What is a Cooperative?
The Statement on Cooperative Identity adopted by the International Cooperative Alliance in 1995 defines cooperatives 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’. In short, they are enterprises owned, controlled and for the benefit of their members.
Uniquely, cooperatives are both associations of people and fully fledged economic enterprises. From the outside, they may look like any other business; but their distinctive feature is that they are owned and controlled by their members who make decisions democratically. The basic rule in cooperatives is ‘one member, one vote’. In other words members have an equal say, regardless of the amount of capital they put into the enterprise.
Cooperative values and principles
Cooperatives around the world share the same core principles and values. The roots of these cooperative principles are in the first modern cooperative, founded in Rochdale, England in 1844.
Cooperatives are values-driven enterprises that put members and their communities at the core of their purpose. These values are self-help, self-responsibility, democracy, equality, equity and solidarity.
The cooperative principles are guidelines by which cooperatives put their values into practice:
- 1st Principle: Voluntary and Open Membership: Cooperatives are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.
- 2nd Principle: Democratic Member Control: Cooperatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary cooperatives members have equal voting rights (one member, one vote) and cooperatives at other levels are also organised in a democratic manner.
- 3rd Principle: Member Economic Participation: Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.
- 4th Principle: Autonomy and Independence: Cooperatives are autonomous, self-help organisations controlled by their members. If they enter to agreements with other organisations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy.
- 5th Principle: Education, Training and Information: Cooperatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their cooperatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of cooperation.
- 6th Principle: Cooperation among Cooperatives: Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.
- 7th Principle: Concern for Community: Cooperatives work for the sustainable development of their communities through policies approved by their members.
What is a worker cooperative?
Worker cooperatives aim to provide the best possible employment for members. In a worker cooperative, the power is in the hands of the workers who decide democratically on the major guidelines of their enterprises and appoint their leaders (managers, boards of directors, etc.).
Worker ownership makes a fundamental difference. In conventional enterprises, the business decisions are made by a single individual, or a group of shareholders, with the purpose of maximizing profit. In a worker cooperative, members reinvest surpluses to maximise the cooperative’s ability to deliver on its mission. Part of surpluses are allocated to developing the cooperative by building up indivisible reserves – a kind of ‘common wealth’. In some countries, this is legally protected, so that the reserve can’t be shared out between members even if they dissolve the business – instead, it must be passed on to another enterprise with a similar mission.
A second part of the surplus may be used to benefit members directly – not in the form of a dividend, but in proportion to their transactions with the cooperative. In a worker cooperative, this might be additional pay for the hours of work carried out during the year. Depending on policies which the members decide, a third element of the annual surplus might be used to support local community causes, the wider cooperative movement, or other activities beneficial to all the members.
Worker cooperatives are present everywhere in the world, in a wide range of activities – from wood products to car making, civil engineering to pharmaceuticals. They operate in both traditional and emerging industries. Almost any enterprise can be organised as a worker cooperative. Although most are created from scratch, hundreds of them are the result of businesses that have been transferred to, or bought out by their workers, and re-founded as worker cooperatives.
Cooperatives also have a unique interpretation of the importance of education. They provide their members with information and training, seeing these as a prerequisite for individuals to develop the autonomy, motivation, self-responsibility, and accountability they will need to be effective cooperators in an increasingly insecure world.
For a deeper understanding of the worker cooperative model, we invite you to read the World Declaration on Worker Cooperatives, approved by the International Cooperative Alliance general assembly in 2005. This declaration is in correspondence with ILO Recommendation 193 concerning the promotion of cooperatives, approved by governments, employers’ and workers’ organisations worldwide.
What is a social cooperative?
Social cooperatives specialise in providing of services of general interest such as social or environmental services, education and culture; or in the reintegration, through work, of disadvantaged and marginalised workers such as people with disabilities, the long-term unemployed, former detainees, addicts or migrants. Most of them are owned, entirely or at least partially, by their workers. Depending on local laws and systems, they may also involve other categories of members such as service beneficiaries, volunteers, public authorities.
Social cooperatives first emerged in Italy in the 1970s, on the initiative of social activists, social workers, church and community leaders. They answered the increase in social need which was not being met by the existing social welfare systems. Today, they can be found in various European countries, and on other continents.
For a more detailed analysis of the social cooperative model, we invite you to read the World Standards of Social Cooperatives approved by CICOPA General Assembly in 2011.
Other kinds of cooperatives in the CICOPA network
Although they are a majority of our members, worker and social cooperatives are not the only types of cooperatives in industry and services. Two new forms in particular are developing, as an answer to emerging economic and social needs.
Independent producers’/workers’ cooperatives
These are cooperatives established by independent producers and workers such as couriers, journalists, graphic designers, consultants, doctors and lawyers. They may pool resources or commission services together, such as marketing, accountancy, ‘back office’ administration, legal services, renting space or equipment. They can do this while maintaining their autonomy. In some of them, the worker/producer members benefit from employee status, and through this have access to the social rights and protections to which employees are entitled. These cooperatives have appeared as a response to the huge expansion of non-standard labour conditions and contracts, particularly self-employment and freelancing. They are a valuable tool for combatting job instability and loss of formal rights linked to the new work forms, and which particularly affect certain groups of workers – for instance, the young, people working in creative industries, women (especially home-based female workers and carers), and migrants.
These cooperatives have more than one category of member, with different stakeholder groups sharing a common interest in the success of the enterprise. The model is most often used as a tool for community and social development, because it allows the active involvement of diverse groups. This is also why so many multi-stakeholder cooperatives are social cooperatives. The various member groups are designated in the cooperative’s by-laws. They may include people who buy from or benefit from the services provided by the cooperative, as well as producers, workers and even – within limits – financial investors. They can also include incorporated bodies such as non-profit organisations, other cooperatives, businesses or municipalities.