A cooperative (also co-operative; often referred to as a co-op or coop) 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. It is a business organization owned and operated by a group of individuals for their mutual benefit. A cooperative may also be defined as a business owned and controlled equally by the people who use its services or who work at it. Cooperative enterprises are the focus of study in the field of cooperative economics.

Origins

The idea of a co-operative dates back as far as human beings have been organizing for mutual benefit. Tribes were organized as cooperative structures, allocating jobs and resources among each other, only trading with the external communities. Post-industrial Europe is home to the first co-operatives from an industrial context.

In 1761, the Fenwick Weavers' Society was formed in Fenwick, East Ayrshire, Scotland to sell discounted oatmeal to local workers. Its services expanded to include assistance with savings and loans, emigration and education. In 1810, Welsh social reformer Robert Owen, from Newtown in mid-Wales, and his partners purchased New Lanark mill from Owen's father-in-law and proceeded to introduce better labor standards including discounted retail shops where profits were passed on to his employees. Owen left New Lanark to pursue other forms of co-operative organization and develop co-op ideas through writing and lecture. Co-operative communities were set up in Glasgow, Indiana and Hampshire, although ultimately unsuccessful. In 1828, William King set up a newspaper, The Cooperator, to promote Owen's thinking, having already set up a co-operative store in Brighton.

The Rochdale Society of Equitable Pioneers, founded in 1844, is usually considered the first successful co-operative enterprise, used as a model for modern co-ops, following the 'Rochdale Principles'. A group of 28 weavers and other artisans in Rochdale, England set up the society to open their own store selling food items they could not otherwise afford. Within ten years there were over 1,000 co-operative societies in the United Kingdom.

Other events such as the founding of a friendly society by the Tolpuddle Martyrs in 1832 were key occasions in the creation of organized labor and consumer movements.

Social economy

In the final decade of the 20th century, cooperatives banded together to establish a number of social enterprise agencies which have moved to adopt the multi-stakeholder cooperative model. In the last 15 years (1994 - 2009) the EU and its member nations, have gradually revised national accounting systems to "make visible" the increasing contribution of social economy organisations.

Organizational and ideological roots

The roots of the co-operative movement can be traced to multiple influences and extend worldwide. In the Anglosphere, post-feudal forms of co-operation between workers and owners, that are expressed today as "profit-sharing" and "surplus sharing" arrangements, existed as far back as 1795. The key ideological influence on the Anglosphere branch of the cooperative movement, however, was a rejection of the charity principles that underpinned welfare reforms when the British government radically revised its Poor Laws in 1834. As both state and church institutions began to routinely distinguish between the 'deserving' and 'undeserving' poor, a movement of Friendly Societies grew throughout the British Empire based on the principle of mutuality, committed to self-help in the welfare of working people.

Friendly Societies established forums through which one member, one vote was practiced in organisation decision-making. The principles challenged the idea that a person should be an owner of property before being granted a political voice. Throughout the second half of the nineteenth century (and then repeatedly every 20 years or so) there has been a surge in the number of cooperative organisations, both in commercial practice and civil society, operating to advance democracy and universal suffrage as a political principle. Friendly Societies and consumer cooperatives became the dominant form of organization amongst working people in Anglosphere industrial societies prior to the rise of trade unions and industrial factories. Weinbren reports that by the end of the 19th century, over 80% of British working age men and 90% of Australian working age men were members of one or more Friendly Society.

From the mid-nineteenth century, mutual organisations embraced these ideas in economic enterprises, firstly amongst tradepeople, and later in co-operative stores, educational institutes, financial institutions and industrial enterprises. The common thread (enacted in different ways, and subject to the contraints of various systems of national law) is the principle that an enterprise or association should be owned and controlled by the people it serves, and share any surpluses on the basis of each members' cooperative contribution (as a producer, labourer or consumer) rather than their capacity to invest financial capital.

The cooperative movement has been fueled globally by ideas of economic democracy. Economic democracy is a socialist extension of the liberal idea of political democracy. Different forms of socialism have developed different approaches to thinking about and building economic democracy. Both Marxism and anarchism, for example, have been influenced by as well as contemporaneous with utopian socialism, which however was based on voluntaristic cooperation, without recognition of class conflict (such as for example is posed by a belligerent capitalist class, dependent on labor and mobilizing by of and for itself). Anarchists are committed to libertarian socialism and they have focused on local organization, including locally-managed cooperatives, linked through confederations of unions, cooperatives and communities. Marxists, who as socialists have likewise held and worked for the goal of democratizing productive and reproductive relationships, often placed a greater strategic emphasis on confronting the larger scales of human organization. As they viewed the capitalist class to be prohibitively politically, militarily and culturally mobilized in order to maintain an exploitable working class, they fought in the early twentieth century to appropriate from the capitalist class the society's collective political capacity in the form of the state, either through democratic socialism, or through what came to be known as Leninism. Though they regard the state as an unnecessarily oppressive institution, Marxists considered appropriating national and international-scale capitalist institutions and resources (such as the state) to be an important first pillar in creating conditions favorable to solidaristic economies. With the declining influence of the USSR after the 1960s, socialist strategies pluralized, though economic democratizers have not as yet established a fundamental challenge to hegemonic and belligerent global neoliberal capitalism.

