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Co-op Types

and Other Cooperatively Oriented Enterprises

Written by George Cheney, professor emeritus in communication at the University of Colorado and an independent contractor working with RMFU.

Most people have encountered at least one type of cooperative: maybe a producer co-op, like food giants Land O’ Lakes or Ocean Spray; a consumer co-op like most local food co-ops or big retailers like REI (Recreational Equipment Incorporated); a credit union or a mutual insurance company; or a rural electric cooperative, which are common around the country. Some people are members of housing co-ops, or co-housing communities that may not be incorporated as co-ops but still function that way.

Cooperatives co-owned by artists and small food producers–usually linked to a physical common space–also can be seen in cities and towns around the country. These are organized in various ways, but in general they are marketing co-ops designed to help small-scale producers promote and sell their wares. Some of these co-ops may also have special relationships for selling to restaurants or galleries or other establishments.

Even with all these familiar examples, it’s not common to connect the dots or to consider all the types that exist or would be possible. Plus, there’s often little awareness by members of a co-op such as a credit union that their membership entails certain benefits; and in this case is different from their being a client at a standard bank.

A good place to start is with a definition of cooperatives. The International Cooperative Alliance (ICA) defines a co-op as “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.” This language casts a broad net, but it expresses the two main dimensions of co-ops as member-controlled businesses: member ownership and member governance. These are sometimes called the economic and the social-structural sides of cooperatives. Ownership means literally that members share the equity or value of the firm, whether the co-op is consumer, producer, or employee-owned (or some combination or variation). Governance refers to the decision making around key policies and plans, understood to follow the core agreed-upon values of the firm. As part of governance, cooperatives have boards of directors drawn completely or largely from their membership. Specific arrangements vary, of course, depending on the type of business, what kind of participation is expected of members, and how active members are.

For example, most credit union members are not very engaged in the decisions of the organization; they act much like consumers at a standard bank. Still the choice to be a member in a credit union may represent support for those values as well as the expectation of occasional dividends and other benefits.

Ownership means literally that members share the equity or value of the firm. In most cases, member ownership has certain monetary benefits: that can range from discounts at the local cooperative grocery store, to dividends paid to members as a percentage of profits, to access to lower interest rates, to actual ownership—meaning a share in the capital, the equity representing the firm. Dividends paid to members are generally called “patronage dividends,” stressing the fact of membership in the co-op. In the ICA definition above, the word “autonomous” is also important: this means that a true cooperative is not subject to control by outside investors, as, by contrast, it would be in a publicly traded corporation.

Co-op Types – Rocky Mountain Farmers Union

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