Cooperative

Many cooperatives follow the seven Rochdale Principles:[32]

1. Voluntary and open membership
2. Democratic member control, with each member having one vote.
3. Economic participation by members
4. Autonomy and independence
5. Education, training and information
6. Cooperation among cooperatives
7. Concern for community

The Co-op Marque, a symbol used by co-operatives internationally

Since 2002, ICA cooperatives and WOCCU credit unions could be distinguished by use of a .coop domain. In 2014, ICA introduced the Global Cooperative Marque[33] for use by ICAs[34] Cooperative members and by WOCCU's Credit Union members so they can be further identified[35] by their coop ethical consumerism label. The marque is used today by thousands of cooperatives in more than a hundred countries.[36]

The .coop domain and Co-operative Marque were designed as a new symbol of the global cooperative movement and its collective identity in the digital age. The Co-operative Marque and domain is reserved just for co-operatives, credit unions and organisations that support co-operatives; is distinguished by its ethical badge that subscribes to the seven ICA Cooperative Principles and Co-op Values. Co-ops can be identified on the Internet through the use of the .coop suffix of internet addresses. Organizations using .coop domain names must adhere to the basic co-op values.

Cooperative of agricultural products of Alginet, 1963

A cooperative is a legal entity owned and democratically controlled by its members. Members often have a close association with the enterprise as producers or consumers of its products or services, or as its employees.[37] The legal entities have a range of social characteristics. Membership is open, meaning that anyone who satisfies certain non-discriminatory conditions may join. Economic benefits are distributed proportionally to each member's level of participation in the cooperative, for instance, by a dividend on sales or purchases, rather than according to capital invested.[38] Cooperatives may be classified as either worker, consumer, producer, purchasing or housing cooperatives.[39] They are distinguished from other forms of incorporation in that profit-making or economic stability are balanced by the interests of the community.[38]

There are specific forms of incorporation for cooperatives in some countries, e.g. Finland[40] and Australia.[41] Cooperatives may take the form of companies limited by shares or by guarantee, partnerships or unincorporated associations. In the UK they may also use the industrial and provident society structure. In the US, cooperatives are often organized as non-capital stock corporations under state-specific cooperative laws. Cooperatives often share their earnings with the membership as dividends, which are divided among the members according to their participation in the enterprise, such as patronage, instead of according to the value of their capital shareholdings (as is done by a joint stock company).

The cooperative share capital[42] or co-operative share capital (in short cooperative capital[42] or co-operative capital) is the form of capital that the cooperative accumulates from the paid participation shares of its members.[43][44][42] The total amount of participation shares the paid to the cooperative constitutes the cooperative capital.[45] The co-operative share capital is usually non-withdrawable and indivisible to the cooperative members.[46]

A consumers' cooperative is a business owned by its customers. Members vote on major decisions and elect the board of directors from among their own number. The first of these was set up in 1844 in the North-West of England by 28 weavers who wanted to sell food at a lower price than the local shops.

Retail cooperatives are retailers, such as grocery stores, owned by their customers. They should not be confused with retailers' cooperatives, whose members are retailers rather than consumers. In Denmark, Singapore, Italy, and Finland the company with the largest market share in the grocery store sector is a consumer owned cooperative.[48][49][50][51] In Switzerland both the largest and the second largest retailer are consumer owned cooperatives.[52]

A housing cooperative is a legal mechanism for ownership of housing where residents either own shares (share capital co-op) reflecting their equity in the cooperative's real estate or have membership and occupancy rights in a not-for-profit cooperative (non-share capital co-op), and they underwrite their housing through paying subscriptions or rent.

Housing cooperatives come in three basic equity structures

• In market-rate housing cooperatives, members may sell their shares in the cooperative whenever they like for whatever price the market will bear, much like any other residential property. Market-rate co-ops are very common in New York City.
• Limited equity housing cooperatives, which are often used by affordable housing developers, allow members to own some equity in their home, but limit the sale price of their membership share to that which they paid.
• Group equity or zero-equity housing cooperatives do not allow members to own equity in their residences and often have rental agreements well below market rates.

Members of a building cooperative (in Britain known as a self-build housing cooperative) pool resources to build housing, normally using a high proportion of their own labor. When the building is finished, each member is the sole owner of a homestead, and the cooperative may be dissolved.

This collective effort was at the origin of many of Britain's building societies, which however, developed into "permanent" mutual savings and loan organisations, a term which persisted in some of their names (such as the former Leeds Permanent). Nowadays such self-building may be financed using a step-by-step mortgage which is released in stages as the building is completed. The term may also refer to worker cooperatives in the building trade.

A utility cooperative is a type of consumers' cooperative that is tasked with the delivery of a public utility such as electricity, water or telecommunications services to its members. Profits are either reinvested into infrastructure or distributed to members in the form of "patronage" or "capital credits", which are essentially dividends paid on a member's investment into the cooperative. In the United States, many cooperatives were formed to provide rural electrical and telephone service as part of the New Deal. See Rural Utilities Service.

In the case of electricity, cooperatives are generally either generation and transmission (G&T) co-ops that create and send power via the transmission grid or local distribution co-ops that gather electricity from a variety of sources and send it along to homes and businesses.

In Tanzania, it has been proven that the cooperative method is helpful in water distribution. When the people are involved with their own water, they care more because the quality of their work has a direct effect on the quality of their water.

