ERE32E Co-operative Business

1. ERE32E Co-operative Business Bridget Carroll Centre for Co-operative Studies, University College Cork, Ireland Session 1: Introduction to co-operatives 26th November 2012

2. On successful completion of this module, you should be able to: • Explain what a co-operative is; • Classify co-operatives according to their prime beneficiaries and give examples of the kinds of businesses operated within each category; • Explain the most important differences between co-operative businesses and conventional businesses; • Appraise the possible competitive advantages of co-operative organisation; • Identify the financial and management dilemmas confronting co-operatives and • 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 12thDecember: Written assignment (70%)

4. 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

5. 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)

6. Source: www.ica.coop

7. 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?

8. 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

9. 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)

10. Structure

11. Brief History

12. 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

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 89countries. • 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)

21. Legislation • In your country? • EU Commission Report 2010 • Check out 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-owned Conventional Ownership Owned by its members Owned by investors and private business people Membership Open membership* Limited ‘membership’ Control Democratic control* Usually depends on shareholding Benefits Equitable 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. • Friday’s presentation: Start thinking!