A cooperative is an organization that is owned and controlled by the people who use its products, supplies or services. Although cooperatives vary in type and membership size, all were formed to meet the specific objectives of members, and are structured to adapt to member's changing needs. Self-reliance and self-help are the hallmarks of cooperatives.
Although cooperation, that is, people working together for their mutual benefit, has been practiced throughout human history, the cooperative as a form of business organization began during the Industrial Revolution. Cooperatives were useful for promoting the interests of the less powerful members of society. Farmers, producers, workers, and consumers found that they could accomplish more collectively than they could individually.
Cooperatives can be used to address a multitude of shared needs:
Agricultural cooperatives are user-owned and user-controlled businesses from which benefits are derived and distributed equitably on the basis of use.
From the farm to the kitchen table, agricultural cooperatives are present in nearly every stage of the food and fiber industries, and have been a part of U.S. agriculture for more than a century. Today, there are more than 4,000 agricultural cooperatives in the U.S., with a total net income of nearly $2 billion and net business volume of more than $89 billion.
supply, and service cooperatives are the most common types of agricultural
cooperatives organized in the United States.
Marketing cooperatives assemble, pack, process, and sell members' products in both domestic and foreign markets. The level of service provided depends on member needs and the product.
Supply cooperatives purchase products and services for their members. They make large-scale purchases of fuel, seed, fertilizers, and crop protectants and pass their cost-savings on to members.
Service cooperatives provide members with specialized services, such as ginning, hulling, and horticultural advice, which are usually not economical for an individual farmer to obtain.
Different from other types of businesses in their structural and operational characteristics, agricultural cooperatives are:
Today's agricultural cooperatives, large and small, are an important part of the global market. They have formed marketing agencies-in-common to jointly export their products, and continue to serve their members by looking for growth opportunities and the use of new technologies. The mission of cooperatives, however, always remains the same--to serve members.
Arts and Crafts Cooperatives
Cooperatives offer several benefits to artists and craftspeople. By working together artisans can gain marketing advantages, reap quantity discounts on supplies through joint purchasing, and share studio space and equipment. Performing artists use the cooperative model to increase their artistic freedom and control over performances.
Arts and Crafts cooperatives are democratic organizations that are governed on a one-member one-vote basis. Typically the cooperative members elect a board of directors that makes major policy decisions and may hire a manager or staff to maintain day-to-day operations. Some artisans operate their cooperative as a collective where all members function as the board of directors and make decisions through consensus.
Through joint marketing artisans of all types can maintain their independence and creativity while reducing time spent on selling and promoting their art. Artisans can open a cooperative store to provide a retail and display place to sell and market their product. Cooperative members can pool their resources to hire a store manager, allowing them to devote more time to their craft. Because they are member-owners of the cooperative, they can decide how their pieces will be displayed and devise equitable ways to rotate or share prime display sites within the store. By marketing their products jointly, co-op members can earn more from sales because they don't have to pay a dealer or agent. They may also be able to reach a broader market through catalogue or retail sales.
By forming a cooperative, artisan members can share studio space that they may be unable to obtain on their own. They can share expensive tools, kilns, or equipment by purchasing them together. When artisans use similar supplies and materials they can use the cooperative for joint purchasing and save money through bulk or quantity purchases. If they wish to, members can offer technical assistance, collegiality, and constructive critiques to one another.
Some arts and crafts cooperatives operate as performance troupes. These performing arts cooperatives are owned and democratically controlled by the performers, directors, stage hands, and other staff of the troupe. Performing arts cooperatives offer member artists more artistic freedom and control over performances than is usually available in more traditional stage companies and dance troupes.
Business cooperatives are formed by businesses to purchase supplies or obtain services at a lower cost. They vary widely both in size and type and include cooperatives of individual business proprietors such as individual taxi-cab owners joining together for dispatch services, small businesses such as retail pharmacies, hardware stores or plant nurseries that purchase supplies cooperatively and real estate information-sharing cooperatives.
Child Care and Preschool Cooperatives Parents are attracted to child care and preschool cooperatives because they offer high quality, affordable child care or early education programs for children. The parent involvement allows parent input and intimate knowledge regarding their preschoolers' out-of-home experiences, as well as opportunities to interact with other parents. As members, parents elect a board of directors that establishes policies and hires qualified staff who run the day-to-day operations.
