What is a co-operative business, and how are they different?

A co-operative 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. (Source: http://www.ica.coop/principles.html)

Here in the United States co-ops are all around us, although you might not realize it. In the U.S. there are over 30,000 co-operatives, with 2 million employees and a combined revenue of $650 billion.

One of the critical ways in which co-ops are different is that though most are tax-paying, for-profit firms, they do not exist to maximize profits. Rather, profits are just one of many tools they use for their real aim, which is to serve the needs of their members, who could be:

More specifically co-ops are distinguished by the 7 principles that they all must abide by:

  • 1st Principle: Voluntary and Open Membership
    Co-operatives 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
    Co-operatives 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 co-operatives members have equal voting rights (one member, one vote) and co-operatives 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 co-operative. At least part of that capital is usually the common property of the co-operative. 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 co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.
     
  • 4th Principle: Autonomy and Independence
    Co-operatives 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 co-operative autonomy.
     
  • 5th Principle: Education, Training and Information
    Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the general public - particularly young people and opinion leaders - about the nature and benefits of co-operation.
     
  • 6th Principle: Co-operation among Co-operatives
    Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.
     
  • 7th Principle: Concern for Community
    Co-operatives work for the sustainable development of their communities through policies approved by their members.

(Source: http://www.ica.coop/coop/principles.html)