1. Cooperatives as an alternative approach PhD seminar on Companies and Markets
EU and Nordic company and financial market law
Senior Associate Tore Fjørtoft, Schjødt Lawfirm

2. My doctoral thesis
Financial rights of members of cooperatives – analysed in the light of the cooperative identity and the corresponding rules for capital companies
Why relevant in a CSR- context?
Promotion of third party interests in cooperatives and capital companies

3. What is a Coopeartive?
An enterprise whose main object is to promote the economic interests of its members by the members taking part in the society as purchasers, suppliers or in some other similar way, and where
1. the surplus, apart from a normal return on invested capital, is either left in the society or divided among the members on the basis of their share of the trade with the society, and
2. none of the members is personally liable for the society’s debts, either in whole or for parts which together comprise the total debts.

4. The cooperative identity
The characteristic trait of the cooperative form
The thesis analysed five aspects:
Cooperative principles and values – ideological foundation
Legal characteristics
Ownership, control and use
A member organization and an economic enterprise
Member interests and other interests

5. The cooperative identity
The characteristic trait of the cooperative form
The thesis analysed five aspects:
Cooperative principles and values – ideological foundation
Legal characteristics
Ownership, control and use
A member organization and an economic enterprise
Member interests and other interests

6. The ideological foundation
Capital companies and cooperatives may be tied to two different versions of utilitarianism
“The greatest happiness of the greatest number” – but what is happiness?
Jeremy Bentham ( ): Pleasure - an individualistic concept
William Thompson ( ): Well-being - much more of a social condition
Thompson – a pioneer in the cooperative movement
Bentham – the first British companies acts enacted during “The Period of Benthamism or Individualism”

7. The cooperative principles
Voluntary and Open Membership
Democratic Member Control
Member Economic Participation
Autonomy and Independence
Education, Training and Information
Co-operation among Co-operatives
Concern for Community:
Co-operatives work for the sustainable development of their communities through policies approved by their members

8. Concern for Community
Has always been a part of the cooperative ideology
Lambert (1963):
Co-operatives have a dual purpose: To serve the members and to serve the society.
A cooperative may promote member interests “only so far as it may legitimately do so and only in so far it is compatible with the general interest”.
The ICA Commission of 1966: “to promote the progress and welfare of humanity”.
The ICA principles (1995): Concern for community as a separate principle
Also reflected in EU and UN documents

9. EU and The United Nations
EU Commission COM(2002)347:
Co-operatives, mutuals and associations as membership-led organisations have a long tradition in combining economic viability with social responsibility. They ensure this through stakeholder dialogue and participative management and thus can provide an important reference to other organisations.
UN General Assembly:
Recognising that cooperatives, in their various forms, promote the fullest possible participation in the economic and social development of all people, including women, youth, older persons and people with disabilities, and are becoming a major factor of economic and social development.
Resolution No 56/114 adopted by the United Nations General Assembly at its 57th Session, 19 December 2001

10. Cooperatives Capital companies
Promotion of societal interests
Different views among scholars
Main impression: What’s controversial in cooperatives is uncontroversial in capital companies and vice versa
“Internalizing externalities” contra “it’s in their DNA”

11. Cooperatives Capital companies
Legal consequences?
Three examples:
The right to membership
The use of the net assets in case of dissolution
Authority and responsibility of the board

12. Right to membership The Cooperatives Act § 14 (1):
Consumers, businesses and others that may have their economic interests promoted by a cooperative society are entitled to become a member of the enterprise by enrolling in it. The enterprise may only refuse membership if there are reasonable grounds for doing so.
Cooperatives as open and including societies – protecting the interests of future members
Capital companies are basically closed companies – outsiders can not require shares

13. Dissolution – use of net assets
The Cooperatives Act § 135 (4) and (5)
Assets remaining (…) shall be spent on cooperative purposes or public benefit purposes.
The statutes may stipulate that the remaining assets shall in whole or in part become the property of those who are members on the dissolution date, and possibly also previous members.
Capital companies: The net assets are distributed to the shareholders

14. The board
Shall or may the board in a cooperative promote third party interests / societal interests to a larger extent than what a corporate board may or shall?
The law provisions: Identical wording but different content?
Heavy emphasis on profit maximizing in capital companies
Concern for community as a cooperative principle and social responsibility and caring for others as cooperative values.
May lead to differences in the application of the rules

15. Cooperatives as an alternative approach PhD seminar on Companies and Markets
EU and Nordic company and financial market law
Senior Associate Tore Fjørtoft, Schjødt Lawfirm