The Online Encyclopedia and Dictionary







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, in an egalitarian fashion. The principles of cooperation are periodically updated by the International Cooperative Alliance [needs link].

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-disciminatory 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 on their function.

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 the United Kingdom the traditional corporate form taken by cooperatives is the 'bona fide cooperative' under the Industrial and Provident Societies Acts. Since the 1980s, however, many have incorprated 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 October 2006 the European Cooperative Statute will come into force as a corporate form for cooperatives with individual or corporate members in different countries of the European Union.

Worldwide, some 800 million people are members of cooperatives. The cooperative movement often has links and associations with Green politics or Socialist politics, with socially responsible investing, and with the social enterprise movement.


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 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.

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 (an arrangement also known as a 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 owned and operated by its "worker-owners". There are no outside, or consumer owners, in a worker's cooperative - only the workers own shares of the business. 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 for particular reasons - the printing industry is one example in which union shops often receive a special market of business (union members). The United States Federation of Worker Cooperatives is the only 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 Cooperatives UK (the successor of the Cooperative Union) 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 . A particularly successful form of multi-stakeholder cooperative is the Italian "social cooperative", of which some 5,000 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.

Consumers' cooperative

The term cooperative also applies to stores owned by employees and customers. Members vote on major decisions; employees get discounts compared with non-member customers. A well known example is the REI (Recreational Equipment Incorporated) co-op. The world's largest consumer co-operative is the Co-operative Group in the United Kingdom, which has a variety of retail and financial services.

Agricultural cooperative

In the US

Farmers often maintain marketing cooperatives, some of which are government-sponsored, which promote and may actually distribute specific commodities. Examples include:

In California and other states where it is legal, medical marijuana is generally produced by cooperatives.

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.

Cooperative banking (Credit union and Cooperative savings banks)

Credit Unions provide a form of cooperative banking. In North America, the caisse populaire movement started by Alphonse Desjardins in Quebec, Canada pioneered credit 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 credit union, marking the beginning of the Mouvement Desjardins.

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--or ABCUL --is the largest such organisation in the UK, representing the majority of Credit Unions.

Important European banking cooperatives include the Credit Agricole in France and the Raiffeisen system in Germany, Austria, the Netherlands, and Belgium. 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.

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 rental. 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 (1771-1858) 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. 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 (1786-1865)--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 edition 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 example 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.

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

External links

Further reading

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.

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