October
is Co-op Month!
NDCCC
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What is a Cooperative?
Cooperative History
Types of Cooperatives
Cooperative Principles and Purposes
Purpose Functions
Reasons for Joining a Cooperative
Capper Volstead Act
Cooperative Statistics
What is a Cooperative?
In simple terms, a cooperative is…you.
Cooperatives are founded on unique and proven business values that put people before
profits. These core values include honesty, openness, democracy and social responsibility.
As a customer of a cooperative, you become an owner, too. The cooperative business
philosophy opens the door of opportunity to all members to an active role in the business.
Cooperatives allow you to voice your concerns at annual meetings and to run for the board
of directors. The “one member, one vote” philosophy gives all members an equal
voice.
Cooperatives are organized for many reasons, including:
n To provide
services that private investor-owned companies my not find profitable enough.
n To provide
a measure of competition.
n To reduce
purchasing costs through volume buying.
Profits are returned to co-op members based on their level of
business volume. For this reason, co-op dividends and patronage refunds return dollars to
local communities.
Many cooperatives are owned by farmers and ranchers. These co-ops allow producers to
obtain fuel and fertilizer at lower prices, and to market or process crops to capture more
income. CHS Inc. and locally-owned Farmers Union oil and elevator cooperatives and
Minn-Dak Farmers Cooperative (which produces sugar) are some examples.
Other cooperatives are consumer-owned, providing their members with a wide range of goods
or services such as health care, utilities, housing and hardware. These co-ops include
rural electric and telecommunications cooperatives and credit unions.
Cooperatives come in all sizes from small buying clubs to Fortune 500 businesses. Among
them are Welch’s, Land O’Lakes, Ocean Spray, Sunkist, ACE Hardware and the
Associated Press.
"A cooperative is a
business voluntarily owned and controlled by its member patrons and operated for them and
by them on a not-for-profit or cost basis. It is owned by the people who use it.
Cooperatives are organized and incorporated to engage in economic activities with certain
ideas of democracy, social consciousness and human relations included. A cooperative
provides services and benefits for its members in proportion to the use they make of their
organization, rather than earning profits for the shareholders as investors."
----University of Wisconsin Center for Cooperatives
The Cooperative History
| 1752 |
The first
successful cooperative organized when Benjamin Franklin formed the Philadelphia
Contributionship of the Insurance of Houses from Loss by Fire.
|
| 1844 |
The
Rochdale Equitable Pioneers Society opened a cooperative story on Toad Lane in Rochdale,
England. Toad Lane is considered the birthplace of modern cooperatives because the
principles and practices of the Pioneers assured the success of the cooperative model.
|
| 1865 |
Michigan
passed the first law recognizing the cooperative method of buying and selling.
|
| 1895 |
The
International Cooperative Alliance (ICA) was established.
|
| 1916 |
The first
national cooperative association formed--the National Cooperative Business Association.
|
| 1922 |
Congress
passes the Capper-Volstead Act allowing farmers to market products together without
violating antitrust laws.
|
| 1929 |
Farm
Credit Administration forms.
|
| 1934 |
National
Credit Union Administration forms.
|
| 1936 |
Rural
Electrification Administration forms.
|
| 1978 |
Congress
passed the National Consumer Cooperative Bank Act, establishing the National Cooperative
Bank.
|
Serving Many
Needs...
More than 100 million people are
members of 47,000 cooperatives.
Types
of Cooperatives
Producer-owned
cooperatives are owned by farmers, producers or small businesses to
process and market their goods, and to provide themselves with credit, equipment and
production supplies.
Consumer-owned
cooperatives enable consumers to secure a wide array of goods and
services, such as health care, utilities, insurance, housing, heating fuel and hardware
supplies.
Worker-owned
cooperatives include employee-owned food stores, processing
companies, restaurants, taxi cab companies, sewing companies, timber processors and
light/heavy industry.
| Agriculture |
Grocery |
Hardware and Lumber |
| Finance |
Utility |
Housing |
| Media |
Franchise Businesses |
Health Care |
| School |
Child Care |
Cooperative
Principles and Practices
"Values and lifestyle are at the heart of cooperative
movement" These principles are guidelines by which cooperatives put their values
into practice.
1. Open and Voluntary Membership
Cooperatives are voluntary organizations, open to all persons able to use their services
and willing to accept responsibilities of membership, without gender, social,
racial, political or religious discrimination..
2. Democratic Member Control
Cooperatives are democratic organization controlled by their members-one member, one
vote-who actively participate in setting their policies and making decisions.
3. Member Economic Participation
Members contribute equitably to and democratically control, the capital of their
cooperative. This benefits members in proportion to their transactions with the
cooperative rather than the capital invested.
4. Autonomy and Independence
Cooperatives are autonomous, self-help organization controlled by their members. If
they raise capital from external sources, or enter into agreements they do so on terms
that ensure democratic control by their members and maintain their cooperative autonomy.
5. Education, Training and
Information
Cooperatives provide education and training for their members, elected representatives,
managers and employees so they can contribute effectively to the development of their
cooperatives. They inform the general public about the nature and benefits of
cooperatives.
6. Cooperation among Cooperatives
Cooperatives serve their member most effectively and strengthen the cooperative movement
by working together through local national regional and international structures.
7. Concern for Community
While focusing on member needs, cooperatives work the sustainable development of their
commentates through policies accepted by members.
Adopted at the International Cooperative Alliance Congress in
Manchester, England on September 23, 1995.
Purpose Functions
1. Marketing
Enable the members to extend control of their
products as long as the cooperative retains physical or legal title through processing,
distribution, and marketing.
2. Purchasing
The members are able to reduce production costs through
quantity purchasing, manufacturing, and distribution of products. Cooperatives are
also able to provide a dependable supply of quality products for its members.
3. Servicing
Cooperatives are able to provide specific services, or more
general services to their members.
Reasons
to Join a Cooperative
1. Profits - To increase profits for the individual, each business or from the
"parent" co-op.
2. Fair Prices - To PREVENT MARKET FAILURE.
3. Economy of Size - a joint venture creates an optimum size, thus more competitive.
Shared costs = savings.
4.
To provide Market Access, especially through transportation.
5. Pool Risk - through size, diversification and limited liability (a business
capitalizing on "safety in numbers").
6. Market Power - To deal with IMPERFECT COMPETITION.
7. Market Failure vs Market Power
-Inputs (inventory) not available
especially in rural regions or economically depressed areas
-Missing services in same regions
-Markets for buying and selling not open
8. Spatial Dimensions
-Relatively high transportation costs vs. Value of the
input/product
-Density of production vs. One/few buyer(s) in an area
9. Risk Reduction
-Individual's exposure is shared & limited
-Less legal risk due to co-op corporate structure
-Less financial risk due to shared ownership - only your
investment is threatened by bankruptcy
-Shared profits
-By pooling products, prices avoid extremes (variability),
instead average prices are paid members
10. Marketing
-Cost and availability of market information
-Prices, buyers, sellers, terms of contracts
-Cost of research shared by members
-Staff trained in marketing
-Transportation of goods to final buyer shared
Capper Volstead
Act allowed cooperatives IF:
- Members are agricultural producers
- No Member has more than one vote
- Dividends on equity are less than 8%
- Non-members make-up less than 50%
- Prices are not unduly enhanced
Co-op
Statistics
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