Co-operative society

A cooperative ("coop"), co-operative ("co-op"), or coöperative ("coöp") is an autonomous association of persons who voluntarily cooperate for their mutual social, economic, and cultural benefit.^[1] Cooperatives include non-profit community organizations and businesses that are owned and managed by the people who use its services (a consumer cooperative) and/or by the people who work there (a worker cooperative).

Meaning

Cooperatives as legal entities

A cooperative is a legal entity owned and democratically controlled by its members. Members often have a close association with the enterprise as producers or consumers of its products or services, or as its employees.^{[citation needed]}

In some countries, e.g. Finland and Sweden, there are specific forms of incorporation for cooperatives. Cooperatives may take the form of companies limited by shares or by guarantee, partnerships or unincorporated associations. In the UK they may also use the industrial and provident society structure. In the USA, cooperatives are often organized as non-capital stock corporations under state-specific cooperative laws. However, they may also be unincorporated associations or business corporations such as limited liability companies or partnerships; such forms are useful when the members want to allow^{[citation needed]}:

1. some members to have a greater share of the control, or
2. some investors to have a return on their capital that exceeds fixed interest,

neither of which may be allowed under local laws for cooperatives. Cooperatives often share their earnings with the membership as dividends, which are divided among the members according to their participation in the enterprise, such as patronage, instead of according to the value of their capital shareholdings (as is done by a joint stock company).

Identity

Cooperatives are typically based on the cooperative values of "self-help, self-responsibility, democracy and equality, equity and solidarity" and the seven cooperative principles:^[14]

1. Voluntary and open membership
2. Democratic member control
3. Economic participation by members
4. Autonomy and independence
5. Education, training and information
6. Cooperation among cooperatives
7. Concern for community

Cooperatives are dedicated to the values of openness, social responsibility and caring for others. Such legal entities have a range of social characteristics. Membership is open, meaning that anyone who satisfies certain non-discriminatory conditions may join. Economic benefits are distributed proportionally to each member's level of participation in the cooperative, for instance, by a dividend on sales or purchases, rather than according to capital invested.^[14] Cooperatives may be classified as either worker, consumer, producer, purchasing or housing cooperatives.^[15] They are distinguished from other forms of incorporation in that profit-making or economic stability are balanced by the interests of the community.^[14] Co-ops can sometimes be identified on the Internet through the use of the .coop gTLD. Organizations using .coop domain names must adhere to the basic co-op values.

The United Nations has declared 2012 to be the International Year of Cooperatives (IYC) ^[16]

Types of cooperative governance

Retailers' cooperative

A retailers' cooperative (known as a secondary or marketing cooperative in some countries) is an organization which employs economies of scale on behalf of its members to receive 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.^[17]

The Best Western international hotel chain is actually a retailers' cooperative, whose members are hotel operators, although it refers to itself as a "nonprofit membership association." It gave up on the "cooperative" label after some courts insisted on enforcing regulatory requirements for franchisors despite its member-controlled status.^{[citation needed]}

Worker cooperative

A worker cooperative or producer cooperative is a cooperative, that is owned and democratically controlled by its "worker-owners". There are no outside owners in a "pure" workers' cooperative, only the workers own shares of the business, though hybrid forms exist in which consumers, community members or capitalist investors also own some shares. In practice, control by worker-owners may be exercised through individual, collective or majority ownership by the workforce, or the retention of individual, collective or majority voting rights (exercised on a one-member one-vote basis).^[18] A worker cooperative, therefore, has the characteristic that the majority of its workforce owns shares, and the majority of shares are owned by the workforce.^[19] Membership is not always compulsory for employees, but generally only employees can become members either directly (as shareholders) or indirectly through membership of a trust that owns the company.^{[citation needed]}

The impact of political ideology on practice constrains the development of cooperatives in different countries. In India, there is a form of workers' cooperative which insists on compulsory membership for all employees and compulsory employment for all members. That is the form of the Indian Coffee Houses. This system was advocated by the Indian communist leader A. K. Gopalan. In places like the UK, common ownership (indivisible collective ownership) was popular in the 1970s. Cooperative Societies only became legal in Britain after the passing of Slaney's Act in 1852. In 1865 there were 651 registered societies with a total membership of well over 200,000.^[20] There are now more than 400 worker cooperatives in the UK,^[21] Suma Wholefoods being the largest example with a turnover of £24 million.^{[citation needed]}

Spanish law permits owner-members to register as self-employed enabling worker-owners to establish regulatory regimes that support cooperative working, but which differs considerably from cooperatives that are subject to Anglo-American systems of law that require the cooperative (employer) to view (and treat) its worker-members as salaried workers (employees).^[22] The implications of this are far-reaching, as this requires cooperatives to establish authority driven statutory disciplinary and grievance procedures (rather than democratic mediation schemes), impacting on the ability of leaders to enact democratic forms of management and counter the authority structures embedded in the dominant system of private enterprise centred around the entrepreneur.^[23]

