Definition of a Co-op

A cooperative is a business controlled by the people who use it. It is a democratic organization whose earnings and assets belong to its members. By patronizing and becoming an active member of a co-op, you invest yourself with the power to shape that business. You control the politics and economics of what is truly your organization.

This localized member control allows co-ops to be as varied as the people they serve. Thus, there are different types of co-ops including: food co-ops, housing co-ops, arts and crafts co-ops, book co-ops, bakery co-ops, bike co-ops, farm co-ops, rural electric co-ops, financial co-ops (credit unions), and insurance co-ops. And each of these has a flavor of its own, reflective of the desires of its individual memberships. Despite the diversity in type and tradition of co-ops, most have several things in common, particularly the ideals and principles from which they emerge.

How Did Co-ops Start?

This common bond of ideals and principles of modern cooperation is traced back to 1844 when a group of 29 weavers pooled their savings and opened the first successful consumer co-op on Toad Lane in Rochdale, England. These early co-opers saw themselves on a largely social mission, to provide for themselves cheap goods and services, which the burgeoning Industrial Revolution was keeping out of their reach in the service of personal profit. Their cooperative started out small, only selling a few staple items, but within a few years they had branched out generating annual sales of $100,000.

In bringing their social vision to life, the Rochdale Pioneers developed specific guidelines for the operation of their co-op. Today we call these guidelines the cooperative principles or Rochdale Principles. Though updated and modified, the principles bear the same social vision of these co-op pioneers. This vision has been shared by thousands of cooperatives around the world which have adopted these principles as their own, and used them to help organize cooperative businesses.

Why Cooperatives?

Cooperative enterprises, which follow cooperative principles and in the cooperative tradition, have many benefits. Although the specific benefits of each cooperative varies depending on the organization and the needs of its members, several benefits are almost universal:

Cooperatives save money.

There is no owner/operator to take a profit from the customer: the customer IS the owner of a cooperative. Members ensure that their cooperative business provides the best quality products and services at the lowest possible cost.

Cooperatives demonstrate economic democracy.

In an investor-owned corporation the people who have the most money and shares have the most control over the way the business is run. In a cooperative each member has an equal share and one vote when decisions are made. This is known as economic democracy.

Cooperatives operate for the benefit of member/owners.

In a cooperative, those with similar needs act together and pool their resources for mutual gain. As a democratic entity, a cooperative changes with the changing needs of its members.

Cooperatives are non-profit.

In a cooperative no one person reaps the benefits if the business has been profitable. After bills are paid and money is set aside for operations and improvements, all profits are returned to co-op members. In a co-op, the purpose is not to make money, but to save it.

Cooperative Principles

The co-operative principles are guidelines by which co-operatives put their values into practice.

First Principle: Voluntary and Open Membership
Co-operatives are voluntary organizations, 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.

Second Principle: Democratic Member Control
Co-operatives are democratic organizations 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 organized in a democratic manner.

Third 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. They 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 the 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.

Fourth Principle: Autonomy and Independence
Co-operatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, 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.

Fifth 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.

Sixth Principle: Cooperation 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.

Seventh Principle: Concern for Community
While focusing on member needs, co-operatives work for the sustainable development of their communities through policies accepted by their members.