their candidates.<sup>6</sup> In particular, one would expect the economics of elections would incentivize boards to use their authority for rent-seeking. While board elections are smaller in scale than local government elections, and usually less competitive (voter turnout figures of 20% or less were commonly quoted), anecdotal evidence suggests that candidates spend on average between five hundred thousand and one million pesos in these campaigns. These include the standard expenditures on, for example, transporting cooperative members (i.e., consumers) to the voting booths, as well as vote buying, with a commonly quoted figure of 200 pesos per vote. The fact that voter turnout in board elections is significantly less than that in municipal elections implies that these elections are more susceptible to manipulation as there are fewer votes to buy to determine an outcome.

Given the importance of key individuals to deliver votes, the informal contract between a board member and these individuals would involve the delivery of votes in exchange for the rents that the EC can provide. These rents can include lucrative suppliers contracts to politically influential individuals with associated kick-back schemes; recruitment of staff, particularly low-skilled casual employees, sometimes ahead of board elections; and intervention on behalf of consumers to forgive penalties for non-payment of bills, or to prevent disconnection.

Some board members may use the EC board as a ―stepping stone‖ for other elected posts (e.g., municipal council) for which the entry barrier for electoral contests is higher (and elections more expensive). These members are expected to use their positions on the board to both build positive reputation among the local constitudents and by building strengthening their campaign ―war chest.‖ Given that an ordinary voter/consumer is not in a position to see direct contribution of an individual board member on the EC‘s performance, the reputation building by a board member is more likely to take the form of addressing specific needs and demands of individual constituents such as a request for deferring bill payments or for employment. From the cases examined for this paper, the frequency of EC board members aspiring for higher elected posts appears to be low.

Given the political process by which board members are elected, we expect each EC to have a baseline value of ―a certain degree of politicization.‖ This stems from the electoral incentives of the board of directors combined with weak bottom-up accountability due to imperfections in EC board elections. We a priori expect this to be the norm across all cooperatives. Furthermore, the reality of local elections in the Philippines where local clans, as opposed to nationally-organized political parties, operate as the key organizational unit for political activities means that a candidate for an EC board is unlikely to succeed electorally without support of one of the local clans. Typically, a single board member represents one of the several local governments in the catchment area. Hence obtaining endorsement of the mayor of that local government, or an alternative local political force, is crucial for his/her electoral success. This makes most board members effectively dependent on mayors or other influential political groups in the locality.

# _The Incentives of Local Politicians_

Local politicians have the choice of either intervening in the functioning of the EC to gain access to EC rents to finance their own political campaigns and to aid in political alliance building (as alliances are built and maintained on the basis of exchanges of favors) or to address EC-wide performance issues that appeal to voters. The former would include brokering employment

> 6 For an analysis of flaws in the Philippines‘ national elections, see ―CEPPS Philippines Election Observation Program, Strengthening Electoral Process, IFES Final Report.‖  International Foundation for Electoral Systems, August 2004.

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