A study on the surplus distribution problem among the members of China farmer professional cooperative
2018
Cheng, M. | Moritaka, M. | Fukuda, S.
The Farmer Professional Cooperative (FPC) Law was enacted in 2006. Under the government's policy guidance, many FPCs were currently established by industrial and commercial capital from entrepreneurs, merchants, and village cadres or by large-scale farmers. At this type of FPC, there is heterogeneity in the investment amount into FPC between core members and many smallholder farmers. Meta-analysis through previous case studies indicates that the core members make a resolution of the distribution of FPC's surplus as much as possible for their favor through violating the FPC Law, which restricts the above limitation of distribution of investment at 40% of the total surplus. Moreover, membership assembly, which can intrinsically prohibit core members from the violation, does not work. In this paper, we indicate that the reason of inefficient membership assembly is the occurrence of prisoners' dilemma among smallholder farmers, which prevents the smallholder farmers from taking an action of the audit; making a counteroffer as well as raising it on the membership assembly. We present three alternatives to deal with this problem. First is the penalty for the core members when violating the FPC Law for the surplus distribution. Second, the auditor-secretary and administrative board should include the representatives of smallholder farmers. Last is to educate the smallholder farmers to enlighten them regarding FPC's philosophy, members' rights and so on.
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