What is a co-operative?

According to the International Co-operative Alliance (ICA), a co-operative is "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."

What does this mean? It means a group of people can get together to achieve an agreed-upon goal and tap into the benefits of a co-op business. That goal is often to gain access to a product, such as organic produce, or a service, such as electricity, or to co-own and co-manage their workplaces. In general, a co-operative is a business owned and controlled by the people who use it.

 

An incorporated entity with limited liability, co-operative shareholders are called members. Members often benefit in two ways from the co-operative:

  • Products and services are customized to suit their needs

  • If in a worker co-op or a multistakeholder co-op, worker members can control their own workplaces and guarantee good conditions of work and fair wages

  • Part of the profits are re-distributed to members based on the amount of business they do with the co-operative.

 

One characteristic of a co-operative that usually separates it from other models is the “one member, one vote” rule. This way of decision-making is different from votes linked to the number of shares held (ie: those with the most shares get the most votes) that some other corporate models use. The result is equitable decision-making and profit distribution, and often a more stable business structure.

Co-operatives operate in most sectors of the economy – from oil refineries to daycares to housing to grocery stores, factories and shops of all kinds – and can provide almost any product or service – from solar panels to toothpaste to health care. They can be either non-profit or for-profit enterprises. And they have a long history of operating well in both urban and rural areas.

Many co-operatives adhere to some version of ICA’s Co-operative Principles. Those principles are:

  1. Voluntary and open membership

  2. Democratic member control

  3. Member economic participation

  4. Autonomy and independence

  5. Education, training, and information

  6. Co-operation among co-operatives

  7. Concern for community

 

Research has found that co-operatives are particularly strong as businesses, especially:

  • In labour-intensive sectors (low capitalization needs), but not necessarily so (consider the Mondragón co-operatives of the Basque Country)

  • When a group of people have a solid vision, common goals, or share a need or social vision

  • Where there are strong inter-firm or intra-firm networks

  • In communities where there are strong community bonds

  • Where workers’ or community members have a strong geographic and sector-wide situatedness

  • In situations emerging from broader crises or market failure (but not necessarily only so, co-ops can also be solid start-ups)

  • When owners of conventional businesses need to resolve their business succession issues, especially where no other traditional purchasers of the business are found

  • Co-operatives are particularly resilient in times of crisis, and tend to fail less than conventional firms because members are very committed to the co-op and are often from the local community

Types of Co-operatives

The four types of co-operatives, found in all sectors of the Canadian and world economy, are:

  • Worker

  • Consumer

  • Producer/Marketing

  • Financial (credit unions, insurance, etc.)

 

And there are also hybrid, multi-stakeholder forms:

  • Multi-stakeholder or solidarity co-operatives

  • New Generation Co-operatives

For more details on the types of co-operatives, check out CooperativesFirst.com/Types-of-Cooperatives/

Statistics about Co-operatives in Canada

  • Four of every ten adult Canadians are members of a co-operative

  • About 8,800 co-operatives exist in Canada

  • They directly employ 150,000+ people

  • About $34 billion a year in business

  • 7 Canadian co-ops are listed in the top 500 companies

  • Desjardins is the 6th largest financial services institution in Canada, $190 billion in assets

  • 1 billion+ members worldwide (in affiliates of International Co-operative Alliance), $3 trillion in assets

Eight advantages of converting to a co-operative for business owners

 

(See Vieta, Depedri & Carrano, 2017):

  1. By selling to employees – “those that know well the enterprise” – exiting owners may be able to attain the desired and best price for the firm.

  2. In the absence of a new business owner, employees might be the only stakeholders able to “retain the know-how,…markets” and value of the firm after the owner’s departure from the business.

  3. Selling to employees or community members prevents the firm from falling into the hands of competitors.

  4. There is a positive “emotional dimension” to knowing that jobs will be maintained by the employees that the owner knows.

  5. A more gradual and smooth business transition might be guaranteed when selling to employees or comomunity members, with “less negative consequences that can preserve” the “history and identity” of the firm.

  6. Employees are already familiar with the business, customers, and the “functioning of the enterprise.”

  7. “Collaboration with clients, banks, and suppliers is not interrupted.”

  8. The development and sustainability of the territory are potentially maintained, preventing the “desertification of some regions” from a business’s closure or move.

    • Local economies are also preserved via local ownership and local jobs

    • Co-ops ride out crises moments much better than conventional firms

    • Co-ops can effectivley operate in sectors with market failure and revive them

Four advantages for employees/workers or the community in converting to a co-op

 

(See Vieta, Depedri & Carrano, 2017):

  1. Jobs are saved in local communities.

  2. A worker co0operative business form can actually strengthen the “financial stability of the enterprise” since “worker-members are motivated by the co-operative results.”

    • Workers or community members are intimately connected to local communities and are less likely to sell off or close the business.

    • Worker or multistakeholder co-ops ride out moments of crisis much better.

  3. The “double identity” of the employee as “worker and owner of the enterprise” reduces “ownership risks” because they are protected. In a worker co-operative, worker-members control capital rather than capital being controlled by investor-owners.

  4. Co-operative federations and other institutional organizations (as in Italy, France, and Spain, Quebec, etc.) provide additional business support structures and financial mechanisms that worker-owners can tap into, giving them a further competitive advantage.