Volunteer cooperative

A volunteer cooperative is a cooperative that is run by and for a network of volunteers, for the benefit of a defined membership or the general public, to achieve some goal. Depending on the structure, it may be a collective or mutual organization, which is operated according to the principles of cooperative governance. The most basic form of volunteer-run cooperative is a voluntary association. A lodge or social club may be organized on this basis. A volunteer-run co-op is distinguished from a worker cooperative in that the latter is by definition employee-owned, whereas the volunteer cooperative is typically a non-stock corporation, volunteer-run consumer co-op or service organization, in which workers and beneficiaries jointly participate in management decisions and receive discounts on the basis of sweat equity.^{[citation needed]}

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. They are legally defined as follows:^[24]

• 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)
• the cooperative has legal personality and limited liability
• the objective is the general benefit of the community and the social integration of citizens
• 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 unemployment, race, sexual orientation or abuse.
• type A cooperatives provide health, social or educational services
• 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 cooperatives at least 30% of the members must be from the disadvantaged target groups
• voting is one person one vote

A good estimate of the current size of the social cooperative sector in Italy is given by updating the official Istituto Nazionale di Statistica (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.^{[citation needed]}

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. The first of these was set up in 1844 in the North-West of England by 28 weavers who wanted to sell food at a lower price than the local shops. A well known example in the United States is the REI (Recreational Equipment Incorporated) co-op, and in Canada: Mountain Equipment Co-op.^{[citation needed]}

With its 414,383 employees, 7,736,210 members and a turnover of €50Bn per year growing at a steady rate of 4.41%,^[25] Legacoop^[26] of Italy is arguably the world's biggest federation of cooperatives.^{[citation needed]}

The world's largest consumers' cooperative is the Co-operative Group in the United Kingdom, which offers a variety of retail and financial services. The UK also has a number of autonomous consumers' cooperative societies, such as the East of England Co-operative Society and Midcounties Co-operative. In fact, the Co-operative Group is something of a hybrid, having both corporate members (mostly other consumers' cooperatives, as a result of its origins as a wholesale society), and individual retail consumer members.^{[citation needed]}

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 US dollars [market exchange rates as of 15 November 2005]) in 2003/4.^[27]

Migros is the largest supermarket chain in Switzerland and has around 2 million of the country's 7.2 million population as members.^{[citation needed]} Switzerland's second-biggest supermarket chain, Coop is also a cooperative. In 2001, it merged with 11 cooperative federations which had been its main suppliers for over 100 years.^{[citation needed]} As of 2005, Coop operates 1,437 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.^{[citation needed]}

Euro Coop is the European Community of Consumer Cooperatives.

Business and employment cooperative

Business and employment cooperatives (BECs) are a subset of worker cooperatives that represent a new approach to providing support to the creation of new businesses.^{[citation needed]}

Like other business creation support schemes, BECs enable budding entrepreneurs to experiment with their business idea while benefiting from a secure income. The innovation BECs introduce is that once the business is established the entrepreneur is not forced to leave and set up independently, but can stay and become a full member of the cooperative. The micro-enterprises then combine to form one multi-activity enterprise whose members provide a mutually supportive environment for each other.^{[citation needed]}

BECs thus provide budding business people with an easy transition from inactivity to self-employment, but in a collective framework. They open up new horizons for people who have ambition but who lack the skills or confidence needed to set off entirely on their own – or who simply want to carry on an independent economic activity but within a supportive group context.^{[citation needed]}

New generation cooperative

New generation cooperatives (NGCs) are an adaptation of traditional cooperative structures to modern, capital intensive industries. They are sometimes described as a hybrid between traditional co-ops and limited liability companies. They were first developed in California and spread and flourished in the US Mid-West in the 1990s.^[28] They are now common in Canada where they operate primarily in agriculture and food services, where their primary purpose is to add value to primary products. For example producing ethanol from corn, pasta from durum wheat, or gourmet cheese from goat’s milk.^[29]

Types of cooperatives

Housing cooperative

Co-op City in New York is the largest cooperative housing development in the world with 55,000 people.^[2]

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 cooperative's real estate, or have membership and occupancy rights in a not-for-profit cooperative (non-share capital co-op), and they underwrite their housing through paying subscriptions or rent.^{[citation needed]}

Housing cooperatives come in three basic equity structures^{[citation needed]}:

• 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 paid.
• Group equity or Zero equity housing cooperatives do not allow members to own equity in their residences and often have rental agreements well below market rates.

