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A cooperative (also co-operative or co-op) is an association of persons who join together to carry on an economic activity of mutual benefit.
The term may be used loosely to signify its members' ideology (as in 'jazz coop') but a mainstream cooperative comprises a legal entity owned and democratically controlled by its members, with no passive shareholders. It thus combines the equal control characteristic of many partnerships with the legal personality conferred on corporations. 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 their membership. Classification is also often based on their function or trade sector.
In the United States most cooperatives are corporations or limited liability companies (LLCs) but other legal entities may also be used. Cooperatives may be for-profit or non-profit. In for-profit cooperatives any surplus may be returned to members by way of a rebate or bonus on their activity with the cooperative, or a dividend on their shareholding in the cooperative.
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 will come into force in October 2006, to provide a corporate form for cooperatives with individual or corporate members in at least two of the EU member states.
Worldwide, some 800 million people are members of cooperatives, and it is estimated that cooperatives employ some 100 million people. The cooperative movement often has links and associations with Green politics or Socialist politics, with socially responsible investing, and with the social enterprise movement.
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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) or have membership and occupancy rights in a not-for-profit continuing co-operative (non-share capital co-op).
Retailers' cooperative
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 consumer 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 is a cooperative that is wholly owned and democratically controlled by its "worker-owners". There are no outside, or consumer owners, in a worker's cooperative - only the workers own shares of the business. Membership is not compulsory for employees, and only employees can become members. Probably the best known example of worker co-operation is the Mondragón Cooperative Corporation (MCC) in the Basque Country.
Unions are often unnecessary in worker cooperatives because the workers have direct control over the management and ownership of the business - they are negotiating with themselves. Some worker cooperatives still choose to become members of local unions to demonstrate their support for the labor movement and to working conditions that have resulted from years of struggle. Worker cooperatives that join unions often benefit from the trade that comes their way from the community of union members and those who support unions for political reasons.
The United States Federation of Worker Cooperatives is the organization in the US representing worker cooperative interests nationally. There are local networks and federations throughout the US in the San Fransisco Bay area, the Twin Cities, Portland Oregon, and Boston.
The 'new wave' of worker cooperatives that took off in Britain in the mid-70s created the Industrial Common Ownership Movement (ICOM) as their federation. The sector peaked at around 2,000 enterprises, and in 2001 ICOM merged with the Co-operative Union (which was the federal body for consumer cooperatives) to create Co-operatives UK, thus reunifying the cooperative sector.
There are examples of "hybrid" co-ops in which workers and consumers both have membership in a co-op, but the types of membership are differentiated, sometimes into districts of the cooperative, often each district having a set amount of decision making power and profit distribution. Hybrid co-ops are also referred to as multi-stakeholder cooperatives.
Social cooperative
A particularly successful form of multi-stakeholder cooperative is the Italian "social cooperative", of which some 7,000 exist. A "type A" social cooperative brings together providers and beneficiaries of a social service as members. A "type B" social cooperative brings together permanent workers and previously unemployed people who wish to integrate into the labour market.
Social co-operatives are legally defined as follows:
- the objective is the general benefit of the community and the social integration of citizens
- type A co-operatives 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 co-operative 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 co-operative 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 co-operatives, 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 co-operatives 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.
Consumers' cooperative
The term cooperative also applies to businesses owned by their 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 US is the REI (Recreational Equipment Incorporated) co-op.
One of the world's largest consumer co-operatives is the Co-operative Group in the United Kingdom, which has a variety of retail and financial services. In reality the Co-operative Group is actually something of a hybrid, having both corporate (other cooperative businesses) and individual members.
Japan has a very large and well developed consumer co-operative movement with over 14 million members; retail co-ops alone had a combined turnover of 2,519 billion yen (24,189 thousand US Dollars) in 2003/4. (Japanese Consumers' Co-operative Union., 2003). As well as retail co-ops there are medical, housing, insurance co-ops alongside institutional (workplace based) co-ops, co-ops for school teachers and university based co-ops.
Around 1 in 5 of all Japanese households belongs to a local retail co-op and 90% of all co-op members are women. (Takamura, 1995). Nearly 6 million households belong to one of the 1,788,000 Han groups (Japanese Consumers' Co-operative Union., 2003). These consist of a group five to ten members in a neighbourhood who place a combined weekly order which is then delivered by truck the following week. A particular stength of Japanese consumer co-ops in recent years has been the growth of community supported agriculture where fresh produce is sent direct to consumers from producers without going through the market.
Agricultural cooperative
Main article: Cooperative farming.
In the US
Farmers' grain Co-op in Crowell, TX.Farmers often maintain agricultural marketing cooperatives, some of which are government-sponsored, which promote and may actually distribute specific commodities. Examples include:
- Cotton Incorporated (cotton),
- Farmland Originally a full-service cooperative, filed for Chapter 11 bankruptcy in 2002. (Processed meat division most well-known to consumers.)