Meaning

Cooperatives as legal entities

Although the term may be used loosely to describe a way of working, a cooperative properly so-called is a legal entity owned and democratically controlled equally by its members. A defining point of a cooperative is that the members have a close association with the enterprise as producers or consumers of its products or services, or as its employees.

In some countries, e.g. Finland and Sweden, there are specific forms of incorporation for co-operatives. Cooperatives may take the form of companies limited by shares or by guarantee, partnerships or unincorporated associations. 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:

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 based on the co-operative values of "self-help, self-responsibility, democracy and equality, equity and solidarity" and the co-operative principles of “voluntary and open membership; democratic member control; member economic participation; autonomy and independence; education and training; co-operation among co-operatives; and concern for community”. Also, 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. Economic benefits are distributed proportionally according to each member's level of participation in the cooperative, for instance by a dividend on sales or purchases, rather than divided according to capital invested. Cooperatives may be generally classified as either consumer cooperatives or producer cooperatives. Cooperatives are closely related to collectives, which differ only in that profit-making or economic stability is placed secondary to adherence to social-justice principles. Co-ops can be identified on the Internet through the use of the .coop gTLD. Those using .coop domain names must adhere to these the basic co-op values.

Types of cooperative governance

Retailers' cooperative

A retailers' cooperative (known as a secondary or marketing co-operative in some countries) 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 Best Western international hotel chain is actually a retailers' cooperative, whose members are hotel operators, although it now prefers to call itself 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.

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 in which consumers, community members or capitalist investors also own some shares are not uncommon. 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). A worker cooperative, therefore, has the characteristic that the majority of its workforce own shares, and the majority of shares are owned by the workforce. 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.

The impact of political ideology on practice constrains the development of co-operatives 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 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. There are now more than 400 worker co-operatives, Suma Wholefoods being the largest example with a turnover of £24 million.

Spanish law permits owner-members to register as self-employed enabling worker-owners to establish regulatory regimes that support co-operative working, but which differs considerably co-operatives that are subject to Anglo-American systems of law that require the co-operative (employer) to view (and treat) its worker-members as salaried workers (employees). The implications of this are far-reaching, as this requires co-operatives 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.

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:

• 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 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 co-operatives 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.

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 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.

Legacoop in Italy has 414 383 employees, 7 736 210 members and turns over €50Bn per year growing at a steady rate of 4.41%

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 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.

EURO COOP is the European Community of Consumer Cooperatives.

Business and employment co-operative

Business and employment co-operatives (BECs) are a subset of worker co-operatives that represent a new approach to providing support to the creation of new businesses.

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 co-operative. The micro-enterprises then combine to form one multi-activity enterprise whose members provide a mutually supportive environment for each other.

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.

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 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.

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 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.

Building cooperative

Members of a building cooperative (in Britain known as a self-build housing co-operative) 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 co-operatives in the building trade.

Utility cooperative

A utility cooperative is a public utility that is owned by its customers with their ownership manifested in the form of patronage or capital credits, and is thus a type of consumers' cooperative. In the US, many cooperatives were formed to provide rural electrical and telephone service as part of the New Deal. See Rural Utilities Service.

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.

Agricultural cooperative

Agricultural cooperatives are widespread in rural areas. In the United States, there are both marketing and supply cooperatives (some of which are government-sponsored) which 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. In contrast, while there are notable exceptions, cooperatives have generally struggled to succeed in developing countries, particularly in Africa, despite heavy injection of funds and technical assistance by donors.

Cooperative banking (credit unions and cooperative savings banks)

Credit Unions provide a form of cooperative banking.

In North America, the caisse populaire movement started by Alphonse Desjardins inQuebec, Canada pioneered credit unions. Desjardins wanted to bring desperately needed financial protection toworking 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 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.

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).

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."

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 cooperative sector, such as the UK, cooperatives 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.