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.^{[citation needed]}

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.^{[citation needed]}

The term may also refer to worker cooperatives in the building trade.^{[citation needed]}

Utility cooperative

A utility cooperative is a type of consumers' cooperative that is tasked with the delivery of a public utility such as electricity, water or telecommunications services to its members. Profits are either reinvested into infrastructure or distributed to members in the form of "patronage" or "capital credits", which are essentially dividends paid on a member's investment into the cooperative. In the United States, many cooperatives were formed to provide rural electrical and telephone service as part of the New Deal. See Rural Utilities Service.^{[citation needed]}

In the case of electricity, cooperatives are generally either generation and transmission (G&T) co-ops that create and send power via the transmission grid or local distribution co-ops that gather electricity from a variety of sources and send it along to homes and businesses.^[30]

In Tanzania, it has been proven that the cooperative method is helpful in water distribution. When the people are involved with their own water, they care more because the quality of their work has a direct effect on the quality of their water.^[31]

Agricultural cooperative

Grain elevators are used by agricultural cooperatives in the storage and shipping of grains.

Agricultural cooperatives or farmers' cooperatives are cooperatives where farmers pool their resources for mutual economic benefit. Agricultural cooperatives are broadly divided into agricultural service cooperatives, which provide various services to their individual farming members, and agricultural production cooperatives, where production resources such as land or machinery are pooled and members farm jointly.^[32] Agricultural production cooperatives are relatively rare in the world, and known examples are limited to collective farms in former socialist countries and the kibbutzim in Israel.^{[citation needed]}

Agricultural supply cooperatives aggregate purchases, storage, and distribution of farm inputs for their members. By taking advantage of volume discounts and utilizing other economies of scale, supply cooperatives bring down members' costs. Supply cooperatives may provide seeds, fertilizers, chemicals, fuel, and farm machinery. Some supply cooperatives also operate machinery pools that provide mechanical field services (e.g., plowing, harvesting) to their members.^{[citation needed]}

Agricultural marketing cooperatives provide the services involved in moving a product from the point of production to the point of consumption. Agricultural marketing includes a series of inter-connected activities involving planning production, growing and harvesting, grading, packing, transport, storage, food processing, distribution and sale. Agricultural marketing cooperatives are often formed to promote specific commodities.^{[citation needed]}

Commercially successful cooperatives include India's Amul (dairy products) and Malaysia's FELDA (palm oil).

Credit unions and cooperative banking

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

Credit unions are cooperative financial institutions that are owned and controlled by their members. Credit unions provide the same financial services as banks but are considered not-for-profit organizations and adhere to cooperative principles.

Credit unions originated in mid-19th century Germany through the efforts of pioneers Franz Hermann Schulze-Delitzsch and Friedrich Wilhelm Raiffeisen. The concept of financial cooperatives crossed the Atlantic at the turn of the 20th century, when the caisse populaire movement was started by Alphonse Desjardins in Quebec, Canada. In 1900, from his home in Lévis, he opened North America's first credit union, marking the beginning of the Mouvement Desjardins.^[33] Eight years later, Desjardins provided guidance for the first credit union in the United States,^[34] where there are now about 7,950 active status federally insured credit unions, with almost 90 million members and more than $679 billion on deposit.^[35]

While they have not taken root so deeply as in Ireland, 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 nine '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.^{[citation needed]}

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 (Spóldzielcze Kasy Oszczednosciowo-Kredytowe) network has grown to serve over 1 million members via 13,000 branches, and is larger than the country’s largest conventional bank.^{[citation needed]}

In Scandinavia, there is a clear distinction between mutual savings banks (Sparbank) and true credit unions (Andelsbank).^{[citation needed]}

The oldest cooperative banks in Europe, based on the ideas of Friedrich Raiffeisen, are joined together in the 'Urgenossen'.

Federal or secondary cooperatives

In some cases, cooperative societies find it advantageous to form cooperative 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.^[36] Cooperative federations are a means through which cooperative societies can fulfill the sixth Rochdale Principle, cooperation among cooperatives, with the ICA noting that "Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures."^[37]

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.”^[36] The best historical example of this were the English CWS and the Scottish CWS, which were the forerunners to the modern Co-operative Group.^{[citation needed]}

Cooperative union

A second common form of cooperative federation is a cooperative 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.”^[36] Co-operatives UK and the International Cooperative Alliance are examples of such arrangements.^{[citation needed]}

Cooperative political movements

In some countries with a strong cooperative sector, such as the UK, cooperatives may find it advantageous to form political groupings to represent their interests. The British Cooperative Party, the Canadian Cooperative Commonwealth Federation and United Farmers of Alberta are prime examples of such arrangements.^{[citation needed]}

The British cooperative movement formed the Cooperative Party in the early 20th century to represent members of consumers' cooperatives in Parliament, which was the first of its kind. The Cooperative Party now has a permanent electoral pact with the Labour Party meaning someone cannot be a member if they support a party other than Labour. An alternative grouping, the Conservative Co-operative Movement is open to people of all parties or none. UK cooperatives retain a significant market share in food retail, insurance, banking, funeral services, and the travel industry in many parts of the country.^{[citation needed]}