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ISSUE: Cooperatives as a Pro-Social Business Model

CONVENER(S): MichaelYacavone

PARTICIPANTS: JonHusband, LoranineMartin?, ElizabethNofziger, GerryGleason, SusanKerr, TedErnst, SundeeWislow


Coops are, almost by definition, pro-social. They are democratically controlled (one member, once vote), support the cooperative principles, and are owned by their members.

Many people assume that Coops are small-time natural food stores, but there are also producer coops like Land 'O Lakes ( and Cabot Cheese ( Even in the food sector, the Hanover Consumer Cooperative ( has five locations, 350 employees, and has $52MM a year in sales - in a population density of ~50K.

Michael Yacavone currently serves as Board President at the Hanover Coop. You can read their annual report at his personal weblog ( Hanover is the second-largest consumer food coop in the USA, behind Seattle, and ahead of Hyde park in Chicago. How is it that a small town of 6,000 people, in a regional area of 50,000 can have a food coop that is bigger than the one in Chicago and nearly as big as Seattle?

The International Co-operative Alliance ( defines the 'official' cooperative principles.

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

Values: Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others.

Principles: The co-operative principles are guidelines by which co-operatives put their values into practice.

1st Principle: Voluntary and Open Membership Co-operatives 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.

2nd Principle: Democratic Member Control Co-operatives 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 co-operatives members have equal voting rights (one member, one vote) and co-operatives at other levels are also organized in a democratic manner.

3rd Principle: Member Economic Participation Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. 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 co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.

4th Principle: Autonomy and Independence Co-operatives are autonomous, self-help organizations controlled by their members. If they enter to 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 co-operative autonomy.

5th Principle: Education, Training and Information Co-operatives 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.

6th Principle: Co-operation among Co-operatives Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.

7th Principle: Concern for Community Co-operatives work for the sustainable development of their communities through policies approved by their members.

Source : ICA News, No. 5/6, 1995.

Examples of cooperatives

There is a large outdoor equipment company in Canada called Mountain Equipment Company (, similar to the REI coop ( in the USA.

There is a software coop for large businesses called Avalanche ( Annual fee is $30,000 per year. Any member can contribute their software code, and any member can use this software for free. Examples are call-center software, operations software, etc. Stuff that might cost $50K to $100K to buy or develop.

Isthmus Engineering ( is a cooperatively-owned engineering and manufacturing company.

Independent Fabrication ( is an employee-owned designer and manufacturer of high-end bicycles.

The Associated Press ( is a cooperative.

TedErnst is starting a housing cooperative in the Chicago area.

MarkSmithivas helped form a new housing cooperative in the Chicago area called Logan Square Cooperative.


Co-op Atlantic ( is a "second-level" co-op -- that is, it is a co-op made up of co-ops. To quote: "Co-op Atlantic is the second largest regional co-operative wholesaler in Canada, and has a membership of 135 co-operative enterprises. Co-op stores serve over 200,000 member families in Atlantic Canada and the province of Quebec."

Many co-op organizations join the National Cooperative Business Association ( In addition to providing educational services, they are also the official registrar for the .coop Internet domain, and provide a voice in Washington to elected officials. In other words, they're the lobbying arm of the movement.

Recently, the regional Cooperative Grocer Associations voted to merge and form a centralized National Cooperative Grocers Association ( This organization will provide centralized services for a group of stores totally hundreds of millions of dollars in natural food purchasing power.

Also, credit unions are cooperative banks. The Cooperative Bank of England ( has done some very interesting work in measuring qualitative results of their work (

(Added by ChrisCorrigan): In Canada, VanCity? Savings ( is the largest credit union in the country. It is member controlled with a new Board elected every year. We have 305,000 members and over $9 billion in assets. One of the things I love about VanCity? is the values statements and the advocate function that VanCity? undertakes as a strong voice in the financial services community in Canada. We also have a community foundation and support a wide range of social and environmental projects in BC. You don't need to be small-time long haired hippies to run a coop! (But it helps!)

Sustainable Agriculture

Connecting people with the source of their food is vitally important for long-term sustainability of the food supply. through CSAs, buying clubs, coops, and teaching consumers about buying regional, in-season local produce, we help the goals of sustainable agriculture.

The Berkshire Coop ( in western Massachusetts has produced an excellent documentary video (20 minutes) called "Sweet Soil: Local Farmers and the Berkshire Co-op Market." It's not mentioned much on their website, but I believe you can order a DVD for ~$20 by emailing them (mailto:[email protected]).

Buying Clubs

Food buying clubs are community-driven. People have a need, and they meet in their homes to fill that need. Coop's often grow out of buying clubs, and some coops maintain buying clubs even after they have a store.

Local farmers rely on buying clubs - in the form of CSAs - and on coops as a local market for their goods.

What is a CSA?

CSAs (community supported agriculture) are an approach where customers sign up prior to the planting season and buy 'shares' in the CSA. Farmers then know how much to grow, and what their market is. (They might grow more, for stores or a farmers's market, but the CSA provides guaranteed pre-paid customers). Then, once a week, farmers drop off the produce at pre-determined places, and customers pick up their box/bags of produce. Customers get in-season vegetables, sometimes different every week. Also, the customer shares the risk with the farmer: if there is no rain there is no produce. And, the farmer is connected directly with their customers.

Why aren't there coops everywhere?

One problem is under-capitalization. Because the shares are owned by the members, investors can't earn a return on their investment and members on their own usually don't have significant capital resources.

One possible solution is prototyped in Wisconsin, where they recently passed a new state law which allows a hybrid LLC/cooperative. In this arrangement, up to 45% of the company can be owned by outside investors. There is a company called Coop Metrics ( that is a hybrid consumer/worker/LLC. 45% is owned by investors, 35% is owned by the workers, and 25% by the customers. This creates a tightly bound interdependency between investors, workers and customers. If there is a profit at the end of the year, it is refunded to each group in proportion. That is, 45% of the profit would go to the investors. If there is more than one investor their 45% would be divided between them proportionally. the worker's share is allocated based on hours worked, and customers in proportion to the amount of their purchases.

If you want to take advantage of this corporate structure, you can incorporate your business in Wisconsin no matter where you are located. Further, now that it is on the books in one state, it is possible to get a copy of the law and encourage your home state senators and congress people to modify your own state laws.

These notes also include some previous web writing by Michael Yacavone. I am sure that I did not capture the richness and depth of the entire conversation, and I hope my colleagues will edit and add to this page.

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