What are co-ops? Why are they important? How do we distinguish co-ops from other forms of stakeholder governance?

Co-ops can be employee-owned, customer-owned, producer-owned, business-owned, and even multi-stakeholder-owned (including investors). At their core, co-ops redistribute both economic and control rights to a wider set of stakeholders and raise important governance questions.

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Co-op Essentials:

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What is a co-op?

• Member-owned business structure with at least five members, where both profits / economic rights and governance / control rights are distributed amongst the members of the cooperative
• Generally serves the interests of the members
• Governance is democratic member control.  In primary co-operatives members have equal voting rights (one member, one vote) and co-operatives at other levels are also organized in a democratic manner
• Co-ops can be employee-owned, customer-owned, producer-owned, business-owned, and even multi-stakeholder-owned (including investors) 
• At their core, co-ops redistribute both economic and control rights to a wider set of stakeholders and raise important governance questions

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Types of Co-Ops

Employee-owned

• King Arthur Flour (link)
• Equal Exchange (employee owned fair trade coffee and chocolate co.)

Consumer-owned

• REI ($2.8B in annual revenue)

Producer-owned

• Ocean Spray (farmer owned, $1.6B annual revenue)
• Blue Diamond Almonds (farmer owned, $1.6B annual revenue)

Business-owned / Purchasing Coops

• Ace Hardware (a purchasing coop owned by early 5k independent hardware stores)

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Multi-stakeholder Co-Ops (with some mix of the above)

Mondragon Corporation / Spain

• Largest cooperative in the world
• Founded in the town of Mondragon in 1956
• Federation of worker cooperatives based in the Basque region
• 257 companies and organizations in four areas of activity: finance, industry, retail, and knowledge
• 2019, employed almost 81.5k ppls
  

Co-Op Benefits

Addresses inequality at a structural level

• More equitably-distributed value benefits a wider set of stakeholders

Better overall performance:

• Employee owned companies experience increased sales growth (averaging 2-3% higher yearly sales growth than their non-employee owned peers)

Employee happiness / productivity / retention:

• Multiple studies have indicated that employee-owned businesses are more productive, more stable, and have lower corporate failure rates

Greater resilience

• The 5-year survival rate for employee owned co-ops is 69% higher than non-cooperatively owned businesses  (66% survival rate vs 39% for other types of enterprises)

Market differentiation / brand value / greater consumer loyalty

• 78% of consumers reported that knowing that a business is a cooperative would make them more likely to use its goods and services

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Drawbacks

• Governance is challenging with many stakeholders, can gridlock
• Challenges in access to finance due to diminished ownership and control of investors vs. other corporate forms
• Cooperative business models are often easier to implement in instances when little startup capital is needed, and where workers are contributing their physical or freelance labor

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History

• Cooperative movement began in the 19th century primarily in Britain and France
• It was not until 1844 when the Rochdale Society of Equitable Pioneers established the "Rochdale Principles" on which they ran their cooperative, that the basis for development and growth of the modern cooperative movement was established
• Cooperative banks, called Credit Unions in the US, were invented in Germany in the mid 19th century
• The United States’ first cooperative was founded by Benjamin Franklin in 1752: a consumer-owned mutual insurance company that is still in operation. The second oldest cooperative in the country is the Associated Press.