We explain what a cooperative is, its structure, values and principles. In addition, we explore the types of cooperatives and more.
What is a cooperative?
A cooperative is a type of business association providing goods or services which is controlled by its members. It is a business jointly owned by individuals united voluntarily to satisfy common economic, social, or cultural needs.
A cooperative is a type of business whose objectives are oriented to the common good of all its members, and which is owned and managed by the people working there. This distinguishes it from other types of businesses, whose purpose is to solely benefit their owners and shareholders, as is the case of corporations, for example.
At the global level, the International Co-operative Alliance (ICA) unites cooperatives worldwide. Founded in London in 1895, it represents and assists them, and in addition shares updated information. ICA Americas has represented ICA in the American continent since 1990, with headquarters in Costa Rica.
- See also: Successful organization
KEY POINTS
- A cooperative is a type business providing goods or services which is formed by members with a common economic, social or cultural objective.
- The difference with other types of business is that members contribute to the organization with their work.
- Cooperatives are run based on democratic principles: all members must participate and vote in the organization's decisions.
Values and principles of cooperatives
Cooperatives are autonomous organizations in which members voluntarily unite to meet economic, social or cultural needs through the cooperative's business activity, which is characterized by certain common values and principles:
- Values. Members responsibility, mutual aid, equality and solidarity.
- Principles. Democratic control: all members vote in the decisions and the economic participation of the members. Each member is entitled to one vote, unlike other businesses such as corporations, where the number of votes each member is allowed to depend on the number of shares they hold.
Types of cooperatives
The main types of cooperatives include:
- Worker cooperatives. These are organizations where members work to produce goods or services through a collective self-employment structure in which everyone contributes capital, must perform tasks, and is involved in administrative management.
- Social cooperatives. These are organizations that promote the social integration of heads of households living in vulnerable situations, people with disabilities, or minority groups who are excluded from the labor system.
- Consumer cooperatives. These are organizations in which workers carry out a business activity in order to provide goods or services for their members. In this way, cooperatives provide quality products at a competitive price.
- Agri-food cooperatives. These are organizations made up of small rural producers who join together to obtain better conditions, such as seed quality, supplies or machinery, while at the same time being able to sell the food produced at more competitive prices.
- Health cooperatives. These are insurance organizations that provide services covering health-related risks for cooperative members.
Differences between cooperatives and other businesses
A business is an organization whose business objective is to gain profit, as is the case of corporations (Corp), limited liability companies (LLC), and joint-stock companies (JSC).
A cooperative is a type of business entity, which mainly differs from other types of businesses in the following aspects:
- Members of a cooperative work to provide service and obtain a common benefit; they do not only seek to obtain individual benefits.
- The profit or earning of a cooperative is divided among its members in proportion to their participation in the business; it is not distributed only among shareholders, as is the case with other types of businesses.
- All members of a cooperative have the right to vote in the executive and economic decisions of a cooperative; not only shareholders.
- All members are involved in the cooperative's management decisions, unlike other types of businesses, where only shareholders represent the Board of Directors.
Structure of cooperatives
Cooperatives are characterized by having a horizontal structure, which means that each member has the same hierarchical level even if they hold different positions.
The structure of a cooperative may vary according to the size of the organization, which in general is composed of:
- Members. They are the basis of every cooperative. They pursue common interests before individual ones, and must be willing to accept responsibility as cooperative members.
- Directors. These are members who hold executive positions, convene assemblies, and make specific decisions regarding the operation and management of the organization.
- Administrators. These are members who perform accounting, tax and money-related tasks. Management must be informed of the different accounting and tax situations for decision-making.
- Employees. These are members appointed by the Board of Directors performing various tasks depending on the industry where the organization operates, such as workers preparing food orders for dispatch, or working the land harvesting vegetables, among other activities.
References
- National Cooperative Business Association, CLUSA international (2022). What is a co-op?. NCBA.
- Co-operatives of the Americas (2022). Co-operative identity, principles and values. ACIAmericas.
- Hispacoop (2021). ¿Cómo funciona una cooperativa de consumidores y usuarios? (video). YouTube.
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