Cooperative

A cooperative (also co-operative or co-op) is defined by the International Co-operative Alliance's Statement on the Co-operative Identity as an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise. A cooperative may also be defined as a business owned by the people who use its services. Cooperative enterprises are the focus of study in the field of cooperative economics. Cooperatives have a sponsored top level domain .coop, which informs users that they are dealing with a co-op.

Meaning

Cooperatives as legal entities

A cooperative is a legal entity owned and controlled by its members. The defining point in a cooperative is that the members have a close association with the cooperative as producers or consumers of its products or services, or as its employees. However, it is the principle of "one member - one vote" which separates it from capital stock corporations.

In the United States cooperatives are generally organized according to state law. They are often organized as non-capital stock corporations under state-specific cooperative laws, which often restrict the use of the words "cooperative" and "co-op" to such organizations. However, they may also be organized as business corporations or unincorporated associations, such as Limited Liability Companies (LLCs) or partnerships; such forms are useful when the members want to allow some members a greater share of the control, which may not be allowed under the laws for cooperatives. Cooperatives do not generally pay dividends, but return savings or profits, sometimes known as patronage, to their members. Cooperatives can have special income tax benefits in the United States; however, because they are an unusual form of organization requiring specialized knowledge, legal and accounting costs are often very high and many choose to be taxed under less favorable corporate or partnership tax laws.

In the United Kingdom the traditional corporate form taken by cooperatives is the 'bona fide co-operative' under the Industrial and Provident Societies Acts. Since the 1980s, however, many have incorporated under the Companies Acts, limited either by shares or by guarantee. In a bid for sustainability, many cooperatives adopt the principle of 'common ownership', and have a zero or nominal share capital, along with a clause stipulating altruistic dissolution. This means that the cooperative cannot be wound up and its assets distributed for personal profit (see: asset stripping). The facility to legally 'lock' a cooperative's assets in this way was brought into force in 2004.

In the European Union, the European Cooperative Statute provides a corporate form for cooperatives with individual or corporate members in at least two of the EU member states.

In the European Union and in large regions of America, cooperatives, with associations, foundations and mutual funds, are considered parts of the Social economy or Third Sector.

Cooperative identity

Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility and caring for others." Such legal entities have a range of unique social characteristics. Membership is open, meaning that anyone who satisfies certain non-discriminatory conditions may join. Unlike a union, in some jurisdictions a cooperative may assign different numbers of votes to different members. However most cooperatives are governed on a strict "one member, one vote" basis, to avoid the concentration of control in an elite. Economic benefits are distributed proportionally according to each member's level of economic interest in the cooperative, for instance by a dividend on sales or purchases. Cooperatives may be generally classified as either consumer or producer cooperatives, depending largely on the mutual interest (see mutual organizations) that their membership shares. Classification is also often based on their function.

Popularity and philosophy

Worldwide, some 800 million people are members of cooperatives, and it is estimated that cooperatives employ some 100 million people.

Cooperatives have been presented as an ideal organisational form for proponents of a number of socio-political philosophies, including cooperative individualism and cooperative federalism; such literature often cites the achievement of a cooperative commonwealth as an ultimate objective. The cooperative movement most often has links and associations with Green politics, Socialist or Anarchist politics, with socially responsible investing, and with the social enterprise movement.

Alternatively, the term may be used loosely to signify its members' ideology.

History of the cooperative movement

Robert Owen (1771–1858) fathered the cooperative movement. A Welshman who made his fortune in the cotton trade, Owen believed in putting his workers in a good environment with access to education for themselves and their children. These ideas were put into effect successfully in the cotton mills of New Lanark, Scotland. It was here that the first co-operative store was opened. Spurred on by the success of this, he had the idea of forming "villages of cooperation" where workers would drag themselves out of poverty by growing their own food, making their own clothes and ultimately becoming self-governing. He tried to form such communities in Orbiston in Scotland and in New Harmony, Indiana in the United States of America, but both communities failed.

