ERE32E Co-operative Business Bridget Carroll Centre for Co-operative Studies, University College Cork, Ireland Session 1: Introduction to co-operatives 20 th November 2011

Introductions  Opening discussion What’s a co-op? What do you know about co-ops? Why do people set up co-ops? What are the problems they face? Where role do they play in the economy? What do you want to know about co- ops?

On successful completion of this module, you should be able to: 1.Explain what a co-operative is; 2.Classify co-operatives according to their prime beneficiaries and give examples of the kinds of businesses operated within each category; 3.Explain the most important differences between co-operative businesses and conventional businesses; 4.Appraise the possible competitive advantages of co-operative organisation; 5.Identify the financial and management dilemmas confronting co-operatives and 6.Explain how successful co-operatives have managed to resolve the financial and management dilemmas facing co-operatives.

Workload for the course  Monday – Thursday morning: Classes  Monday -Thursday afternoon: Self-directed study and/or in groups – using readings/hand-outs provided Prepare group presentation for Friday (30%).  Friday: Group presentations  Next 3 weeks: Assignment (70%)

What’s a co-op?  A co-operative is a business that is owned and democratically controlled by the people who use its services and share in its benefits.

User-focused co-op model  User-owned: people who own and finance the co-op are those that use it.  User-control: people who use the co-op control the co-op  User-benefits: benefits distributed to the users on the basis of their use. Barton, D. (1988)

Why study co-ops?  The top 300 co-operative and mutual businesses shared a turnover of approximately $1,000 billion (USD) in  By way of comparison, Canada, the world's ninth largest economy, had a Gross Domestic Product of $979 billion (US$). ICA Global 300 (2008)

Source:

Economic significance  In Brazil, co-operatives are responsible for 72% of wheat production, 44% of barley, 43% of soy, 39% of milk, 38% of cotton, 21% of coffee and 16% of maize. Agricultural co-operatives exported over US$ 1.3 billion.  In Belgium, co-operative pharmacies have a market share of 19.5%.  In Kenya, co-operatives are responsible for 45% of the GDP and 31% of national savings and deposits. They have 70% of the coffee market, 76% dairy and 95% of cotton.  Co-operatives provide 20% more jobs than multinational enterprises.  Your country?

Structure MembersBoard of directors (volunteers) - OfficersStaff & Committees

Some more examples

 Vancouver, Canada  Established 1971 by 6 members, $35 capital  Typical co-op start-up – members’ need  Typical also: no employees, no premises etc.  As membership grows obtain a premises/better premises  Rules/By-laws/statutes  Today: 3 million members, $261 sales  Consumer co-op 

Case Study: The Camp Nou way (Ridley-Duff & Bull, 2011) BarcelonaArsenal Shareholders142,000 members4 major shareholders own 87% of voting shares Leadership1 person, 1 vote President elected by members (max. 2 terms) No meaningful elections Chair of board decided by main shareholders Cheapest adult season ticket €79€1,013 Most expensive adult season ticket €663€2,089

Brief History

 Rochdale Pioneers, 1844 Industrial Revolution Co-op store – Toad Lane, Rochdale, U.K. “Pioneers” of principles/rules/practices governing co-ops Principles adopted worldwide

Other developments  Denmark, creameries (milk), from 1882  Germany, credit, Raiffeisen,  Agriculture co-ops flourished from 1890’s  Grew in other sectors also – retailing, credit

Not all co-ops share same ideology/philosophy  Idealistic objectives prioritise meeting members’ needs, empowerment and self- help and other values  Pragmatic objectives see co-ops as a practical solution, i.e. job creation, with managerial objectives of efficiency and financial stability taking priority over member participation.

But common philosophy of many  Robert Owen and many others shared a vision of the potential of co- operatives.  They argued for a thriving co-op movement as a means of social improvement through self-help, mutual aid and self-sufficiency.

Internationally many have agreed to a common Statement of Identity  International Co-operative Alliance (ICA), Geneva  Independent, non-governmental association which unites, represents and serves co-ops. Has 240 member organisations in 89 countries. 

ICA - Key definition of a co-op:  “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” -ICA, Statement on Co-operative Identity, 1995

Values  Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity.  In the tradition of their founders, co- operative members believe in the ethical values of honesty, openness, social responsibility and caring for others.

Co-op Principles – later! 1.Voluntary & Open Membership 2.Democratic Member Control 3.Member Economic Participation 4.Autonomy & Independence 5.Education, Training & Information 6.Co-operation Among Co-operatives 7.Concern for Community

Legislation  In your country?  EU Commission Report 2010  Check out  Scroll to the bottom of the page – national reports.

Comparison between co-ops and conventional companies  Similarities Legal framework Board of directors Mission / objectives / strategy Capital Managers Surplus [profits] Efficient/effective

Comparison with conventional companies  Differences Who can be owner/shareholders? How is control exercised ? How are benefits shared ?

Main differences between co-operatives and conventional businesses Characteristic User-ownedConventional OwnershipOwned by its members Owned by investors and private business people MembershipOpen membership* Limited ‘membership’ ControlDemocratic control* Usually depends on shareholding BenefitsEquitable distribution of surpluses to all members* Return for investors and private interests Reason for service To suit members’ needs and requirements Primarily for profit-making

Summary:  A co-op is a business owned and controlled by its member-users.  It’s a type of incorporated business (along with private limited company, partnership, sole trader etc.) and  A process, set of values, set of principles.

Homework!  This afternoon, study Chapters 1 & 4 of Zeuli & Cropp (2004) and Chapter 2 of Briscoe & Ward (2000). – watch the video and read the FAQs. See governance section also.  Friday’s presentation: Start thinking!