What are Cooperatives?

What are Cooperatives?

A cooperative 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.

Cooperatives bring people together in a democratic and equal way. Whether the members are the customers, employees, users or residents, cooperatives are democratically managed by the ‘one member, one vote’ rule. Members share equal voting rights regardless of the amount of capital they put into the enterprise.

As businesses driven by values, not just profit, cooperatives share internationally agreed principles and act together to build a better world through cooperation. Putting fairness, equality and social justice at the heart of the enterprise, cooperatives around the world are allowing people to work together to create sustainable enterprises that generate long-term jobs and prosperity.

Cooperatives allow people to take control of their economic future and, because they are not owned by shareholders, the economic and social benefits of their activity stay in the communities where they are established. Profits generated are either reinvested in the enterprise or returned to the members.

The cooperative movement is far from being a marginal phenomenon, at least 12% of humanity is a cooperator of any of the 3 million cooperatives on earth.

Types of Cooperatives

1. Housing cooperatives

A housing cooperative is a type of cooperative that owns real estate properties, which comprise one or more residential buildings. Housing cooperatives usually develop in areas where the cost of housing is high. Unlike other types of real estate properties, such as condominiums where individual buyers acquire properties, housing cooperatives are member-based. Interested individuals can become members by purchasing shares in the corporate.

Each member of a housing cooperative is given the right to occupy one housing unit in a property developed by the cooperative. Shareholders pool their financial resources together. It leverages their buying power, allowing them to reduce the cost for services and products associated with a specific property. The elected representatives are responsible for screening and selecting members to be allocated housing units in each of the properties developed by the cooperative.

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2. Credit unions

Another popular form of cooperative is the credit union. Credit unions are financial institutions that are owned and managed by members, and they provide traditional banking services. Credit unions range from small community-owned banks to large entities spread across the country.

Since credit unions are membership-based, they are considered to be non-profit entities, and therefore, exempt from certain forms of taxation that for-profit entities are subjected to. Credit union members enjoy higher interest rates on deposits than the rates paid by commercial banks.

Revenues generated by the organization are used to finance its daily operations, while the profits are used to fund projects that are of interest to the members.

3. Retail cooperatives

Retail cooperatives are domiciled in the retail industry. They are owned and managed by their customers, and they own retail stores such as grocery stores. Retail cooperatives are overseen by an elected board of directors, which is elected by the members.

A retail cooperative can also be established by other retailers as a way of sharing marketing expenses and using the collective purchasing powers to negotiate discounts from manufacturers. Members of retail cooperatives can be grocery stores, pharmacy stores, bookshops, hardware stores, etc.

4. Consumer cooperatives

A consumer cooperative is a business owned and managed by its customers, and its goal is to meet the needs of its members. The consumers of the products or services offered by the cooperative are also the providers of capital used to establish or purchase the entity. Most consumer cooperatives take the form of retail outlets such as food coops and bakeries. Other types operate in the areas of healthcare, utilities, and insurance.

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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.

How Cooperatives are Structured

Cooperatives are structured in a way that allows shared decision-making and democratic control in every decision made by the entity. There are certain elements that are shared among the different types of cooperatives, including:

1. Membership

New members must be admitted according to the criteria agreed upon during the formation of the entity. Usually, most cooperatives are organized according to the profession, business activity, or community of the members, and new members who join must share these aspects.

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For example, military-affiliated cooperatives mainly admit members who are current or past officers of the military, as well as their spouses or relatives. The members must agree to abide by the rules and make timely contributions.

Each member is entitled to one equal vote during the annual general meeting (AGM) or special general meetings called to vote for certain organizational changes or proposals.

2. Governing bylaws

Each cooperative is governed by its bylaws, which are rules of engagement that specify the procedure of carrying out different functions and activities. The bylaws of a cooperative specify how the members of the board of directors are elected, how and when the AGM and other special meetings are held, how the officers and board of directors are compensated, when the cooperative can be dissolved, etc. All decisions made by the executive officers and the board of directors must be guided by the provisions of the cooperative’s bylaws.

3. Board of directors

The board of directors serves as the decision-making organ of the cooperative, and the board members are voted into office for a specific term by the members. The functions and powers of the board of directors are outlined in the cooperative’s bylaws. The board should consist of an odd number of members so that, when voting on certain decisions, there can be a definite winner.