Although Owen inspired the cooperative movement, others – such as Dr William King (1786–1865) – took his ideas and made them more workable and practical. King believed in starting small, and realized that the working classes would need to set up cooperatives for themselves, so he saw his role as one of instruction. He founded a monthly periodical called The Cooperator, the first edition of which appeared on May 1 1828. This gave a mixture of cooperative philosophy and practical advice about running a shop using cooperative principles. King advised people not to cut themselves off from society, but rather to form a society within a society, and to start with a shop because, "We must go to a shop every day to buy food and necessaries—why then should we not go to our own shop?" He proposed sensible rules, such as having a weekly account audit, having 3 trustees, and not having meetings in pubs (to avoid the temptation of drinking profits). A few poor weavers joined together to form the Rochdale Equitable Pioneers Society at the end of 1843. The Rochdale Pioneers, as they became known, set out the Rochdale Principles in 1844, which have been highly influential throughout the cooperative movement.

Cooperative communities are now widespread, with one of the largest and most successful examples being at Mondragón in the Basque country of Spain.

In many European countries, cooperative institutions have a predominant market share in the retail banking and insurance businesses.

Types of cooperatives

Housing cooperative

A housing cooperative is a legal mechanism for ownership of housing where residents either own shares (share capital co-op) reflecting their equity in the co-operative's real estate, or have membership and occupancy rights in a not-for-profit co-operative (non-share capital co-op), and they underwrite their housing through paying subscriptions or rent.

Housing cooperatives come in three basic equity structures:

• In Market-rate housing cooperatives, members may sell their shares in the cooperative whenever they like for whatever price the market will bear, much like any other residential property. Market-rate co-ops are very common in New York City.
• Limited Equity housing cooperatives, which are often used by affordable housing developers, allow members to own some equity in their home, but limit the sale price of their membership share to that which they bought in for. Provisions are often

Building cooperative

Members of a building cooperative (in Britain known as a self-build housing cooperative) pool resources to build housing, normally using a high proportion of their own labour. When the building is finished, each member is the sole owner of a homestead, and the cooperative may be dissolved.

This collective effort was at the origin of many of Britain's building societies, which however developed into "permanent" mutual savings and loan organisations, a term which persisted in some of their names (such as the former Leeds Permanent). Nowadays such self-building may be financed using a step-by-step mortgage which is released in stages as the building is completed. The term may also refer to worker cooperatives in the building trade.

Retailers' cooperative

An annual general meeting of a retail co-operative in England, 2005.

A retailers' cooperative (often known as a secondary or marketing co-operative in the UK) is an organization which employs economies of scale on behalf of its members to get discounts from manufacturers and to pool marketing. It is common for locally-owned grocery stores, hardware stores and pharmacies. In this case the members of the cooperative are businesses rather than individuals.

The well-known Best Western hotel chain is actually a giant cooperative, although it now prefers to call itself a "nonprofit membership association." It gave up on the "cooperative" label after the courts kept insisting on calling it a franchisor despite its nonprofit status.

Utility cooperative

A utility cooperative is a public utility that is owned by its customers. It is a type of consumers' cooperative. In the US, many such cooperatives were formed to provide rural electrical and telephone service as part of the New Deal. See Rural Utilities Service.

Worker cooperative

A worker cooperative or producer cooperative is a cooperative that is wholly owned and democratically controlled by its "worker-owners". There are no outside, or consumer owners, in a workers' cooperative. Only the workers own shares of the business. Membership is not compulsory for employees, but only employees can become members.

Social cooperative

A particularly successful form of multi-stakeholder cooperative is the Italian "social cooperative", of which some 7,000 exist. "Type A" social cooperatives bring together providers and beneficiaries of a social service as members. "Type B" social cooperatives bring together permanent workers and previously unemployed people who wish to integrate into the labour market.

Social cooperatives are legally defined as follows:

• the objective is the general benefit of the community and the social integration of citizens
• type A cooperatives provide health, social or educational services
• those of type B integrate disadvantaged people into the labour market. The categories of disadvantage they target may include physical and mental disability, drug and alcohol addiction, developmental disorders and problems with the law. They do not include other factors of disadvantage such as race, sexual orientation or abuse
• various categories of stakeholder may become members, including paid employees, beneficiaries, volunteers (up to 50% of members), financial investors and public institutions. In type B co-operatives at least 30% of the members must be from the disadvantaged target groups
• the cooperative has legal personality and limited liability
• voting is one person one vote
• no more than 80% of profits may be distributed, interest is limited to the bond rate and dissolution is altruistic (assets may not be distributed)

A good estimate of the current size of the social cooperative sector in Italy is given by updating the official ISTAT figures from the end of 2001 by an annual growth rate of 10% (assumed by the Direzione Generale per gli Ente Cooperativi). This gives totals of 7,100 social cooperatives, with 267,000 members, 223,000 paid employees, 31,000 volunteers and 24,000 disadvantaged people undergoing integration. Combined turnover is around 5 billion euro. The cooperatives break into three types: 59% type A (social and health services), 33% type B (work integration) and 8% mixed. The average size is 30 workers.