Preschool cooperatives, also known as parent participation nursery schools (PPNS), date back to 1916 when a group of faculty wives at the University of Chicago organized a cooperative program to provide social and educational experiences for their young children, and to gain child-free time to pursue volunteer activities. Contemporary preschool cooperatives usually offer enrichment activities for children for two to four hours per weekday. The program is staffed by an expert in early childhood education and parents assist in the classroom. Parent involvement contributes to the quality of the program and also cuts down on operational costs. Because PPNS programs often have significant parent participation requirements, they tend to attract children with one parent who is at home full-time.
Child care cooperatives offer quality care for children while their parents work. Although many aspects of the programs are identical to PPNS programs, they usually differ from them in three significant ways: they offer full-day care, more staff are hired, and parent participation requirements are significantly reduced.
A growing number of PPNS programs are modifying or offering options to their programs so they can accommodate employed parents. Many offer additional "after preschool" child care services. Some allow nannies or grandparents to complete the parent participation requirements or participation options that can be completed during evenings or weekends. Other programs offer members the option of reducing their parent participation requirements by paying an increased fee.
Employer-Assisted Cooperative Child Care can be a useful model for on- or near-worksite child care. In the employee model, parents at the worksite develop a child care cooperative as previously described. The employer may assist the cooperative by helping with start-up expenses, contributing financially, or by providing in-kind assistance like utilities, use of buildings and outdoor space, duplicating, secretarial assistance, or other goods or services.
In a child care consortium, businesses, rather than parents, are the members and they join together to provide near-worksite child care for their employees. In this model, businesses share the costs and benefits associated with employer-assisted child care programs. The consortium model is helpful to smaller companies, or those with a small parent population who don't have a sufficient population to support a child care center on their own. Some larger businesses become involved in consortia because they want to "try out" offering child care benefits to their employees.
Baby-sitting cooperatives allow parents to equitably exchange baby-sitting services so they can enjoy a night out or travel on business trips. These cooperatives are less formal and involve relatively short-term arrangements. When parents take care of a child or children from a member family they earn points or scrip that can be "spent" when they need baby-sitting services.
Credit Unions are member-owned, non-profit, financial cooperatives organized by consumers to encourage savings and to obtain loans at the lowest possible cost. A credit union's members share a common bond such as having the same occupation or employer, belonging to the same association or religious group, or living in the same community. Members elect a board of directors on a one-member one-vote basis.
Credit unions developed at a time when banks were not very interested in the consumer market, especially in small deposits and loans typically needed by working-class people. The credit union idea came to the United States from Germany, where the first credit union was formed about 130 years ago. The first U.S. credit union opened in 1909, in New Hampshire. In California, the first credit union was formed in Fresno in 1924 and the first California credit union law was signed in 1927. This paved the way for the widespread development of credit unions in the state. The number of credit unions grew even more rapidly after the formation of the California Credit Union League in 1933 and the passage of the Federal Credit Union Act of 1934. California passed an updated version of its credit union law in 1951, which explicitly affirms the democratic purposes of credit unions.
Community Development Credit Unions are credit unions organized in predominantly low-income communities. In addition to providing for consumer needs, they have an explicit mission of community reinvestment and revitalization. They provide financing for housing acquisition and rehabilitation and for small businesses, both privately and cooperatively owned. CDCUs were developed in response to findings that traditional financial institutions take out more capital from low-income communities than they put in.
California credit unions can be chartered under either federal or state laws, but most are federally insured. In both membership and economic terms, credit unions comprise the largest consumer cooperative sector in California and represent a large share of the financial services industry.
Food Cooperatives are one type of consumer cooperative. They range from multi-outlet supermarkets to small buying clubs with a few members. They are formed by consumers to obtain lower prices and greater control over product range and quality. Many cooperative supermarkets began as small buying clubs and developed into storefront cooperatives as membership increased.
The first consumer food cooperative in California was formed in 1867 in San Francisco. Although the modest daily sales were financially sound, the store lasted only a short time. In the 1930s there was a burst of cooperative activity throughout the United States in response to the Great Depression. In California two long-lived consumer cooperatives were formed, in Palo Alto in 1935 and in Berkeley in 1937. Although the 1988 closure of the Berkeley food cooperative was a setback for the consumer cooperative movement, many other food cooperatives in California are thriving and expanding; most have been formed within the last 20 years. In addition to traditional economic benefits associated with cooperative food purchasing, these cooperatives often emphasize nutritional quality and the politics of production and distribution. Cooperatives' priorities in these areas vary, and this is reflected in differing policies on labor and capital investment, as well as in financial policies such as patronage refunds, markups, and discounting.
Food cooperatives are governed by a board of directors, elected by the members on a one-member one-vote basis. Volunteer work by members is not a requirement of membership, but some members do volunteer time to their cooperative.
