclosure of information, the adequacy of board meeting, the participation of co-op members, and staff morale. These issues stand for sound management. In addition, no one can voice doubts if the management maintains its legitimacy and ethics.

However, to be frank, we must seriously look into whether a co-operative has a sound management that has been established with legitimacy and ethics. Of course, I know that there are co-operatives

that have adopted honesty as one of their basic values. However, when viewed nationally, we cannot deny that there exist thoughts, whether conscious or unconscious, that seem to say "if we so decide, we can make any rules we want." ("Unlimited Authority") This is the due to their closed environment. At one time, I broke into a cold sweat on hearing the decisions of the board of directors of some co-operatives.

The need for management that adheres to the law is paramount in many fields related to co-operatives. I am concerned that there have been incidents, visible even at a glance, that include product liability, food poisoning, window dressing, bankruptcy, unreasonable dismissal,

embezzlement, sexual harassment, death from overwork, and relations with Japanese mafias.

Everyone knows that persons involved in co-operatives have cherished values of good judgment, such as good faith, public disclosure, social responsibility, and thoughtfulness towards others, as listed in the "ICA statement on the Co-operative Identity" ("ICA statement" hereinafter) which was adopted by the ICA in 1995. I would say that this is a standard premise upon which co-operative societies are established, and hence we didn't particularly stress it. However, the current reality of the co-operative societies in Japan -- even if applicable only to a partial segment -- is that in some territories the "standard premise" occasionally breaks down.

3. The Reliability of Numbers and Data and Its Organizational Climate



4. The Relationship of the Three Parties: Members, Employees, and Elected Leaders (Directors)

In co-operative societies, the existence of trust among the members, the employees of the co-operative, and the directors is essential to effective management. No matter what a co-operative undertakes, a relationship of trust among the three will determine the result. It can be

said that the core section supports the organizational power.

The success of the vocal comment campaign and the comment card campaign of the co-op members depend on the every day business attitudes and the presence of mutual trust between the co-op members and the co-op employees. If either side did not trust the other, this activity will not succeed. The managers should always keep this in mind.

At the same time, this activity is not only a reflection of trust. In fact, it is an activity that can increase trust. The point is that everyday business attitudes must entail a willingness to listen, to reply, to keep promises, and to strive for and study for achievements. If there is no willingness to listen, replies are neglected, promises are vague, and phrases such as "we can't do that" are continually repeated. It is not hard to imagine what would happen to the evaluation of the co-op members.

While promoting the vocal comment campaign and comment card campaign of the coop members in the university co-operative for the last two decades, I have experienced one reality -- the improvement of the management level through a shared policy within the business organization; the formulation of an open character that answers everything; an organizational character that answers any and all comments; and the store manager answering from the same level as the members of the co-operative. This is a future asset that no one can replace.

In all likelihood, it is certain that this vocal comment campaign has no meaning under a manager who does not have the will to change the co-operative's constitution or that of his or her organization.


5. The Origin of Solidarity that Supports the Intellect



6. The Values of the Citizens and the Values of the Co-operative

The ICA declaration praises highly the cooperative "values". "The co-operative has the values of self-help, self-responsibility, democracy, equality, fairness, and solidarity. The members of the co-operative assume the traditions of each founder, and adopt the good judgment values of good faith, public disclosure, social responsibility, and thoughtfulness toward others."

Of course, it would be hasty and shallow to state that the actual situation of all co-operatives is as stated in the declaration, but the process of attaining this ideal situation is the co-operatives raison d'etre.

It is not that the fountain of the values of the co-operative is within the co-operative organization. This fountain is in the thoughts and wishes of many people who seek life, person-to-person relationships, and a relationship with society. As long as a co-operative takes this seriously, many people will recognize its value.

The basic values of the co-operative, which many people hold in common, are not exclusive to co-operatives; moreover, it is not something that one specific co-operative can monopolize. In other words, the co-operative organization is the treasure of its members, and the co-operative system is the treasure of the nation and the whole world.

