The key difference between a cooperative and an
investor-owned company is that a cooperative is a business owned and operated
by its members for their mutual benefit.
An investor-owned company’s only owner focus is financial.
Because a cooperative is operated for the mutual benefit of
its members by its members, member control beyond the levels usually accepted
in an investor-owned company is imperative to achieving successful outcomes for
members, both financial and in services.
Control by cooperative members is important because in cooperatives,
purpose includes how the cooperative interacts with its members’ businesses and
this can vary and change over time. By contrast in investor-owned companies,
purpose is always clear, to make money through shares and dividends.
The types of controls members
have over the decision making of cooperatives are:
- Redemption of membership – Ultimate form of control, very dissatisfied, Rarely used.
- Voting rights at AGM – Official level of control. Used annually, more frequently with concern.
- Engagement with the co-operative – co-operative level of control and is directive or interactive only. Used regularly/daily. Used in a variety of mediums. NB: Increases in reciprocal engagement decreases the dependence on other forms of control by improving outcomes for members.
Redemption of membership (ownership) – Exercised Anytime
- Remove capital and cease trading with the co-op.
- Personal risk to own business as trading security reduced.
- Galvanises remaining members to direct the board
Voting rights at AGM: - Exercised Annually
- Election of Board members
- Changes to constitution – changes are to the parameters of the business (not on how the business is run)
- Passing the annual report
- Appointment of Auditor
- Winding up the organisation
Engagement with co-op: - Varied and ongoing
- Directive remits at AGM/SGM
- Speaking rights at AGM/SGM
- Access to co-op communications and publications
- Access to Directors
- Access to member representatives
- Invitation to member update meetings
- Access to member only areas on co-op website
- Participation in focus groups or local forums
- Clear complaints procedures on operational or governance issues
- Information-sharing networks
- Member/management working parties
- Cooperative training and education
- Advocacy
- Other forms of formal and informal communication through-out the co-op
Improving member participation is the key to a successful,
member controlled, member focused cooperative.
It all starts with the constitution. Having a constitution that clearly
defines the parameters of how the cooperative operates, how membership is
defined and the rights and responsibilities of members is important in setting
the framework for a successful cooperative.
Unlike investor-owned businesses, reciprocal engagement with
members is a key component to the success of co-operatives. Having a Board that works to develop strong
member engagement directly with members will strengthen outcomes for
members. There needs to be a clear
pathway from the Board to the members and back again. The use of external PR firms in communicating
with members is extremely damaging to this process and actively destroys value
for members.
Member control of a co-operative is vastly different from
owner control in an investor-owned business.
It needs to be protected through the constitution and actively encouraged
by a member-focused Board. Lack of co-operatively
focused professional development training by the Board, the use of outside PR
firms to communicate with members, an overly complicated constitution that does
not focus on the important issues, and no clear lines of open communication are
all warning signs of poor co-operative health.
The use of reciprocal engagement methods that promote strong lines of
formal and in-formal communication by the Board and member representatives is
one of the key ways of helping members exercise control over their
co-operative. Strong member control creates strong outcomes for the
co-operative.
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