So what is a cooperative and why should I care

(Submitted by Hannah Scott, Manager, Ohio Cooperative Development Center, OSU South Centers)

cooperation-384084_1280 (2)Merriam – Webster defines cooperation as “a situation in which people work together to do something.” Cooperation is the essence of the cooperative business model. A cooperative is member-owned, member-controlled businesses from which the members derive a benefit equitably. That all sounds nice, but what does it actually mean?

First, member-ownership refers to just that – the members of the cooperative are also the owners, just as the investors in a corporation are the owners of that corporation. In a cooperative, member-owners are also the main users of the business; and they benefit from the co-op’s services, which can range from education, to group marketing, to cooperative purchasing and beyond. An important point about cooperatives is implied in this principle: cooperatives’ success depends on member-owner commitment to the business as both owners and patrons.

Second, member-owners control the cooperative. Like other corporations, cooperatives are governed by a board of directors. Directors are elected from the membership by other member-owners to govern the cooperative and set the cooperative’s policy. In addition, most cooperatives follow the principle of one-member, one-vote. When voting issues are brought to the membership by directors, each member may cast one vote regardless of their level of equity in the cooperative or how much they use the cooperative. This principle allows cooperatives to be governed democratically rather than on the basis of ownership stake—one of the major differences between cooperatives and other business models.

us-566321_1920 (2) CooperationFinally, members should benefit from a cooperative equitably or fairly. Fair benefits in a cooperative often refers to the fact that the portion of revenues from the business that are not held for reinvestment are distributed to member-owners based on how much they used the cooperative that year. For example, a member-owner who markets more products through the cooperative will receive a larger portion of the revenue. Cooperatives refer to this as a patronage system. Patronage systems or other methods of ensuring that member-owners benefit fairly from the business are important for successful cooperation.

The Ohio Cooperative Development Center at the Ohio State University South Centers works with new and emerging cooperatives and cooperative like businesses in rural Ohio and West Virginia in an effort to support economic development. The center provides services and resource linkages, including formation counseling, member education, bylaw development, board training and consultation, resource linkages, and assistance with feasibility studies, strategic plan development, business planning, and policy development.