Creating a cooperative economy
by Adam Schwartz
This article was originally published in May 2018
In stock-owned businesses, such as those you find on Wall Street, owners can live anywhere. They never have to use the goods or the services that the company offers.
For instance, you can own stock in McDonald’s and never eat there, or own shares in Walmart and never shop there. This separated ownership can lead to lack of concern by investors about the impact of their businesses on communities. After all, the main interest of the investor is getting a financial return on their investment.
Businesses, such as Uber or Airbnb, may market themselves as part of the “sharing” economy but in reality they are investor-owned businesses where the stockholders never have to use the service.
Cooperatives are fundamentally different. Co-ops blend the best of the free market with an ownership model that requires the co-op to be responsible to the people who actually use the goods or services. The owners are the users of the business.
In the case of consumer co-ops, such as PCC Community Markets, the vast majority of the owners are going to be your neighbors, the people who live in the same community, and most are active shoppers. When the owners are the users of the goods or services, there is more alignment and allegiance to the values of the business. In turn, in order to keep the owners happy, the business needs to stay consistent with the values of the owners.
Cooperatives come in all shapes and sizes and exist in most countries around the world. Here in the U.S., there are more than 39,000 cooperatives. They exist in every sector of our economy and are responsible for employing almost 1 million people.
Four co-op models
Cooperatives generally fall into four categories.
Producer co-ops: These include some of the best-known brands in the country: Sunkist, Welch’s, Cabot Cheese, Land O’ Lakes, Organic Valley, and Blue Diamond. In these examples, farmers came together so they could market their products better and earn a sustainable price.
Consumer co-ops: These co-ops are owned by the people who use the goods or services and includes PCC Community Markets and 300 other grocery store co-ops across the nation. Electric co-ops, credit unions, housing co-ops, and health care co-ops are other types of consumer co-ops designed to make services more available and affordable.
Purchasing or Shared Services co-ops: Co-ops, such as Ace Hardware, Carpet One and True Value, all are examples of small business people coming together so they can buy goods at similar prices found at big box stores. Consumer co-ops often form purchasing co-ops to help them reduce costs and offer more services. PCC is a member/owner of the National Co-op Grocers, as are more than 100 other grocery co-ops, to help reduce costs and improve services while building the co-op brand.
Worker co-ops: In this type of co-op, the workers own the business and it can be in any kind of industry. Successful worker co-ops include: Isthmus Engineering (more than 30 engineers own the firm and select their manager); Cooperative Home Care, where almost 2,000 mostly Latina women own the business that provides in-home health care for the elderly and injured; and Equal Exchange, which imports coffee, tea and chocolate while paying a fair price to co-op farmers who grow the products. Other worker co-ops include those for bakers, taxi drivers and information technology professionals. A great example of a local worker-owned cooperative is Patty Pan, a supplier to PCC. Learn more about how Patty Pan works at pattypangrill.com.
The sharing economy
What do all these co-ops have in common? They truly are designed to be “shared” by all the members because all the members are users and owners.
All co-ops share a commitment to the same seven cooperative principles that connect all co-ops. In my work with co-ops from all sectors in this country and around the world, I can attest that there is a co-op solution for any possible challenge facing your community.
We all “live locally,” so it makes sense to do as much as we can to strengthen our local economies. When that is not possible (e.g., there are no local bananas in Seattle), we can buy from companies that share our values of respecting workers and the environment. Cooperatives help make that possible.
When asked about the key ingredients to success, PCC CEO Cate Hardy says, “We have the highest commitment to product quality and we have created a sense of community that does not exist at other investor-owned grocery stores.” By sticking to the values that attract people to the cooperative, it becomes a self-rewarding cycle. Integrity, transparency and good value feeds growth.
Unlike other stores that go to great lengths to hide the origin of private label brands, PCC shares the spotlight with local providers. It offers loans and assistance to help market and grow a producer’s business. This type of support is critical when small new businesses are getting started.
Looking back on his 41-year career at PCC, former CFO, Randy Lee, notes, “We always realized we needed to be a good business first, while holding on to our values. We constantly strive to do both.” The proof is evident as PCC is the largest food co-op in the country and still is growing.
More relevant than ever
The modern era of cooperatives dates back to 1844 and a group of 28 artisans and weavers in Rochdale, England. They were tired of being forced to buy their essential groceries from “the company store” at inflated prices and shoddy quality. So they created a new kind of business, the cooperative. It was different on purpose. Among other things it gave women the right to vote about 70 years before women had that right in U.S. elections.
The unique aspects of the co-op governance model continue today. Each member is allocated one vote based on their membership. This is different than stock-held companies where the number of votes is dependent on the number of shares owned. Co-ops bring a needed equality to the democratic process.
Board members are elected by the members. This creates another ring of accountability. Unlike investor-owned businesses that recruit board members that may or may not have any specific tie to the business, co-ops democratically elect their directors.
Therefore, it is important that co-op members participate. PCC’s board election is happening now and voting this year is easier than ever. Active PCC members can participate in the election by voting online or in stores between April 27 and May 30.
Co-ops are about local people coming together to solve a problem. One of the reasons co-ops are so popular across so many industries is that they answer the question: What’s in it for me — with a solution that also serves we, the community?
So, the next time you or your community are facing a problem, think cooperatively. Chances are, there will be a cooperative solution.
Adam Schwartz is the founder of The Cooperative Way, a consulting firm that helps co-ops succeed. He is an author, speaker, consultant and member-owner of the CDS Consulting Co-op. Contact him at email@example.com or on Twitter: @adamcooperative.
Seven co-op principles
Cooperatives around the world operate according to the same core principles and values, adopted by the International Co-operative Alliance.
- Voluntary and Open Membership
Cooperatives are voluntary organizations, open to all people able to use its services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.
- Democratic Member Control
Cooperatives are democratic organizations controlled by their members — those who buy the goods or use the services of the cooperative — who actively participate in setting policies and making decisions.
- Members’ Economic Participation
Members contribute equally to, and democratically control, the capital of the cooperative. Participation benefits members in proportion to the business they conduct with the cooperative rather than on the capital invested.
- Autonomy and Independence
Cooperatives are autonomous, self-help organizations controlled by their members. If the co-op enters into agreements with other organizations or raises capital from external sources, it is done so based on terms that ensure democratic control by the members and maintains the cooperative’s autonomy.
- Education, Training and Information
Cooperatives provide education and training for members, elected representatives, managers and employees so they can contribute effectively to the development of their cooperative. Members also inform the general public about the nature and benefits of cooperatives.
- Cooperation among Cooperatives
Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.
- Concern for Community
While focusing on member needs, cooperatives work for the sustainable development of communities through policies and programs accepted by the members.