The Co-operative Bank's head office in Manchester. The statue in front is of Robert Owen, a pioneer in the cooperative movement.

Credit unions are cooperative financial institutions owned and controlled by their members. Credit unions provide the same financial services as banks but are considered not-for-profit organizations and adhere to cooperative principles.

Credit unions originated in mid-19th-century Germany through the efforts of pioneers Franz Herman Schulze'Delitzsch and Friedrich Wilhelm Raiffeisen. The concept of financial cooperatives crossed the Atlantic at the turn of the 20th century, when the caisse populaire movement was started by Alphonse Desjardins in Quebec, Canada. In 1900, from his home in Lévis, he opened North America's first credit union, marking the beginning of the Mouvement Desjardins. Eight years later, Desjardins provided guidance for the first credit union in the United States, where there are now about 7,950 active status federally insured credit unions, with almost 90 million members and more than $679 billion on deposit.

Financial cooperatives hold a significant market share in Europe and Latin America, as well as a few countries in Sub-Saharan Africa. They also have a strong presence in Asia, Australia, and the United States. According to the World Council of Credit Unions (WOCCU), there were 68,882 financial cooperatives in 109 countries in 2016, serving more than 235 million members, with total assets exceeding 1.7 trillion dollars. It is worth noting that the WOCCU's data do not include some major financial cooperative networks in Europe, such as Germany, Finland, France, Denmark, and Italy. In many high-income economies, financial cooperatives hold significant market shares of the banking sector.[53]

According to the European Association of Cooperative Banks, the market share of cooperative banks in the Small and Medium Enterprises (SMEs) credit market by the end of 2016 was 37% in Finland, 45% in France, 33% in Germany, 43% in the Netherlands, and 22% in Canada. In Germany, Volksbanken-Raiffeisen banks have a market share of approximately 21% of domestic credit and domestic deposits. In the Netherlands, Rabobank holds 34% of deposits, and in France cooperative banks (Crédit Agricole, Crédit Mutuel and BPCE Group) possess more than 59% of domestic credit and 61% of domestic deposits. In Finland, OP financial group holds 35% and 38% of domestic credit and deposits, respectively, and in Canada, Desjardins holds around 42% of domestic deposits and 22% of domestic credit.[53]

There are many types of cooperative financial institutions with different names across the world, including financial cooperatives ('cooperativa financiera' is the Spanish term used in Latin America), cooperative banks, credit unions, and savings and credit cooperatives ('cooperativa de ahorro y crédito' in Spanish or 'coopérative d'épargne et de credit' in French-speaking countries).[53]

Cooperative banking networks, which were nationalized in Eastern Europe, work now as real cooperative institutions. In Poland, the SKOK (Spółdzielcze Kasy Oszczędnościowo-Kredytowe) network has grown to serve over 1 million members via 13,000 branches, and is larger than the country's largest conventional bank.

In the Scandinavia, there is a clear distinction between mutual savings banks (Sparbank) and true credit unions (Andelsbank).

The oldest cooperative banks in Europe, based on the ideas of Friedrich Raiffeisen, are joined in the 'Urgenossen'.

A community cooperative is owned and governed by members of a local geographical community. It is established to meet the community's needs by providing goods or services that are not be available or affordable through traditional market channels. This is distinct from meeting individuals' needs as individuals.

The aim of a community cooperative is often to create a more equitable and sustainable economy that serves the needs of local residents, rather than generating profits for external shareholders. By working together and pooling resources, members can often achieve economies of scale, negotiate better prices, and develop services that better meet the needs of their community. Community cooperatives can also help to build social capital and foster a sense of community ownership and pride. They have been successful vehicles for rural development in the Gaeltacht in Ireland and the Highlands and Islands of Scotland.

A worker cooperative or producer cooperative is a cooperative owned and democratically controlled by its "worker-owners". In a pure worker cooperative, only the workers own shares of the business on a one person, one vote basis, though hybrid forms exist in which consumers, community members or capitalist investors also own some shares (though these shares may or may not have voting power). In practice, control by worker-owners may be exercised through individual, collective or majority ownership by the workforce, or the retention of individual, collective or majority voting rights. A worker cooperative, therefore, has the characteristic that the majority of its workforce owns shares, and the majority of shares are owned by the workforce. Membership is not always compulsory for employees, but generally, only employees can become members either directly (as shareholders) or indirectly through membership of a trust that owns the company.

The impact of political ideology on practice constrains the development of cooperatives in different countries. In India, there is a form of workers' cooperative which insists on compulsory membership for all employees and compulsory employment for all members. That is the form of the Indian Coffee Houses. This system was advocated by the Indian communist leader A. K. Gopalan. In places like the UK, common ownership (indivisible collective ownership) was popular in the 1970s. Cooperative Societies only became legal in Britain after the passing of Slaney's Act in 1852. In 1865 there were 651 registered societies with a total membership of well over 200,000. There are now more than 400 worker cooperatives in the UK, Suma Wholefoods being the largest example with a turnover of £24 million.