Let's look at the public viewpoint that "once a co-operative breaks down, it will never stand up again in that area, so we should not snuff out the light of co-operatives." Frankly, it is not impossible for a co-operative to go bankrupt. There is a myth that co-operative societies do

not go bankrupt, but they can and do. What's more, the so-called bad co-operatives get crushed. This is the conclusion of the tenets of being responsible for oneself. And when a bankruptcy occurs, the people who are not responsible desire to establish a new co-operative in the same area. This is the historical view, as well. We must then leave the possibility of establishing a new co-operative to the people. After all it is a co-operative activity. From the perspective that the co-operative system is an asset of the nation, this is a social responsibility.


7. Organizational Operations that Reflect the State of the Co-operative



8. The Ultimate Issue - The Commitment of the Members and Employees of the Co-operative

Amidst the drastic reorganization of the co-operative's management, a time has come for the struggle of the directors and executives. But it is not just that. The commitment or aggressive participation of members and employees is also vital. Needless to say, the same applies to rebuilding the co-operative too.

The co-operative where the management falsifies the accounts has a need to evaluate not only the conformity with the vision (policy) and its technical abilities, but of the manager's lack of solidarity, and the lack of trust among the three parties -- members of the co-operative, employees, and directors. This is worth investigating because, it is the core that supports the co-operative's power and organizational performance.

Professor Hans H. Munkner, of Narburg University, Germany, analyzed the precedent of the bankruptcy of the Co-op Dortmund, which was on a scale equal to that of the Co-op Sapporo, and proposed the improvement of corporate governance. In his report, he pointed out that "The lack of vision, the lack of a sense of direction that the management team must advance for the future and the lack of coping abilities in the face of difficulties are threatening many co-operatives that face situations that are thought to be disadvantageous to the development of co-operatives in a changing environment. The important issue is not just the problem of the governance of co-operatives, but the problem of the raison d'etre of the co-operative in modern times. There is a lack of clear characteristics and an individual corporate identity." (Report of Consumers' Co-operative Institute, Japan No. 22, March 1999)

A vision is something that delineates the organization's way of Life and sense of direction for future advancement. It represents the Spiritual and material driving force that advances daily activity. Therefore, even if drawn up, it is never something to pray for, nor does it testify to the goodness of co-operative societies on paper. Vision is in the daily lives, and must be connected with the breath of each manager of each co-operative.

Commitment is not for measuring the obedience of orders from above. An honest commitment is born when individuals, who have been respected personally, have thoughts that bring to life their own abilities. Such commitment challenges their abilities and make them strive to achieve each member's social, economic, and cultural interests, and dovetail these with the sense of direction and the actual operations of the co-operative.

Determining what kind of organizational culture the co-operative will have through these points is essential to the sense of direction and actual day-to-day operations. However, in the case of organizational culture/enterprise culture, if it leans towards corporate philanthropy and

the citizenship of the corporation, I think the culture becomes suspicious. It is thought that organizational culture is necessarily a kind of culture that is formulated through the activity of a group, and is imbibed with the concepts that are applied to enterprise activity.

Organizational culture is vital for instructing and governing the cooperative activities of all the employees of the enterprise. It contains the enterprise's philosophy and spirit, management's ideas, objectives, value system, historical tradition, organizational climate, and behavioral model. In that sense, it is decisive to investigate organizational culture.

The September 1995 General Assembly of the ICA, which brought together co-operatives from around the world, adopted statements related to the identity of the co-operative. They were adopted with Dr. A. F. Laidlaw raising the issue, the raising of the four proposals regarding ethics by then-President Marcus, and Mr. S. Å. B k's report to the ICA Tokyo Congress. I am sure that Japanese co-operatives have fulfilled their active role in this respect. It is the social responsibility of the members of the co-operative, their responsibility for the future, to understand these are not mere words and to earnestly apply them in a complementary fashion to the culture and climate of Japan. This is my very own commitment.

(Report of Consumers' Co-operative Institute, Japan No. 23 )