A cooperative is a term used to describe any type of organization that is owned and controlled by the individuals who use the services or products that the organization deals in. A cooperative differs from other types of businesses in that its primary aim is to find favourable outcomes for its members, rather than to generate profits for its investors.
A cooperative can vary in size, ranging from small community buying clubs to large, national companies. Businesses or individuals usually join cooperatives to enjoy the benefits of pooled risks, group purchasing, or getting the power of owning or controlling a particular company.
A cooperative is designed to improve your business’ bargaining power, make you more competitive, take advantage of new or existing market opportunities, obtain ‘hard-to-get’ products or services, and improve the overall quality of your products.
Control and Ownership in Cooperatives
While ownership in a typical company is usually determined by the percentage of the business that an individual owns, ownership in cooperatives is dependent on you purchasing from the cooperative. For example, in order to become a member of Samsung, Inc., you will need to purchase Samsung’s stock. However, to become a member of a cooperative, all you need to do is purchase the cooperative’s products.
Additionally, each member of the cooperative is allowed a maximum of one vote, thus providing all members with equal voting rights. This is unlike traditional companies where you can purchase multiple shares in order to increase your influence in the company’s decisions.
Principles of Cooperatives
Every cooperative is based around the following basic principles:
1. An Organisation for the Poor
While cooperatives provide membership to all kinds of businesses, they are primarily designed to cater for the poor. This is because one of the chief objectives of a cooperative is to enhance the productivity of its members by providing credit facilities. And because a cooperative doesn’t give credit for meeting social obligations, it is, therefore, an association for financially-challenged individuals looking to boost their productivity.
2. Voluntary Membership
A cooperative is a voluntary organization that is open to any individual that is willing to accept the responsibilities that come with being a member. This also means that one can terminate their membership when they wish to.
3. Democratic Member Control
A cooperative is a democratic organization that is controlled by its members, who are responsible for making decisions and setting policies. As mentioned earlier, voting rights are equal among all members.
4. Member Economic Participation
All members are expected to equitably contribute to the capital of the organization.
5. Absence of Exploitation
Cooperatives inherently deny the exploitation of their members and customers. They work towards eliminating the need for intermediaries, who typically exploit small businesses. This ensures that the economic interests of the cooperative’s members stay protected.
6. Independence and Autonomy
A cooperative is a self-help organization that acts independently and is only controlled by its members.
7. Information, Education, and Training
A cooperative should provide continuous education or training to its members, employees, managers, and elected representatives to increase the value of their contributions to the organization.
8. Cooperation among Cooperatives
It is typical of various cooperatives to work together towards achieving common goals and objectives.
9. Concern for Community
Even though cooperatives are designed to focus on solving the needs of their members, they also usually work towards the sustainable development of the communities which they are a part of using policies formulated by their members.
Why Cooperatives Matter
By its very definition, a cooperative refers to a society of individuals or businesses working together to achieve the same goal. Combining forces allows individuals to accomplish objectives that they would have had difficulty achieving by themselves.
Additionally, cooperatives help build strong bonds among their members, thus helping forge tight-knit communities, which improves the overall quality of business. Moreover, cooperatives must adhere to principles that help ensure that the interests of their members are met.
Joining a local cooperative society, therefore, is something small businesses should consider as it will help increase the productivity of your enterprise. Do you want to learn more about cooperative societies? Check out our blog section for more information.