Business and employment cooperatives (BECs) are a subset of worker cooperatives that represent a new approach to providing support to the creation of new businesses. Like other business creation support schemes, BEC's enable budding entrepreneurs to experiment with their business idea while benefiting from a secure income. The innovation BECs introduce is that once the businesses are established, the entrepreneurs are not forced to leave and set up independently, but can stay and become full members of the cooperative. The micro-enterprises then combine to form one multi-activity enterprise whose members provide a mutually supportive environment for each other. BECs thus provide budding business people with an easy transition from inactivity to self-employment, but in a collective framework. They open up new horizons for people who have ambition but who lack the skills or confidence needed to set off entirely on their own – or who simply want to carry on an independent economic activity but within a supportive group context.[54]

A "purchasing cooperative" is a type of cooperative arrangement, often among businesses, to agree to aggregate demand to get lower prices from selected suppliers. Retailers' cooperatives are a form of purchasing cooperative.

Major purchasing cooperatives include Best Western, ACE Hardware and CCA Global Partners.

Agricultural service cooperatives provide various services to their individual farming members, and to agricultural production cooperatives, where production resources such as land or machinery are pooled and members farm jointly.[55]

Agricultural supply cooperatives aggregate purchases, storage, and distribution of farm inputs for their members. By taking advantage of volume discounts and utilizing other economies of scale, supply cooperatives bring down members' costs. Supply cooperatives may provide seeds, fertilizers, chemicals, fuel, and farm machinery. Some supply cooperatives also operate machinery pools that provide mechanical field services (e.g., plowing, harvesting) to their members. Examples include the American cranberry-and-grapefruit cooperative Ocean Spray, collective farms in socialist states and the kibbutzim in Israel.

Producer cooperatives have producers as their members and provide services involved in moving a product from the point of production to the point of consumption. Unlike worker cooperatives, they allow businesses with multiple employees to join. Agricultural cooperatives and fishery cooperatives are such examples.

Agricultural marketing cooperatives operate a series of interconnected activities involving planning production, growing and harvesting, grading, packing, transport, storage, food processing, distribution and sale. Agricultural marketing cooperatives are often formed to promote specific commodities.

Commercially successful agricultural marketing cooperatives include India's Amul (dairy products), which is the world's largest producer of milk and milk products, Dairy Farmers of America (dairy products) in the United States, and Malaysia's FELDA (palm oil).

Producer cooperatives may also be organized by small businesses for pooling their savings and accessing capital, for acquiring supplies and services, or for marketing products and services.

Producer cooperatives among urban artisans were developed in the mid-19th-century in Germany by Franz Hermann Schulze-Delitzsch, who also promoted changes to the legal system (the Prussian Genossenschaftsgesetz of 1867) that facilitated such cooperatives.[56] At about the same time, Friedrich Wilhelm Raiffeisen developed similar cooperatives among rural people.[57]

Multi-stakeholder cooperatives include representation from different stakeholder groups, such as both consumers and workers.

Cooperatives traditionally combine social benefit interests with capitalistic property-right interests. Cooperatives achieve a mix of social and capital purposes by democratically governing distribution questions by and between equal but not controlling members. Democratic oversight of decisions to equitably distribute assets and other benefits means capital ownership is arranged in a way for social benefit inside the organization. External societal benefit is also encouraged by incorporating the operating-principle of cooperation between co-operatives. In the final year of the 20th century, cooperatives banded together to establish a number of social enterprise agencies that have moved to adopt the multi-stakeholder cooperative model. In the years 1994–2009 the EU and its member nations gradually revised national accounting systems to "make visible" the increasing contribution of social economy organizations.[58]

A particularly successful form of multi-stakeholder cooperative is the Italian "social cooperative", of which some 11,000 exist.[59] "Type A" social cooperatives bring together providers and beneficiaries of a social service as members. "Type B" social cooperatives bring together permanent workers and previously unemployed people who wish to integrate into the labor market. They are legally defined as follows:

• no more than 80% of profits may be distributed, interest is limited to the bond rate, and dissolution is altruistic (assets may not be distributed)
• the cooperative has legal personality and limited liability
• the objective is the general benefit of the community and the social integration of citizens
• those of type B integrate disadvantaged people into the labour market. The categories of disadvantage they target may include physical and mental disability, drug and alcohol addiction, developmental disorders and problems with the law. They do not include other factors of disadvantage such as unemployment, race, sexual orientation or abuse.
• type A cooperatives provide health, social or educational services
• various categories of stakeholder may become members, including paid employees, beneficiaries, volunteers (up to 50% of members), financial investors and public institutions. In type B cooperatives at least 30% of the members must be from the disadvantaged target groups
• voting is one person one vote

The SCIC – Société coopérative d'intérêt collective (co-operative society of collective interest) is a type of multi-stakeholder co-operative structure introduced in France in 1982. A SCIC must have at least three different categories of members, including users and employees. Other stakeholder groups that may be represented are volunteers, public authorities and other individual or corporate supporters. Voting is on a 'one member, one vote' basis, though voting in colleges is also provided for under certain circumstances.

SCICs must have a 'general interest' objective. Public bodies can subscribe for up to 20% of the capital. The status allows an association to convert into a co-operative without having to change its legal form. The relative rigidity of the structure, combined with the government's failure to grant tax relief, has limited its take-up.

Multi-stakeholder co-operatives also exist in the retail sector. An example is Färm,[60] a Belgian wholefood retailing cooperative founded in 2015 which favours organic and local produce. It operates 16 shops, of which 11 are in Brussels.

