1. ERE32E Co-operative Business Bridget Carroll Centre for Co-operative Studies, University College Cork, Ireland Session 1: Introduction to co-operatives 1 December 2014

2. 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.

3. Workload for the course  Monday – Thursday morning: Classes  Monday -Thursday afternoon: Self-directed study – using readings/hand-outs provided/linked Prepare group presentation for Friday.  Friday: Group presentations (30%)  By 5 th January: Written assignment (70%)

4. Why study co-ops?  The top 300 co-operative and mutual businesses shared a turnover of approximately $1,000 billion (USD) in 2004.  By way of comparison, Canada, the world's ninth largest economy, had a Gross Domestic Product of $979 billion (US$). ICA Global 300 (2008)

5. Source: www.ica.coopwww.ica.coop

6. Economic significance  Brazil 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.  Belgium Co-operative pharmacies have a market share of 19.5%.  Kenya 45% of the GDP and 31% of national savings and deposits. They have 70% of the coffee market, 76% dairy and 95% of cotton.  Your country?

7. 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-owned  User-controlled  User-benefits

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

9. Structure MembersBoard of directors (members - volunteers) - OfficersStaff & Committees

10.  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  http://www.mec.ca http://www.mec.ca

11. Brief History

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

13. Other developments  Denmark, creameries (milk), from 1882  Germany, credit, Raiffeisen, 1818-1888  Agriculture co-ops flourished from 1890’s  Grew in other sectors also – retailing, credit

14. Some bad stories too!  Co-ops & communism Take over of existing co-ops Confiscation of assets Agriculture co-ops became collective farms and not farmer owned businesses  Co-ops & fascism Murder of co-op leaders Destruction of co-ops as independent forces/autonomous organisations

15. 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.

16. But common philosophy of many  Robert Owen, William Thompson, Moses Coady, Horace Plunkett and, for some time at least, Nora Herlihy 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.

17. 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.  http://www.ica.coop http://www.ica.coop

18. 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

19. 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.  Follow 7 co-operative principles – later!

20. 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

21. Legislation  In your country?  EU Commission Report 2010  Check out http://www.euricse.eu/node/257 http://www.euricse.eu/node/257  Scroll to the bottom of the page to find the national reports.

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

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

24. 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

25. 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.

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