In addition to storefront food cooperatives there are numerous buying clubs in California, consisting of a group of individuals or households coming together to buy food in bulk to take advantage of quantity discounts and to obtain a range of foods not available locally. Buying clubs are mainly run on a volunteer basis by members, with a majority of members volunteering time.
Housing Cooperatives make up one of the largest cooperative sectors in California. Housing cooperatives are set up as corporations that are owned by members or shareholders who receive services from the corporation in the form of housing. Each member owns a share in the corporation, which entitles him or her to occupy a unit of housing. Cooperatives are typically financed through a blanket mortgage that covers the entire property. Mortgage payments and operating expenses are met through member carrying charges.
Many cooperatives were developed to provide affordable housing and ownership opportunities for low and moderate income households. These types of cooperatives almost always receive public subsidies to ensure affordable carrying charges. Share prices in these cooperatives are usually low, and member households may not own more than one share. To further preserve affordability and prevent speculative resale, price restrictions are placed on the sale of shares.
The importance of such affordable cooperative housing was recognized by the California Legislature in 1979, when legislation was passed that provided legal status for limited-equity housing cooperatives. This legislation requires that such cooperatives be incorporated as non-profit public benefit corporations, limit share price increases to 10 percent per annum, and mandate dedication of any profits from the sale of a cooperative to public or charitable entities. Since the legislation passed, thousands of apartment units and mobile home spaces have been developed through limited-equity housing cooperatives.
Some cooperatives operate in the private market and receive no subsidies. In these cooperatives, sometimes known as market-rate or stock cooperatives, individual members of the cooperatives arrange private financing of share purchases. Members can own more than one share and rent out the additional units for a profit. When a member moves out the share is sold to the incoming member for its full market value.
In mobile home park cooperatives the individuals homes are owned privately; the rest of the land and facilities are owned by the cooperative. Members own a share in the cooperative, which entitles them to occupy a homesite or space and to use the park facilities. Mobile home park cooperatives have been set up in both market rate and limited equity forms.
Insurance Cooperatives operate much like retail cooperatives except that they provide insurance services instead of consumer goods. Policyholders constitute the membership and elect the board of directors. Insurance cooperatives operate by pooling and investing the premiums paid by members. The revenues generated are then used to reduce the costs of providing insurance. Because policyholders are also owners, any profits are returned to the consumers as dividends. Insurance cooperatives are able to provide lower insurance rates and greater control for members.
Retail Cooperatives sell consumer goods to members as well as non-members. Members, however, enjoy discounts or patronage refunds, or both. Patronage refunds are a percentage of the total amount of money a member has spent on purchases over a specified period of time. These refunds come from the earnings of the cooperatives. Retail cooperatives also offer control. Because the members elect representatives to the board of directors and can participate in general membership meetings, consumers control the operation and policies of the cooperative.
Student Cooperatives are set up and run by students to meet specific needs. Housing and food cooperatives are the most common student cooperatives. Others include child care cooperatives and bookstores. Student cooperatives are democratically run through the one-member one-vote principle. Although members are primarily students, board members may also include alumni, university officials, or other non-students.
Besides reduced costs for important needs such as housing and food, student cooperatives provide other important benefits. Students can participate in the management of their cooperative and learn valuable business and organizational skills. In cooperative housing, students can gain valuable experience by living with people from different cultural and social backgrounds.
Utility Cooperatives provide utilities such as communication services, electricity, and water to their members. Cable television cooperatives are organized very much like utility cooperatives. Members share the start-up and capitalization costs. In return, they benefit from the lower rates that result when users are also owners. Telephone cooperatives also play a major role in rural areas, serving more than a million members nationally.
Worker Cooperatives are businesses owned by the workers. The cooperative form of organization allows ordinary people to combine their energy, capital, and skills to gain steady employment and income, participate in the ownership and management of their business, and share the profits made from their investment and labor.
Historically, worker cooperatives date back to 1790 in the U.S. and the 1760's in England. They are found all over the world. The cooperative form of organization can be applied to any business area, including manufacturing, services, shipbuilding, food products, restaurants, computer software, engineering, reforestation, construction, and many other industries.
Worker cooperatives are unique both as cooperatives and businesses. Workers participate directly in decisions that affect them in their workplace as well as those that determine the growth and success of the business. Worker cooperatives provide worker-members with employment and income along with the ownership and control of the enterprise. Through their ownership and control the worker-members receive a fair share of the profits and control over the way their work is organized, performed, and managed.
Worker cooperatives apply distinctive worker cooperative principles which specify that worker-members:
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