Categories of members:

The cooperative brings together all the participants in the food chain from farm to fork, represented by six different categories of members:

• A Investors: the people providing the financial means necessary to achieve the enterprise's ambitions, currently four of the project's founders. This category holds 94% of the shares but only exercises 50% of the votes. The board will consider applications from people wishing to invest in excess of €25,000;
• B Managers: the members of Färm's management;
• C Workers: members of staff working at Färm, who currently number 36;
• D Sympathisers: clients and people who want to support the project without having a contractual or commercial relationship with it. Anyone can become part of this category by buying shares worth a minimum of €105 (currently 5 shares of €21), and a maximum of €5,000. As of September 2020 the cooperative was not accepting new members;
• E Suppliers and producers: there is no obligation to hold shares in order to collaborate commercially with Färm, but the enterprise finds it nice that the two groups support each other;
• F Supporters: self-employed people who have opened a store under the Färm brand.

Governance

Each member has one vote. The members elect the board of 10 at the annual general meeting. Each category of members has at least one board member to represent them.

An innovative governance provision ensure that one group of members can dominate the others. In practice board decisions are taken by consensus. In the event of a vote, each director has one vote, and except where the cooperative's registered or internal rules provide otherwise, decisions are taken by simple majority of those present or represented. But in the event of a tie, if the votes of a group of voters all belong to the same category, the votes of the other categories prevail.

To ensure that members are committed to the cooperative's values, vision and objectives, to guarantee its long-term finance and to limit financial speculation, shares are not transferable for a period of four years.

Members receive a 2% discount on purchases.

New generation cooperatives (NGCs) are an adaptation of traditional cooperative structures to modern, capital intensive industries. They are sometimes described as a hybrid between traditional co-ops and limited liability companies or public benefit corporations. They were first developed in California and spread and flourished in the US Mid-West in the 1990s.[61] They are now common in Canada where they operate primarily in agriculture and food services, where their primary purpose is to add value to primary products. For example, producing ethanol from corn, pasta from durum wheat, or gourmet cheese from goat's milk.

A platform cooperative, or platform co-op, is a cooperatively owned, democratically governed business that establishes a computing platform, and uses a protocol, website or mobile app to facilitate the sale of goods and services. Platform cooperatives are an alternative to venture capital-funded platforms insofar as they are owned and governed by those who depend on them most—workers, users, and other relevant stakeholders. Proponents of platform cooperativism claim that, by ensuring the financial and social value of a platform circulate among these participants, platform cooperatives will bring about a more equitable and fair digitally mediated economy in contrast with the extractive models of corporate intermediaries. Platform cooperatives differ from traditional cooperatives not only due to their use of digital technologies, but also by their contribution to the commons for the purpose of fostering an equitable social and economic landscape.

A volunteer cooperative is a cooperative that is run by and for a network of volunteers, for the benefit of a defined membership or the general public, to achieve some goal. Depending on the structure, it may be a collective or mutual organization, which is operated according to the principles of cooperative governance. The most basic form of volunteer-run cooperative is a voluntary association. A lodge or social club may be organized on this basis. A volunteer-run co-op is distinguished from a worker cooperative in that the latter is by definition employee-owned, whereas the volunteer cooperative is typically a non-stock corporation, volunteer-run consumer co-op or service organization, in which workers and beneficiaries jointly participate in management decisions and receive discounts on the basis of sweat equity.

In some cases, cooperative societies find it advantageous to form cooperative federations in which all of the members are themselves cooperatives. Historically, these have predominantly come in the form of cooperative wholesale societies, and cooperative unions. Cooperative federations are a means through which cooperative societies can fulfill the sixth Rochdale Principle, cooperation among cooperatives, with the ICA noting that "Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, regional and international structures."

A second common form of cooperative federation is a cooperative union, whose objective (according to Gide) is "to develop the spirit of solidarity among societies and... in a word, to exercise the functions of a government whose authority, it is needless to say, is purely moral." Co-operatives UK and the International Cooperative Alliance are examples of such arrangements.

In some countries with a strong cooperative sector, such as the UK, cooperatives may find it advantageous to form political groupings to represent their interests. The British Co-operative Party, the Canadian Cooperative Commonwealth Federation and United Farmers of Alberta are prime examples of such arrangements.

The British cooperative movement formed the Co-operative Party in the early 20th century to represent members of consumers' cooperatives in Parliament, which was the first of its kind. The Co-operative Party now has a permanent electoral pact with the Labour Party meaning someone cannot be a member if they support a party other than Labour. Plaid Cymru also run a credit union that is constituted as a co-operative, called the 'Plaid Cymru Credit Union'.[62] UK cooperatives retain a strong market share in food retail, insurance, banking, funeral services, and the travel industry in many parts of the country, although this is still significantly lower than other business models.[63]

Former leader of the British Labour Party Jeremy Corbyn has publicly expressed support for worker cooperatives.[64]

In 2021, Hanson and Prushinkaya performed a survey on working conditions of cooperatives in the US,[66] in which cooperativists expressed that they were making wages above the minimum for good living conditions. According to the report, they received, on average, 3,52 $/hour more than at their previous job.

Research shows that, in the US, the 77% of the cooperatives have a 1:1 or 2:1 top-to-bottom pay ratio, whereas the average large corporation in the US has a CEO-to-worker pay ratio of 303:1.[66] This means that in worker's cooperatives there is much more distribution of wealth between the members of the cooperatives, which means that workers that are at the bottom of the organizational pyramid make more money than workers that are at the bottom of the pyramid but that are in conventional firms.

