Organization owned by and operated for the benefit of those using its services. Cooperatives have been successful in such fields as the processing and marketing of farm products and the purchasing of other kinds of equipment and raw materials, and in the wholesaling, retailing, electric power, credit and banking, and housing industries. The modern consumer cooperative traces its roots to Britain's Rochdale Society of Equitable Pioneers (1844); the movement spread quickly in northern Europe. In the U.S., agricultural marketing cooperatives developed in rural areas in the 19th century; other contemporary examples include consumer and housing cooperatives. Seealso credit union.
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A cooperative (also co-operative or coöperative; 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. 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.
Although co-operation as a form of individual and societal behavior is intrinsic to human organization, the history of modern co-operative forms of organizing dates back to the Agricultural and Industrial Revolutions of the 18th and 19th centuries. The 'first co-operative' is under some dispute, but there were various milestones.
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, social reformer Robert Owen 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.
In some countries, 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:
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.)
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 co-operative's real estate, or have membership and occupancy rights in a not-for-profit co-operative (non-share capital co-op), and they underwrite their housing through paying subscriptions or rent.
Housing cooperatives come in two basic equity structures:
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.
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.
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 thus 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.
Social cooperatives are legally defined as follows:
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.
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.
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 , 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.
In Europe, there are strong agricultural / agribusiness cooperatives, and agricultural cooperative banks. Most emerging countries are developing agricultural cooperatives. Where it is legal, medical marijuana is generally produced by cooperatives.
A cooperative is a form of vertical integration and is similar to an Alliance.
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.
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.
See Also: List of Co-operative Federations
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.