What Is A Cooperative?
A cooperative is a group of people who work together for economic benefit. It is a member-owned, member-controlled business incorporated under state law that operates primarily for the benefit of its members to meet their mutual needs.
Cooperative can meet member needs by:
- Improving bargaining power when dealing with other businesses
- Reducing costs
- Obtaining products or services otherwise unavailable
- Obtaining market access or broadening market opportunities
- Improving product or service quality
- Increasing income
The three core functions of a cooperative are:
- to allow members to gain access to affordable production supplies and goods
- to provide needed services
- to assist members to maximize the return they receive for the goods they produce
Philosophy And Principles Of A Cooperative
Co-ops are common in the fact that they share a fundamental respect for all human beings and a belief in people’s capacity to improve themselves economically and socially through mutual help.
The seven principles that serve as guidelines for how cooperatives do business are as follows:
- Open and voluntary membership (open to all)
- Member economic participation (members provide basic capital to start and operate)
- Democratic member control (all have equal voting with 1 vote per member)
- Autonomy and independence (limit the influence of outside agencies or business partners)
- Education, training and information (education of members and general public on cooperative business and nature and benefits of cooperation)
- Cooperation among cooperatives (try to help one another)
- Concern for community (members needs are primary concern but also work for sustainable development of their communities)
Cooperative Governance
Co-ops are managed by an elected board of directors that is responsible for overseeing the affairs of the co-op on behalf of the members. The board must act as a whole; individual directors have no authority outside of board meetings, except as delegated by the board as a whole. The board is held accountable to its members.
The primary responsibilities of the Board are to:
- Act as trustees on behalf of the members (monitoring of financial status, reporting regularly to members, and making sure the co-op follows its bylaws, policies and any applicable regulations)
- Ensure sound management of the co-op
- Set long-range goals and plan for the co-ops future
- The board should focus their discussions and decision making on two things:
- Clearly defining results to be achieved by management or others responsible for a project
- Setting limits needed to guide management’s performance