Research also shows that the effect of output price changes on wage variations is positive for both conventional firms (CF) and cooperatives (WC), but larger in WCs than in CFs.[69] This means that, because the distribution of wealth is much greater in WCs, an increase in the benefits of a WC usually is reflected in a proportional increase in the wages, whereas in CF this increase in the wages is much smaller (since the wealth is accumulated by people in the higher position, or is saved for new corporate investments).

However, the fact that the wealth is distributed between the already hired workers has the downside of preventing the cooperatives of hiring more workers, thus having a rate of creation of new jobs that is lower than CF. However, in WC changes on output prices does not translate in more employment, whereas in CF it does (CF create less employment).[69]

Research shows that in times of crisis, employment and wages are more protected in WC than in conventional firms;[69] since the focus of WCs is on protecting employment and because the workers that control the WC do not want to lose their jobs, WC are generally more willing to protect them. This does not happen so much in CF, where the focus is on maintaining the margin of benefits and not employment, which is considered a cost in times of crisis.

Research also shows that the difference of wages between workers hired by the cooperative and workers that are members of the cooperative is small (a worker can work for the cooperative but not be a member of it).[69] Two explanation have been proposed: the first one is that the spirit of cooperativism also extends to hired workers; and the second that sometimes employees are needed for highly skilled jobs, which provides them with strong bargaining power enabling them to defend their employment positions and to compensate for their lack of formal control rights over the firm.[69]

The formation of cooperatives has been used many times to create jobs in economically depressed sites. The communalization of wealth in poor areas often allows them to make the first investment in capital, which allows them to set the cooperative and start having benefits, thus producing an inflow of wealth in the community, which then is redistributed within the members of the cooperatives. This scheme of using cooperatives to create wealth and job opportunities in depressed areas has been famously used, for example, by the Mondragon Corporation, which has provided long term stable jobs for the population of Mondragon (Euskadi) since the mid 50s.

The focus that cooperatives have in protecting jobs is reflected in research. Hanson and Prushinkaya have showed that, in the US, turnover rates are lower in WC than in CF (the turnover rate is the percentage of employees leaving a company within a certain period of time)[66] Jobs at workers’ cooperatives tend to be longer term.[70]

There are several explanations for this: higher compensation and wages for workers; higher job satisfaction; greater adaptability to crisis and economic difficulties, etc.

Research shows that WC show higher adaptability to crisis and economic hardships than CF.[71] During negative demand shocks, WCs contain employment drop and allow a greater downward wage adjustment[71] (the workers themselves decided to lower their own wages in order to keep the jobs). Another adaptability mechanism is the mutual support between WCs.[72] The case of Cooperativa Mondragón is paradigmatic in this sense: during the 80s, some cooperatives were experiencing financial difficulties, and Mondragon redeployed workers in the struggling co-operatives to ones that were better off.[72] Those who were not redeployed were given income assistance that equaled 80% of their salary.[72] The central control structure of Mondragon allowed for this to happen. This would have been unlikely to happen in unorganized and autonomous co-operatives.[72] This same scheme to save employment prevented Fagor cooperative workers from losing their jobs when Fagor went bankrupt: they were relocated to other cooperatives of the Mondragon group.[72]

Overworking due to the need for competitiveness applies to cooperatives as well. Some authors argue that the limitation of working hours in a cooperative should only apply for non-members workers of the coop (hired workers), whereas member workers should be allowed to work as much as they want, allowing the cooperative to collectively take those kind of decisions if they only apply to member workers.[73]

See: Workplace democracy

According to Pam a Pam,[68] having internal democracy is not limited to having communal spaces of debate and decision making, but also ensuring that the participation in those spaces is not limited by issues of positionality, privilege, or rank.[68]

For example, one of the basic issues with internal democracy is to make sure that every worker has access to all the information of the cooperative, and that is aware of every debate that is happening within the cooperative. It is important to make sure that all important decisions are taken in formal spaces, and avoid using informal spaces in which not everyone might be present to take those decisions.

This issue of having access and voice in the formal spaces for decision making of the cooperative becomes more important the bigger the cooperative gets. Research shows that,  in larger cooperatives, member participation is lower than in smaller cooperatives, and there is a deterioration of internal democracy and working conditions for cooperative members and employees.[74]

Mark Kaswan argues that "the cooperative structure alters the socio-economic relations of their members, aligning their interests with one another on the basis of a strong principle of equality. It is this alignment of interests on the basis of equality that gives cooperatives their strongly democratic character.[75]

According to Kaswan, internal democracy is mostly defined by the type and the size of the cooperative.[75]

• The type of activity developed by the cooperatives is one of the main conditioning factors. For example, in worker cooperatives, the workers spend a lot of time in contact with each other, having a high level of both interaction and interdependency. In consumer’s cooperatives, both the frequency and the intensity of the encounters is lower, thus reducing their democratic participation.[75]
• The size of the cooperative is the most important factor for internal democracy. For example, Robert Dahl argues that "assembly-style direct democracy can only effectively function in fairly small organisations".[76][75] This is because ncreasing size also increases the complexity of management, which may lead to ‘managerialism’, or the development of powerful officials whose concerns and interests may be different from those of common members. If the manager is already a worker-member of the cooperative, the problem might be resolved; but if the manager is hired specifically for managerial purposes, some hierarchies can arise. The contradiction with the issue of size comes with the social impact of the cooperative: greater size usually means greater social impact, but also has a toll on internal democracy.