A supermarket run by a consumer cooperative in the port of Leith, Edinburgh.

Consumers' cooperative

A consumers' cooperative is a business owned by its customers. Employees can also generally become members. Members vote on major decisions, and elect the board of directors from amongst their own number. A well known example in the United States is the REI (Recreational Equipment Incorporated) co-op, and in Canada: Mountain Equipment Co-op.

The world's largest consumer cooperative is the Co-operative Group in the United Kingdom, which offers a variety of retail and financial services. There are also a number of other, independent consumer cooperative societies in the UK, such as the East of England Co-operative Society and Midcounties Co-operative. In fact the Co-operative Group is actually something of a hybrid, having both corporate members (other consumer cooperatives) and individual members.

Japan has a very large and well developed consumer cooperative movement with over 14 million members; retail co-ops alone had a combined turnover of 2.519 trillion Yen (21.184 billion U.S. Dollars [market exchange rates as of 11/15/2005]) in 2003/4. (Japanese Consumers' Co-operative Union., 2003).

Migros, is the largest supermarket chain in Switzerland and keeps the cooperative society as its form of organization. Nowadays, a large part of the Swiss population are members of the Migros cooperative – around 2 million of Switzerland's total population of 7,2 million[1] [2], thus making Migros a supermarket chain that is owned by its customers.

Coop is another Swiss cooperative which operates the second largest supermarket chain in Switzerland after Migros. In 2001, Coop merged with 11 cooperative federations which had been its main suppliers for over 100 years. As of 2005, Coop operates 1437 shops and employs almost 45,000 people. According to Bio Suisse, the Swiss organic producers' association, Coop accounts for half of all the organic food sold in Switzerland.

Farmers' grain Co-op in Crowell, TX.

Agricultural cooperative

Agricultural cooperatives are widespread in rural areas.

In the United States, there are both marketing and supply cooperatives. Agricultural marketing cooperatives, some of which are government-sponsored, promote and may actually distribute specific commodities. There are also agricultural supply cooperatives, which provide inputs into the agricultural process.

In Europe, there are strong agricultural / agribusiness cooperatives, and agricultural cooperative banks. Most emerging countries are developing agricultural cooperatives. Where it is legal, medical marijuana is generally produced by cooperatives.

Cooperative banking (credit unions and cooperative savings banks)

The Co-operative Bank's head office, 1 Balloon Street, Manchester. The statue in front is of Robert Owen, a pioneer in the cooperative movement.

Credit Unions provide a form of cooperative banking.

In North America, the caisse populaire movement started by Alphonse Desjardins in Quebec, Canada pioneered credit unions. Desjardins wanted to bring desperately needed financial protection to working people. In 1900, from his home in Lévis, Quebec, he opened North America's first credit union, marking the beginning of the Mouvement Desjardins.

While they have not taken root so deeply as in Ireland or the USA, credit unions are also established in the UK. The largest are work-based, but many are now offering services in the wider community. The Association of British Credit Unions Ltd (ABCUL) represents the majority of British Credit Unions. British Building Societies developed into general-purpose savings & banking institutions with "one member, one vote" ownership and can be seen as a form of financial cooperative (although many 'de-mutualised' into conventionally-owned banks in the 1980s & 1990s). The UK Co-operative Group includes both an insurance provider CIS and the Co-operative Bank, both noted for promoting ethical investment.

Other important European banking cooperatives include the Crédit Agricole in France, Migros and Coop Bank in Switzerland and the Raiffeisen system in many Central and Eastern European countries. The Netherlands, Spain, Italy and various European countries also have strong cooperative banks. They play an important part in mortgage credit and professional (i.e. farming) credit.

Cooperative banking networks, which were nationalized in Eastern Europe, work now as real cooperative institutions. A remarkable development has taken place in Poland, where the SKOK (Spółdzielcze Kasy Oszczędnościowo-Kredytowe) network has grown to serve over 1 million members via 13,000 branches, and is larger than the country’s largest conventional bank.