- Florida's Natural Growers (citrus)
- Land O'Lakes (dairy and farm supply).
- Ocean Spray (cranberries and citrus),
- Sunkist Growers, Incorporated (citrus fruit),
- Sun-Maid (raisins),
- Tillamook County Creamery Association (dairy)
- Nebraska Rural Radio Association A group of farmer/rancher owned radio stations in Nebraska
In California and other states where it is legal, medical marijuana is generally produced by cooperatives.
There are also agricultural supply cooperatives. Examples include:
In other parts of the world
There are strong agricultural / agribusiness cooperatives, and agricultural cooperative banks, in most European countries.
Most emerging countries are experiencing a significant development of agricultural cooperatives, an economic sector prone to cooperation either for export or for local needs. Ex. Bolivarian Republic of Venezuela.
Cooperative banking (Cr unions and Cooperative savings banks)
Cr Unions provide a form of cooperative banking. In North America, the caisse populaire movement started by Alphonse Desjardins in Quebec, Canada pioneered cr 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 cr union, marking the beginning of the Mouvement Desjardins.
While they have not taken root so deeply as in Ireland, cr 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 Cr Unions Ltd - ABCUL - represents the majority of British Cr Unions.
Important European banking cooperatives include the Crédit Agricole in France, Migros and Coop Bank in Switzerland and the Raiffeisen system in Austria, Germany, Switzerland, the Netherlands, and Belgium. Spain, Italy and various European countries also have strong cooperative banks. They play an important part in mortgage cr and professional (i.e. farming) cr. 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.
Car sharing
Car sharing is a process by which multiple households share vehicles, which are stored in convenient common locations. It may be thought of as a very short-term, locally-based car hire. It is most prevalent in Switzerland (where the Mobility Car-Sharing cooperative has some 50,000 clients), but is also common in Germany, Austria, and the Netherlands, and is growing in popularity in other European countries. Car sharing operations may be for-profit or non-profit organizations. Zipcar and Flexcar are examples.
To reduce confusion with ride-sharing, some Britons prefer the term 'car clubs'.
History of the co-operative movement
Robert Owen (1771a href="1858.html" title="1858">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 co-operation" 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 co-operative movement, others--such as Dr. William King (1786a href="1865.html" title="1865">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 co-operatives for themselves, so he saw his role as one of instruction. He founded a monthly periodical called The Cooperator, the first ion of which appeared on May 1, 1828. This gave a mixture of co-operative 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 form the basis of the cooperative movement today.
Co-operative communities are now widespread, with one of the largest and most successful examples being at Mondragón in the Basque country of Spain (see link below). Co-operatives were also successful in Yugoslavia under Tito where Workers Councils gained a significant role in management.
In many European countries, cooperative institutions have a predominant market share in the retail banking and insurance businesses.
An annual general meeting of a retail co-operative in England, 2005.In the UK, co-operatives 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 some Labour MPs are Co-operative Party members. 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 100 largest US coops by turnover
- Crédit Agricole
- collective
- common ownership
- commune
- Coop Himmelblau
- Employee-owned corporation
- Friendly Society
- Industrial and provident society
- microfinance
- Migros
- mutual fund
- Purchasing cooperative
- Friedrich Wilhelm Raiffeisen
- Rochdale College
- Mondragón Cooperative Corporation
- North American Students of Cooperation
- social enterprise
- Southern States Cooperative - a cooperative that supplies farmers.
- Waterloo Co-operative Residence Incorporated
References
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
- The Cooperative Branch of the International Labour Organization
- Desjardins movement
- La Coop fédérée
- Co-op Housing Federation of Canada
- New York City Coop Apartment Law
- Mondragon Co-operative in Spain
- Co-operatives UK, the central organisation for all UK co-operative enterprises
- The online database of UK Co-operatives
- The Co-operative Group, a UK consumer co-operative
- ICOS, the Irish Co-operative Organisation Society
- United States Federation of Worker Cooperatives
- National Cooperative Business Association (USA)
- The ICA Group, technical advice for cooperative start-ups in the USA.
- Co-operatives can register to use the .coop internet domain at the dotCoop web site.
- English website from the Japanese Consumer Co-operative Union.
- A new approach to cooperative understanding
- Babysitting cooperatives
- Network of Bay Area Worker Cooperatives
- University of Wisconsin Center for Cooperatives
- Coopnet Update paper and event database
Further reading
- 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
Other meanings
In biochemistry, a macromolecule that exhibits cooperative behavior has ligand binding characteristics that depend on the amount of ligand bound. See cooperative binding for more details.