• Facilitation of all meetings/assemblies is rotated among all members of the coop; training and coaching in facilitation will be provided.
• Permanent and external facilitation (from a specialized process work paradigm external coop) on emotions, conflicts of power, informal hierarchies.
• Any decision made by a coop member can be recalled if 50% of coop members request it.
• Create a space where members can propose improvements and a committee reviews and prioritizes them.
• Revise periodically how the flow of information goes, and see if there are individuals or segments of the coop excluded from this flow, for whatever reason (lack of proper access, unclear messages, technical jargon, excessive workload, etc.), and define collective measures to define what is relevant information (and what is not) and guarantee a full access to it.

There is a legal debate on whether to consider being a member of a cooperative as a formal worker or not. For instance, it has been claimed that “the relationship of the worker-member with their cooperative should be considered as distinct from that of conventional wage-based dependent work and self-employed work”. Some authors argue that cooperatives should have their own legal status differentiated from the legal status of a conventional firm, in order for them to get recognition and adapt the law to its unique features.[77]

In Argentina, lawyers have debated whether the relationship between members in the worker cooperative also constitute an employment relationship to which the rules governing pais dependent work are applicable. Some say yes, mainly based on the argument that participation in the management and direction is not incompatible with the condition of subordination and that the individual is subordinated to the majority vote. However, other interpretations say that the link between members and the worker cooperatives is not a labor relation. In many law cases it has been widely adopted that the size of the cooperative is decisive for this question since the personal contribution of members is more important in small cooperatives.

In the US, he Internal Revenue Service determines whether a worker is an independent contractor by considering the degree that the worker:[78]

• Receives less extensive instructions on the work to be done, but not how it should be done;
• Receives training from the business about required procedures and methods;
• Has significant investment in the work;
• Is not reimbursed for some business expenses;
• Has the opportunity to realize a profit or incur a loss;
• Receives benefits from the business;
• Has a written contract that shows the relationship the worker and business intend.

The following factors are generally considered when determining whether an employment relationship exists under the FLSA:

• Is the worker performing work that is an integral part of the business?
• Do the worker's managerial skills affect the worker's opportunity for both profit and loss?
• What kinds of investment does the worker make in facilities and equipment compared to the employer?
• Does the worker exercise independent business judgement and initiative?
• Is the relationship with the employer indefinite, which suggests an ongoing employee relationship?
• What kind of control does the employer have about how the work is performed, pay amounts, hours worked, and whether the worker is free to also work for others and hire helpers?

However, the recognition of cooperatives as different entities than conventional firms sometimes creates a legal void that has been used regularly for laboral fraud.[70] For example, in Spain, cooperatives are not subjected to the sectoral collective agreements of each sector.[79] In some cases, businesses take the form of a cooperative to avoid being subjected to collective agreements gained through trade unionism and syndicalism, thus being able to pay lower or have worse labor conditions than the ones stipulated in the collective agreement, while at the same time retaining the same power and salary pyramids.[70]

Many cooperatives are accused of being instruments to be used to lay off workers, to out-source and to exploit workers and small producers. The “cooperativatisation” of both public and private sector activities in some countries has been accompanied by a deterioration of working conditions. This is due both to the perversion of the cooperative form and to weak labour regulations applied to these kinds of work forms.[70]

Usually, the law stablishes that a cooperative has to have a minimum percentage of workers-owners (usually the 33%). The cooperatives can hire workers that are not part of the cooperative, but usually the law stablishes a maximum amount of time that they can work in the cooperative without being members of it; after that, cooperatives are legally obliged to make those workers part of the cooperative. Some cooperatives commit laboral fraud because either they have a smaller percentage of cooperativized workers thant the stablished by law, or they have people working without being members for more time than the legally allowed.[80]

In Spain, since the law does not subject cooperatives to the collective agreements or to the social securityregulations, the following scheme has been used: if a business wants to pay less that what the sectorial agreement of its economic sector establishes, the business can create a cooperative, which is not subjected to those, hire all the workers using that cooperative, and then outsource the activity to this cooperative. In this way, instead of having to hire all the workers directly (thus having to pay the Social Security fees and the minimum wage stablished by the collective agreement), the company only has to use the cooperative as a shell company, and in this way it does not have to pay for it, since the workers are hired by the cooperative and not by the company, they are not subject to the sectoral agreement or social security.[79] This is the case, for example, of Spain's Servicarne Coop, hired by meat industries such as Coren and Sada, which according to the Audiencia Nacional "does not carry out a cooperative activity” and has not been established with the purpose of fulfilling the objectives set forth in the Cooperatives Law [...] but only with the aim of obtaining certain benefits that are linked to it, creating a merely formal appearance of a cooperative”, for example avoiding to pay the Social Security fees.[81][82]

Potential solutions to this fraudulent usage of workers’ cooperatives have been suggested:

• Cover the legal void that allows this to happen[70]
• Create cooperative federations that ensure the cooperative identity and its regular functioning
• Etc.

• Flexible scheduling.
• Remote work for all staff, with the possibility to do the full working week that way, but also putting some mandatory in-person moments for everyone (conflict resolution, first meetings with new employees, farewell for leaving employees, conflict resolution, strategically and/or politically relevant and/or difficult meetings, celebrations in the coop).
• All time on worker cooperative business is paid.
• Equal pay for all positions (assuming a balanced share of responsibility and job complexity).
• 40 days of vacation (at least).
• Safe and regenerative working place. Applications based on biomimicry and biophilia to promote natural, healthy and diverse environments (different places for calmness, meditation, creativity, stimuli, team bond generation, individual reflection, exercise, connection with nature, water, plants, art, etc.).

