Cooperative facts for kids

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Chengnei Branch, Taiwan Cooperative Bank 20130411
Chengnei Branch, Taiwan Cooperative Bank

A cooperative (also co-operative or co-op) comprises a legal entity owned and democratically controlled by its members, with no passive shareholders. Unlike a union, a cooperative may assign different numbers of votes to different members; typically a cooperative is governed proportionally according to each member's level of economic interest in the cooperative. However, many cooperatives maintain a strict "one member, one vote" policy -- one of the Rochdale principles -- to avoid the concentration of control by an elite. 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 but other legal entities may also be used. Cooperatives may be for-profit or non-profit.

The cooperative movement often has links and associations with Green politics (in the US) or with Labour politics (in the UK), and with socially responsible investing.

Types of cooperatives

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).

ScotmidCoop200411 CopyrightKaihsuTai
a supermarket run by a retailers' cooperative in the port of Leith, Edinburgh.

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.

A utility cooperative is a public utility that is owned by its customers (an arrangement also known as a consumer cooperative). In the United States, many such cooperatives were formed to provide rural electrical and telephone service as part of the New Deal. See Rural Utilities Service.

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 U.S. representing worker cooperative interests nationally. There are local networks and federations throughout the U.S. in the San Fransisco Bay area, the Twin Cities, Portland Oregon, and Boston.

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.

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

  • Sunkist Growers, Incorporated (citrus fruit),
  • Sun-Maid (raisins),
  • Ocean Spray (cranberries and citrus),
  • Cotton Incorporated (cotton),
  • Farmland (processed meat),
  • Land O'Lakes (dairy and farm supply).
Best Western Bella Villa Cabana
Best Western Bella Villa Cabana

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.

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 which began the Mouvement Desjardins.

Credit Unions are also established in the UK. The largest are work based but many are now enlarging out into the community.

The Association of British Credit unions, or ABCUL is the largest organisation in the UK representing the majority of Credit Unions.

History of the co-operative movement

Robert Owen statue - Manchester - April 11 2005
Head Office of the Co-operative Bank Manchester with the statue of Robert Owen in front

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 co-operative 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 the largest and most successful example being at Mondragón in the Basque country of Spain. Co-operatives were also successful in Yugoslavia under Tito where Workers Councils gained a significant role in management.

In the United Kingdom, 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. British co-operatives retain a significant market share in food retail and the travel industry in some areas of the country.

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Cooperative Facts for Kids. Kiddle Encyclopedia.