What Is a Cooperative?

One Definition

A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through jointly-owned and democratically-controlled enterprise.

International Cooperative Alliance

7 Cooperative Principles

The International Cooperative Alliance has also outlined seven guidelines by which cooperatives put their values into practice.

  1. Voluntary and Open Membership
    Cooperatives are voluntary organizations, 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.
  2. Democratic Member Control
    Cooperatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary cooperatives members have equal voting rights (one member, one vote) and cooperatives at other levels are also organized in a democratic manner.
  3. Member Economic Participation
    Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.
  4. Autonomy and Independence
    Cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, 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 co-operatives. They inform the general public—particularly young people and opinion leaders – about the nature and benefits of co-operation.
  6. Cooperation among Cooperatives
    Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.
  7.  Concern for Community
    Cooperatives work for the sustainable development of their communities through policies approved by their members.

What Distinguishes Cooperatives?

While the International Cooperative Alliance defines seven cooperative principles, Robert Briscoe and Rachel Ward point out in their book Helping Ourselves: Success Stories in Cooperative Business & Social Enterprise three principles that make cooperatives different from other types of business:

  1. User-owned: cooperatives are owned and financed by the people who use them.
  2. User-controlled: cooperatives are controlled by the people who use them.
  3. User-benefits: benefits of cooperatives are shared among its users according to their use.

A cooperative is a self-help business, owned and democratically controlled by the people who use its services and share in its benefits.

Helping Ourselves: Success Stories in Cooperative Business & Social Enterprise by Robert Briscoe and Rachel Ward

Types of Cooperatives

There are several different types of cooperatives. Three of the main types are:

  1. Producer cooperatives are owned and democratically controlled by independent producers, commonly farmers, but could also be fishermen, artists, taxi-drivers, or even doctors.
  2. Consumer cooperatives are owned and democratically controlled by its customers, or those who use the products, including for example, grocery store customers, housing residents, or electricity users. 
  3. Worker cooperatives are owned and democratically controlled by its workers, such as bakery, a window manufacturer, or a home care agency.

To be successful, cooperatives must have a higher purpose than making money … The center of any cooperative’s concern is human beings, not dollars, and the business is really an means to human ends

Max Kummerow, as cited by Briscoe and Ward above