Guidelines on Compensation for Cooperative Directors

Republic Act No. 9520 (Cooperative Code of the Philippines) provides the operative rule on director compensation under Article 46.
The Circular is issued to ensure proper implementation of Article 46 of Republic Act No. 9520. (Section 2)
The Circular is issued to enhance the accountability and fiduciary responsibility of cooperative officers as trustees of the members. (Section 2)

“Compensation” is a broad term covering all forms of remuneration given for services rendered; it does not require immediate payment, direct return, or direct cash equivalent. (Section 3(a))
“Per diem” refers to an allowance given as reimbursement for extra expenses incurred in performing duties. (Section 3(b))
“Honorarium” refers to an appreciation gesture given to a person with professional expertise in recognition of superior knowledge in a specific field, granted not as an obligation but as appreciation for services that admit of no compensation in money. (Section 3(c))

The by-laws of the cooperative shall fix the compensation of the directors. (Section 4)
If the cooperative by-laws have not fixed directors’ compensation, the directors are not entitled to receive any compensation from the cooperative. (Section 4)
In the absence of by-laws-fixed compensation, the cooperative shall grant only reasonable per diem to directors. (Section 4)

Other compensation other than per diem may be given to directors only if authorized by a majority vote of all members with voting rights at a regular or special general assembly meeting specifically called for the purpose. (Section 5)
Directors represent the cooperative’s member-shareholders as trustees and must not use their director office for personal benefit at the expense of the cooperative and members. (Section 5)
The grant of compensation other than per diem to directors must be made only after adoption of a General Assembly Resolution approving such compensation. (Section 5)

The grant of per diem to directors shall be suspended when the cooperative incurred a net loss in the preceding year. (Section 6(a))
The grant of per diem to directors shall be suspended when the cooperative’s dividend rate fell below the official national inflation rate during the preceding year. (Section 6(b))
During the suspension period, the directors and officers shall not receive any per diem from the cooperative. (Section 6)
The suspension must be implemented strictly until the cooperative recovers from the adverse circumstance or circumstances. (Section 6)
Recovery does not compound the suspension effects, and no recovery of per diem during the period of suspension is allowed. (Section 6)

During the first year of existence of a cooperative, directors are allowed to receive only reasonable per diem. (Section 7)

Compensation of the members of committees may be fixed in the by-laws of the cooperative. (Section 8(a))
Compensation of cooperative employees shall be determined by the board of directors, subject to existing labor laws. (Section 9(a))

Authority inspectors or examiners shall include the implementation of Article 46 of Republic Act No. 9520 and this Memorandum Circular as an item in every inspection or examination. (Section 10(a))
The same implementation item must be reflected in the inspection or examination report. (Section 10(a))

If any provision of the Circular is declared unconstitutional, the remaining provisions continue in full force and effect. (Section 11)