According to Gianluca Salvatore and Riccardo Bodini, self-financing schemes include the act and the practice of using one's own capital to provide funding for an enterprise. The main advantage of self-financing is that it sets the cooperative free from outside influence and debt, but the capacit to expand the coop might be constrained by the lack of capital.[84]

This is the main form of financing in cooperatives. Usually, workers cooperatives do not only socialize the labor force, but also a part of the economical wealth of each member, that is put in a pool together with the rest of contributions, and that constitutes the capital of the cooperative. Usually, future members have to socialize a certain amount of money to the cooperative before they can become formal members.[84]

The most common way to do it all at once before joining the cooperative, but other financing schemes have been proposed. For example, some cooperatives do not ask for an initial investment, but rather require workers to work for a certain period of time, while retaining a percentage of the wage, until the worker has paid all the requirements and can become a formal member of the cooperative.[84]

Usually, when the worker decides to leave the cooperative, all the money invested will be returned to the worker.

The amount required will vary depending on a lot of factors, such as for example:[84]

• The type of cooperative: if it is a big industrial cooperative, the amount required will probably be higher than for a small services cooperative.
• The current budget of the cooperative: if a cooperative is already economically well established, probably the requirements will be lower. However, if the cooperative is still young and still requires a lot of investments, the initial requierent wil be higher.[85]

Occasionally. if the situation requires it, workers of the cooperative can decide to put some more money as an investment, which can later be returned.[84]

If the cooperative is based on selling products or services, a part of the finance comes from the profits that they get from their activities.[84]

A cooperative can have different assets from which it can get money without having to sell those assets. For example, if the cooperative has money in the bank, and the bank gives interests, it can generate some more money. Or for example, if the cooperative owns a place and rents it, it can get some more money out of it.[84]

Assets can also be converted to money. For example, if the cooperative owns shares of another company, they can sell them and turn them into liquidity. Or if the cooperative owns a building, it can sell it. Different types of assets can be converted to liquidity with different levels of ease: for example, selling shares is easier and less time-consuming than selling land, which might take months. Thus, shares are much more easily converted to liquidity than land.[84]

Financial grants, that are awards typically given by foundations or governments, can also be a source of financiation for cooperatives. They differ from loans in the fact that they under most conditions they do not have to be paid back. Some grants have waiting periods before the grantee can take full ownership of them.[84]

They are usually in the form of cash, but can also be in the form of other assets. Donations are specially recommendable if the cooperative has a strong aim for social impact and mutual aid, in which case individual or collective donors might be interested in donating.[84]

Crowdfunding is a way of sourcing money for a project by asking a large number of contributors to individually donate a small amount to it. In return, the backers may receive token rewards that increase in prestige as the size of the donation increases.[84]

A successful example of how to finance a workers cooperative with a crowdfunding is the case of the cooperative of the Collettivo di Fabbrica GKN - Insorgiamo!, who, after occupying and taking back the control of a GKN factory in Florence, they began a crowdfunding campaign to get the initial money needed to create a cooperative that included all the workers that previously worked there. They used that money to make the initial investments to reconvert the factory to manufacture bicycle parts, with a sustainability goal.

Especially for SSE cooperatives, one way to get finance is getting grants from governments or private organizations. The latter are usually related to philanthropy. The difference with other types of grants is that they do not require any previous conditions of challenges that need to be achieved.[84]

Challenge grants are funds disbursed by governments, foundations and trusts on completion of challenge requirements. The challenge refers to the actions or results that must be achieved before money is released. The challenge could require a new solution to an existing problem that had been ignored. Additional requirements could be specified, from programme certification to member participation. An example of a challenge grant would be money that is given by a bank if the cooperative increases membership by a certain amount.[84]

Lending or debt instruments provide borrowers with funding in exchange for repayment of this funding along with interest, based on predetermined timeframes and interest rate terms. The provision of funding might require guarantees.[84]

Concessional and flexible loans include special features such as no or low interest rates, extended repayment schedules, and interest rate modifications during the life of the loan.[84]

Crowd lending, also known as peer-to-peer lending, is the practice of lending money through online services that directly match lenders with borrowers. Lenders can earn higher returns compared to savings and investment products offered by banks, while borrowers can borrow money at lower interest rates.[84]

For example, when the bank provides sums of money as donations or financing at competitive conditions in support of initiatives that favour social innovation.[84]

An equity investment is money that is invested in a company by purchasing shares of that company in the stock market. Some cooperatives use that as a source of money. In cooperatives equity investments are usually not used, since it is something that is generally believed to go against the principles of cooperativism (the Rochdale Principles themselves limit the equity investments).[84]

Direct capital contribution to a project without the guarantee of repayment; the return on a direct equity investment will depend on the performance of a project/company over the investment period.[84]

Especially at the start of a cooperative, this is used in some cases. It involves a person or a legal entity that, with a financial contribution, favours the establishment of a company and the carrying out of the social activity. Typically, they make part of the initial investment, and once the company is established, they resell all or part of the subscribed shares.[84]

