Definition of a Cooperative
A cooperative is a form of corporation owned and controlled by its users. For example, a grocery co-op is owned by the people who shop there.
Cooperatives are open to anyone who is willing to accept the terms of membership. They are fully controlled by their members, and members equally contribute to the capital. The profits of the co-op are distributed among the members or reinvested in the company.
Equality is one of the core values and founding principles of a co-op. Members in a cooperative have an equal say. Unlike other types of corporations, where shareholders have more say if they own a higher percentage of the company, all co-op members follow the principle of “one member, one vote,” which carries equal weight.
A co-op will usually have a board of directors to run the business, set up policies and make sure everything stays on track. The members of the board are members of the cooperative and are usually elected by vote. The board of directors makes decisions based on the votes of regular members.
A cooperative can be created in any industry and can be any size. Cooperatives are commonly found in agriculture, grocery, healthcare, housing, financial services and utilities. Cooperative businesses continue to grow, and today, 1 in 3 Americans has joined a co-op.
Principles of a Cooperative
- Voluntary and Open Membership: Cooperatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities and meet the requirements of membership, without gender, social, racial, political or religious discrimination. Members have control over setting policies for the co-op and making decisions for the cooperative.
- Democratic Member Control: Cooperatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions.
- Member Economic Participation: Members contribute equitably to, and democratically control, the capital of their cooperative.
- Autonomy and Independence: Cooperatives are autonomous, self-help organizations controlled by their members.
- Education, Training, and Information: Cooperatives provide education and training for their members, elected representatives, managers, and employees so they can contribute to the development of their cooperatives. They inform the general public about the nature and benefits of cooperatives.
- Cooperation among Cooperatives: Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional, and international structures.
- Concern for Community: Cooperatives work for the sustainable development of their communities through policies approved by their members.
Cooperatives span many different activities and services from childcare to transportation, farming to solar energy, financial services to purchasing school supplies. Cooperatives are owned by their members, which could be consumers, producers/farmers, workers, businesses or organizations, municipalities, and other co-ops.
Types of Cooperatives
There are many different types of cooperatives, for example:
Consumer Cooperatives
Consumer cooperatives are owned by members who use the co-op to purchase the goods or services that they need. Locally, REI is a consumer co-op.
Worker Cooperatives
A worker cooperative (coop) is a business owned and managed by its workers. Unlike traditional companies, worker cooperatives operate on democratic principles, where each worker-member has an equal say in decision-making and shares in the business’s success. Patty Pan Cooperative is a worker co-op.
Producer Cooperatives
Producer cooperatives are owned by people who produce similar types of goods or services. The members use the cooperative to more effectively negotiate prices and to access larger markets. The cooperative can further process member products to add value and increase producer returns.
Purchasing or Shared Services Cooperatives
Purchasing cooperatives combine member demand to achieve better pricing, availability, and delivery of products or services. The members of purchasing cooperatives are businesses or organizations, rather than individual consumers, that use the cooperative to more efficiently manage their operations. Ace Hardware is a purchasing cooperative.
Multi-stakeholder Cooperatives
Also referred to as hybrid or solidarity model cooperatives, multi-stakeholder cooperatives are owned by two or more types of members who have different roles and interests in an enterprise that more broadly benefits them all. Member classes may include consumers (either individuals or businesses), producers, workers, or investors.