The British cooperative movement formed the Co-operative Party in the early 20th century to represent members of consumers' cooperatives 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 Co-operative MPs. UK cooperatives 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 Co-operative Federations
• List of cooperatives
• Co-operative economics
• Collective
• Syndicalism
• common ownership
• commune
• Cost the limit of price
• democratic socialism
• Employee-owned corporation
• Friendly Society
• History of the cooperative movement
• Danish cooperative movement
• Industrial and provident society
• microfinance / microcredit
• Mondragón Cooperative Corporation
• mutual aid
• mutual organization
• Mutual Ownership Defense Housing Division
• mutualism
• Neo-Capitalism
• Friedrich Wilhelm Raiffeisen
• Participatory democracy
• Participatory economics
• Rochdale Principles
• social economy
• social enterprise

Notes

1. Statement on the Co-operative Identity
2. Brown, J. (2006), “Designing Equity Finance for Social Enterprises”, Social Enterprise Journal, 2(1): 73 81.
3. Monzon, J. L. & Chaves, R. (2008) “The European Social Economy: Concept and Dimensions of the Third Sector”, Annals of Public and Cooperative Economics, 79(3/4): 549-577.
4. Gates, J. (1998) The Ownership Solution, London: Penguin.
5. Ridley-Duff, R. J. (2007) “Communitarian Perspectives on Social Enterprise”, Corporate Governance: An International Review, 15(2):382-392.
6. Rothschild, J., Allen-Whitt, J. (1986) The Cooperative Workplace, Cambridge University Press
7. Weinbren, D. & James, B. (2005) “Getting a Grip: the Roles of Friendly Societies in Australia and Britain Reappraised”, Labour History, Vol. 88.
8. Ridley-Duff, R. J. (2008) “Social Enterprise as a Socially Rational Business” , International Journal of Entrepreneurial Behaviour and Research, 14(5): 291-312.
9. Rothschild, J., Allen-Whitt, J. (1986) The cooperative workplace, Cambridge University Press, Chapter 1.
10. Cliff, T., Cluckstein, D. (1988) The Labour Party: A Marxist History, London: Bookmarks.
11. http://www.ica.coop/coop/principles.html
12. Ridley-Duff, R. J. (2009) "Cooperative Social Enterprises: Company Rules, Access to Finance and Management Practice”, Social Enterprise Journal, 5(1), forthcoming
13. ICA (2005) World Declaration on Worker Cooperatives, Approved by the ICA General Assembly in Cartagena, Columbia, 23rd September 2005.
14. Slaney's Act and the Christian Sociliasts: A Study of How the Industrial and Provident societies' Act 1852 was passed.
15. http://www.cooperatives-uk.coop/performancereview
16. Oakeshott, R. (1990) The Case for Worker Co-ops (2nd Edition), Basingstoke: Macmillan.
17. Ridley-Duff, R. J. (2008) Mediation: Developing a Theoretical Framework for Understanding Alternative Dispute Resolution, Centre for Individual and Organisational Development, Sheffield Hallam University, published at www.roryridleyduff.com/writingacademic.htm.
18. Legacoop
19. Dti Reference
20. EURO COOP
21. http://cooperativenetwork.coop/wm/education/youthprograms/web/USDACurriculum_MNedition/StartHere.htm
22. Gide, Charles; as translated from French by the Co-operative Reference Library, Dublin, "Consumers' Co-Operative Societies", Manchester: The Co-Operative Union Limited, 1921, p. 122
23. Statistical information on the Co-operative Movement

References

Further reading

• "Consider the Collective: More than business as usual" by John Emerson, 2005. Article on graphic design and printing cooperatives.
• "Consumer Co-operatives in a Changing World" edited by Johann Brazda and Robert Schediwy (ICA), 1989
• Consumers' Co-operative Societies, by Charles Gide, 1922
• Co-operation 1921-1947, published monthly by the Cooperative League of America
• Cooperative Peace, by James Peter Warbasse, 1950
• Cooperatives: Principles and practices in the 21st century, by Kimberly A. Zeuli and Robert Cropp, 2004
• Problems Of Cooperation, by James Peter Warbasse, 1941
• The History of Co-operation, by George Jacob Holyoake, 1908
• "For All The People: Uncovering the Hidden History of Cooperation, Cooperative Movements, and Communalism in America," PM Press, by John Curl, 2009
• "The International Co-operative Movement" by Johnston Birchall, 1997
• Cooperative Social Enterprises: Company Rules, Access to Finance and Management Practice in the Social Enterprise Journal, Vol. 5., Issue, 1 by Rory Ridley-Duff, 2009.
• Developing Successful Worker Co-ops, London: Sage Publications by Cornforth, C. J., Thomas, A., Spear, R. G. & Lewis, J. M., 1988.
• Reluctant Entrepreneurs, Open University Press by Paton, R., 1989.
• Making Mondragon, New York: ILR Press/Itchaca, by Whyte, W. F. & Whyte, K. K., 1991
• Understanding Cooperatives, a curriculum on cooperative business for secondary school students.

External links

• Canadian Co-operative Association
• Co-operatives UK
• DEBUuT, Business Cooperative of the Brussels Region
• International Co-operative Alliance
• International Confederation of Popular Banks
• Venezuela's Cooperative Revolution from Dollars & Sense magazine
• The National Co-operative Archive – holds records relating to all aspects of the co-operative movement.
• The European Union Project “Credit Cooperatives - Russian Federation” official web site
• Twin Oaks Communities Conference Conference focused on education about Cooperative Living