Why form a co-operative?

Why form a co-operative?

It is a basic question that needs to be asked by everone considering the formation of a co-operative. It is important that there is a decision for a co-operative - rather than because someone else has suggested it and/or other options have not been considered.

Co-operatives are a form of business enterprise that are based on principles and practices that originated in the 19thC. These principles and practices can be summarised in the following - user ownership, use and benefit.

User ownership, use and benefit deserves careful consideration. The members of the co-operative form the co-operative because they want to use and benefit from the services of the co-operative and their ownership guarantees that the services are those wanted by the members. These services could include, for example, herd improvement, renewable energy, the processing and marketing of milk and school clothing.

Co-operative democracy enables the members of the co-operative to control their co-operative based on one vote per member. The users and beneficiaries of the co-operative own and control the co-operative. With ownership and control. however, there is an obligation on members to participate.

With investor-owned companies the users receive services but they have no control of the provision of these services. The managers of the companies are primarily responsible to the investor-owners and not the users of the services. Of course, companies will attempt to provide acceptable services to users to retain them as customers and maximise their profits for the investor-owners but ultimately they are capital-driven rather than service-driven,

Investor-owned companies are also controlled by the majority of shares and not the majority of shareholders as in a co-operative. It is the minority of shareholders who have the wealth to own the majority of shares who have majority control. The priorities of these companies are established and influenced, therefore, by a minority.

Last updated:21-Jan-2007

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