In Scandinavia, there is a clear distinction between mutual savings banks (Sparbank) and true credit unions (Andelsbank).

Carsharing

Carsharing is an arrangement by which individuals and groups share vehicles, which are stored in convenient common locations. It may be thought of as a very short-term, locally-based car hire, run on a members-only basis. It is available in most major cities in Europe. In Switzerland Mobility Car-Sharing cooperative has more than 50,000 clients), but is also common in Germany, Austria, and the Netherlands, and is fast growing in popularity in other European countries, Asia and North America. Car sharing operations may be for-profit or non-profit organizations. Zipcar and Flexcar are the biggest and best-known - both are for-profit corporations. Cooperative Auto Network in Vancouver BC is the only cooperative carsharing company in North America.

In Britain, where the term 'car sharing' normally refers to carpools or ride-sharing, they are called 'car clubs'.

Federal or secondary cooperatives

In some cases, cooperative societies find it advantageous to form co-operative federations in which all of the members are themselves cooperatives. Historically, these have predominantly come in the form of cooperative wholesale societies, and cooperative unions. Cooperative federations are a means through which cooperative societies can fulfill the sixth Rochdale Principle, cooperation among cooperatives, with the ICA noting that "Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures."

See Also: List of Co-operative Federations

Cooperative wholesale society

According to cooperative economist Charles Gide, the aim of a cooperative wholesale society is to arrange “bulk purchases, and, if possible, organise production.” The best historical example of this were the English CWS and the Scottish CWS, which were the forerunners to the modern Co-operative Group.

Cooperative Union

A second common form of Co-operative Federation is a Co-operative Union, whose objective (according to Gide) is “to develop the spirit of solidarity among societies and... in a word, to exercise the functions of a government whose authority , it is needless to say, is purely moral.” Co-operatives UK and the International Co-operative Alliance are examples of such arrangements.

Co-operative Party

In some countries with a strong Co-operative sector, such as the UK, Co-operatives may find it advantageous to form a Parliamentary Political party to represent their interests. The British Co-operative Party and the Canadian Co-operative Commonwealth Federation are prime examples of such arrangements.

In the UK, cooperatives formed the Co-operative Party in the early 20th century to represent members of co-ops in Parliament. The Co-operative Party now has a permanent electoral pact with the Labour Party, and has 29 Members of parliament who were elected at the 2005 General Election as 'Labour and Co-operative' MPs. UK co-operatives retain a significant market share in food retail, insurance, banking, funeral services, and the travel industry in many parts of the country.

See also

• List of cooperatives
• List of Co-operative Federations

—

• collective
• common ownership
• commune (intentional community)
• Co-operative economics
• democratic socialism
• Employee-owned corporation
• Friendly Society
• Industrial and provident society
• microfinance / microcredit
• mutual aid
• mutual organization
• mutualism (economic theory)
• Participatory democracy
• Participatory economics
• Friedrich Wilhelm Raiffeisen
• Rochdale Principles
• social economy
• social enterprise

References

ISBN links support NWE through referral fees

• Japanese Consumers' Co-operative Union (2003). "co.op, 2003 Facts and Figures".
• Isao Takamura (1995). "Japan: Consumer Co-op Movement in Japan".

External links

• International Co-operative Alliance
• Canadian Co-operative Association
• Cooperatives at the Open Directory Project
• Venezuela's Cooperative Revolution from Dollars & Sense magazine

Further reading

• Cooperatives: Principles and practices in the 21st century, by Kimberly A. Zeuli and Robert Cropp, 2004
• Consumers' Co-operative Societies, by Charles Gide, 1922
• Co-operation 1921-1947, published monthly by The Co-operative League of America
• The History of Co-operation, by George Jacob Holyoake, 1908
• Cooperative Peace, by James Peter Warbasse, 1950
• Problems Of Cooperation, by James Peter Warbasse, 1941
• "Consumer Co-operatives in a Changing World" edited by Johann Brazda and Robert Schediwy (ICA), 1989
• "The International Co-operative Movement" by Johnston Birchall, 1997
• The Distributist Review
• The ChesterBelloc Mandate
• La Espada y El Canon

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