A cooperative society is a distinct type of organization that prioritizes the collective needs and benefits of its members over maximizing profit for external shareholders. These entities are built on values such as self-help, self-responsibility, democracy, equality, equity, and solidarity, making them unique in the economic landscape.
Key Characteristics of Cooperative Societies
According to the Commission, cooperatives possess several fundamental defining characteristics that set them apart:
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Voluntary and Open Membership: Cooperatives are open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination. This principle ensures that individuals can freely join or leave a cooperative without undue barriers.
- Practical Insight: This characteristic fosters inclusivity, allowing anyone who stands to benefit from the cooperative's services to become a member and have a say in its operations. For instance, a local credit union welcomes anyone within its service area to become a member, provided they meet basic criteria.
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Democratic Member Control: In a cooperative, control is inherently democratic, meaning each member has an equal say in decision-making. This is typically implemented through a "one member, one vote" system, regardless of the amount of capital an individual has contributed. This principle ensures that the cooperative is run for the benefit of all members, rather than just the largest investors.
- Example: During annual general meetings, all members, whether they've invested a minimal amount or a significant sum, cast a single vote for board members or policy changes. This egalitarian approach distinguishes cooperatives from conventional corporations where voting power is proportional to share ownership.
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Equitable and Fair Distribution of Economic Results: Cooperatives distribute economic results (surpluses or profits) in a fair and equitable manner. This distribution is typically based on the volume of operations or transactions a member conducts with the cooperative, rather than solely on the capital invested. This mechanism is often known as "patronage refunds" or "dividends on patronage."
- How it Works: If a consumer cooperative generates a surplus, members might receive a portion back based on how much they purchased from the cooperative throughout the year. Similarly, a dairy producer cooperative might distribute surpluses to its farmer-members based on the volume of milk they supplied. This directly links the economic benefit to the member's engagement and usage of the cooperative's services.
Additional Guiding Principles
While the Commission highlights the core three, the International Cooperative Alliance (ICA) outlines a broader set of international cooperative principles that further define these organizations:
- Autonomy and Independence: Cooperatives are autonomous, self-help organizations controlled by their members. They maintain independence in their operations, ensuring that democratic control by members is preserved, even when entering into agreements with other entities or sourcing external capital.
- Education, Training, and Information: Cooperatives commit to providing education and training for their members, elected representatives, managers, and employees. This ensures they can contribute effectively to the cooperative's development. They also actively inform the public about the cooperative model and its benefits.
- Cooperation Among Cooperatives: To serve their members most effectively and strengthen the broader cooperative movement, cooperatives work together. This collaboration can occur through local, national, regional, and international structures, fostering mutual support and shared resources.
- Concern for Community: Cooperatives are not solely focused on their members but also work for the sustainable development of their communities. This commitment often translates into policies and initiatives approved by members that benefit the wider local area.
Summary of Cooperative Characteristics
| Characteristic | Description |
|---|---|
| Voluntary & Open Membership | Individuals can freely join or leave the cooperative without discrimination, provided they can use its services and accept membership responsibilities. |
| Democratic Member Control | Each member has an equal vote ("one member, one vote"), regardless of capital contributed, ensuring member-centric decision-making and governance. |
| Equitable Economic Participation | Economic benefits (surpluses) are distributed fairly among members, typically based on their volume of transactions or operations with the cooperative, rather than on their investment. |
| Autonomy & Independence | Cooperatives are self-governing entities, controlled by their members, and maintain their independence even when forming partnerships or seeking external funding. |
| Education & Training | They provide educational opportunities for members, leaders, and staff to enhance their involvement and understanding, and educate the public about the cooperative model. |
| Cooperation Among Cooperatives | Cooperatives collaborate with each other at various levels (local, national, global) to better serve members and reinforce the cooperative movement. |
| Concern for Community | Beyond serving their members, cooperatives contribute to the sustainable development and well-being of their local communities. |
These characteristics underscore the distinct nature of cooperative societies as businesses driven by values and principles, serving their members' needs and contributing to broader community welfare.