Other forms of equity investments used by cooperatives are: equity funds/mutual fund, quasi-equity, equity crowdfunding, social venture capital/impact investing, patient capital, etc.[84]

Through all these financial means, a cooperative can create a financial profit. The next set of critical financial decisions becomes how to distribute that profit. There are different forms of redistributing the benefit.[86]

Usually, growing the business is not the main goal of a cooperative (the main goal is to redistribute profit amongst its members), but sometimes it is necessary to reinvest a part of the profits in the form of new capital, which will allow the cooperative to expand its operations and increase profit in the future. This is especially true during the initial steps of the cooperative, in which its operations have to grow to the point in which they have regained the initial capital investment. The capital reinvestments are decided collectively through the democratic mechanisms that a cooperative has.[86]

Patronage refunds are the distribution of profits to the members of the cooperative, who have previously invested money in the form of capital by members and social loans.[86]

The Rochdale principles state that cooperatives should have limited return on equity investments, so its usual for most of the cooperatives to not use equity investments, and, if they do, pay few dividends to the shareholders. The main reason for which they do that is that distributing profits as dividends reduces the potential amount of patronage refunds.[86]

Part of the benefits of a cooperative must be saved as a safe fund, which will allow the cooperative to face unexpected situations and crises if they appear.[86]

In case that a cooperative experiences a loss, there are alternatives to handle them in the most efficient way possible.[86]

If a cooperative has had profits at some point, it should have some savings, which it can use in times of economic losses. In this way, they can absorb the losses simply with the money they already had, not having to affect neither wages, employment, or stocks.[86]

This is one of the most common ways to allocate the losses. Making this decision involves the workers deliberating through the stablished democratic mechanisms on how are the losses going to be distributed amongst membership.[86]

We have already seen that, in times of economical hardships, cooperatives are more willing to reduce their wages rather than reduce employment, whereas conventional firms would rather fire some people and keep the same wages for the rest of them.[69]

In general terms, research shows that productivity in worker's cooperatives is higher than in conventional firms. For example, Fakhfakh et al. (2012)[83][65] show that in several industries conventional firms would produce more with their current levels of employment and capital if they adopted the employee-owned firms’ way of organising

There are many explanations for that:

• The first one, that commitment to the cause causes more productivity. The fact that employees can participate in decision making makes them more involved with the objectives of the cooperative.
• Another explanation is that the collective work environment enhances job satisfaction, thus augmenting productivity. Research has shown that collectivists working in simulated collectivist cultures do in fact produce more cooperative behavior than do individualists (i.e., those low in collectivism) in these cultures.[91] Furthermore, it has been argued that collectivists’ ideological commitment to the group members yields higher levels of motivation.[92] Consequently, in addition to making turnover less likely, high collectivism in the WC environment should translate to high performance.

Capital and the Debt Trap reports that "cooperatives tend to have a longer life than other types of enterprise, and thus a higher level of entrepreneurial sustainability". This resilience has been attributed to how cooperatives share risks and rewards between members, how they harness the ideas of many and how members have a tangible ownership stake in the business. Additionally, "cooperative banks build up counter-cyclical buffers that function well in case of a crisis," and are less likely to lead members and clients towards a debt trap (p. 216). This is explained by their more democratic governance that reduces perverse incentives and subsequent contributions to economic bubbles.

A 2013 report by ILO concluded that cooperative banks outperformed their competitors during the financial crisis of 2007–2008. The cooperative banking sector had 20% market share of the European banking sector, but accounted for only 7 percent of all the write-downs and losses between the third quarter of 2007 and the first quarter of 2011. Cooperative banks were also over-represented in lending to small and medium-sized businesses in all of the 10 countries included in the report.[93]

A 2013 report published by the UK Office for National Statistics showed that in the UK the rate of survival of cooperatives after five years was 80 percent compared with only 41 percent for all other enterprises.[6] A further study found that after ten years 44 percent of cooperatives were still in operation, compared with only 20 percent for all enterprises.

A 2012 report published by The European Confederation of cooperatives and worker-owned enterprises active in industry and services showed that in France and Spain, worker cooperatives and social cooperatives "have been more resilient than conventional enterprises during the economic crisis".[94]

In a 2007 study by the World Council of Credit Unions, the five-year survival rate of cooperatives in the United States was found to be 90% in comparison to 3-5% for traditional businesses.[95] Credit unions, a type of cooperative bank, had five times lower failure rate than other banks during the financial crisis[96] and more than doubled lending to small businesses between 2008 and 2016, from $30 billion to $60 billion, while lending to small businesses overall during the same period declined by around $100 billion.[97] Public trust in credit unions stands at 60%, compared to 30% for big banks[98] and small businesses are five times less likely to be dissatisfied with a credit union than with a big bank.[99]

A 2010 report by the Ministry of Economic Development, Innovation and Export in Québec found the five-year survival rate and ten-year survival rate of cooperatives in Québec to be 62% and 44% respectively compared to 35% and 20% for conventional firms.[100] Another report by the BC-Alberta Social economy Research Alliance found that the three-year survival rate of cooperatives in Alberta to be 81.5% in comparison to 48% for traditional firms.[101] Another report by the aforementioned Research Alliance found that in British Columbia, the five-year survival rates for cooperatives between 2000 and 2010 to be 66.6% in comparison to conventional businesses that had 43% and 39% in the years 1984 and 1993 respectively[101]