What is a Cooperative?

by Devra Gartenstein

The more I read and learn about cooperatives and the more experience I get participating in one, the more provocative I find the question, “What is a cooperative?”

The legal definition is reasonably clear, covering two main prerequisites:  one vote per member, and equity and profit allocations based on patronage—or participation—rather than monetary contribution.

The legendary Rochdale Pioneers created a clear and compelling list of cooperative principles: open, voluntary membership; democratic control; limited return, if any, on equity capital; net surplus belonging to user-owners; honest business practices; an ultimate aim of advancing the common good; education; and cooperation among cooperatives.

These principles apply to all types of cooperatives. Participation in a consumer or purchasing cooperative can be as simple as paying a one-time fee, voting for board members, and receiving an annual payment based on profit or surplus. But some consumer cooperatives, such as the one founded by the Rochdale Pioneers, are community-based organizations with the capacity to profoundly affect members’ lives by implementing cooperative principles.

Producer cooperatives are alliances of independent operators who collaborate strategically and financially, pooling resources to develop infrastructure and market their offerings, and then sharing the fruits of these investments down the line. Worker cooperatives are democratically run businesses where employee-owners share profit and decision-making. While members of producer coops mostly manage their own enterprises and come together to create synergies, members of worker coops participate in running a single business that harnesses their labor and creativity.

A set of principles is abstract and even impersonal, but a business—especially a cooperative enterprise—is a living, breathing being. Some cooperatives have visionary and influential founders, but their long term success ultimately hinges on establishing frameworks that endure even after these individuals are no longer involved in the day to day.

Some cooperatives, including the tried and true Mondragon network, were founded with the express purpose of fostering democratically-controlled work environments. Others, like my own Patty Pan, embraced the cooperative model as a solution to the issue of ownership succession.

Although many start with thoughtful bylaws, the process of running a cooperative is messy and unwieldy. Egos clash as members balance personal interests against the good of the enterprise as a whole, especially when there isn’t enough incoming capital to make ends meet.

At Patty Pan’s annual members meetings, we take time to reflect on the nature and meaning of our cooperative. We have a relaxed and casual company culture, which translates to a relaxed and casual cooperative structure. We’re a small group with little turnover, and we’d already learned to work together reasonably well before the business became a cooperative.

But we know that our success and longevity as a cooperative hinges on our ability to create a model that will endure even after our founding members have moved on. We’ll need systems for evaluation and accountability, and quality written materials that communicate who we are and how we run the business.

Because our company culture is so casual, we’ll need to develop flexible and friendly tools, and caveats that allow us to operate informally as long as our members are comfortable with this informality, using our structural framework as fallback. It’ll be a dance. It’ll be interesting. The work will never be fully finished.