In computer programming, a software framework is an abstraction in which software,
providing generic functionality, can be selectively changed by
additional user-written code, thus providing application-specific
software. It provides a standard way to build and deploy applications
and is a universal, reusable software environment that provides particular functionality as part of a larger software platform to facilitate the development of software applications, products and solutions.
Frameworks have key distinguishing features that separate them from normal libraries:
inversion of control: In a framework, unlike in libraries or in standard user applications, the overall program's flow of control is not dictated by the caller, but by the framework. This is usually achieved with the Template Method Pattern.
default behaviour: This can be provided with the invariant methods of the Template Method Pattern in an abstract class which is provided by the framework.
extensibility:
A user can extend the framework–usually by selective overriding–or
programmers can add specialized user code to provide specific
functionality. This is usually achieved by a hook method in a subclass
that overrides a template method in the superclass.
non-modifiable framework code:
The framework code, in general, is not supposed to be modified, while
accepting user-implemented extensions. In other words, users can extend
the framework, but cannot modify its code.
Rationale
The designers of software frameworks aim to facilitate software
developments by allowing designers and programmers to devote their time
to meeting software requirements rather than dealing with the more
standard low-level details of providing a working system, thereby
reducing overall development time. For example, a team using a web framework to develop a banking website can focus on writing code particular to banking rather than the mechanics of request handling and state management.
Frameworks often add to the size of programs, a phenomenon termed "code bloat".
Due to customer-demand-driven applications needs, both competing and
complementary frameworks sometimes end up in a product. Further, due to
the complexity of their APIs, the intended reduction in overall
development time may not be achieved due to the need to spend additional
time learning to use the framework; this criticism is clearly valid
when a special or new framework is first encountered by development
staff.
If such a framework is not used in subsequent job taskings, the time
invested in learning the framework can cost more than purpose-written
code familiar to the project's staff; many programmers keep copies of
useful boilerplate code for common needs.
However, once a framework is learned, future projects can be
faster and easier to complete; the concept of a framework is to make a
one-size-fits-all solution set, and with familiarity, code production
should logically rise. There are no such claims made about the size of
the code eventually bundled with the output product, nor its relative
efficiency and conciseness. Using any library solution necessarily pulls
in extras and unused extraneous assets unless the software is a
compiler-object linker making a tight (small, wholly controlled, and
specified) executable module.
The issue continues, but a decade-plus of industry experience has shown that the most effective frameworks turn out to be those that evolve from re-factoring
the common code of the enterprise, instead of using a generic
"one-size-fits-all" framework developed by third parties for general
purposes. An example of that would be how the user interface in such an
application package as an office suite grows to have common look, feel,
and data-sharing attributes and methods, as the once disparate bundled
applications, grow unified into a suite that is tighter and smaller; the
newer/evolved suite can be a product that shares integral utility
libraries and user interfaces.
This trend in the controversy brings up an important issue about
frameworks. Creating a framework that is elegant, versus one that merely
solves a problem, is still rather a craft than a science. "Software elegance"
implies clarity, conciseness, and little waste (extra or extraneous
functionality, much of which is user-defined). For those frameworks that
generate code, for example, "elegance" would imply the creation of code
that is clean and comprehensible to a reasonably knowledgeable
programmer (and which is therefore readily modifiable), versus one that
merely generates correct code. The elegance issue is why relatively few
software frameworks have stood the test of time: the best frameworks
have been able to evolve gracefully as the underlying technology on
which they were built advanced. Even there, having evolved, many such
packages will retain legacy capabilities bloating the final software as
otherwise replaced methods have been retained in parallel with the newer
methods.
Examples
Software frameworks typically contain considerable housekeeping and
utility code in order to help bootstrap user applications, but generally
focus on specific problem domains, such as:
Artistic drawing, music composition, and mechanical CAD
According to Pree, software frameworks consist of frozen spots and hot spots. Frozen spots
define the overall architecture of a software system, that is to say
its basic components and the relationships between them. These remain
unchanged (frozen) in any instantiation of the application framework. Hot spots
represent those parts where the programmers using the framework add
their own code to add the functionality specific to their own project.
The necessary functionality can be implemented by using the Template Method Pattern in which the frozen spots are known as invariant methods and the hot spots
are known as variant or hook methods. The invariant methods in the
superclass provide default behaviour while the hook methods in each
subclass provide custom behaviour.
When developing a concrete software system with a software
framework, developers utilize the hot spots according to the specific
needs and requirements of the system. Software frameworks rely on the Hollywood Principle: "Don't call us, we'll call you."
This means that the user-defined classes (for example, new subclasses)
receive messages from the predefined framework classes. Developers
usually handle this by implementing superclassabstract methods.
A cooperative (also known as co-operative, co-op, or coop) 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".
Cooperatives are democratically controlled by their members, with each
member having one vote in electing the board of directors. They differ from collectives in that they are generally built from the bottom-up, rather than the top-down.
Cooperatives may include:
Worker cooperatives: businesses owned and managed by the people who work there
Consumer cooperatives: businesses owned and managed by the people who consume goods and/or services provided by the cooperative
Producer cooperatives: businesses where producers pool their output for their common benefit
Multi-stakeholder or hybrid cooperatives that share ownership
between different stakeholder groups. For example, care cooperatives
where ownership is shared between both care-givers and receivers.
Stakeholders might also include non-profits or investors.
Second- and third-tier cooperatives whose members are other cooperatives
Platform cooperatives that use a cooperatively owned and governed website, mobile app or a protocol to facilitate the sale of goods and services.
The Research published by the Worldwatch Institute found that in 2012 approximately one billion people in 96 countries had become members of at least one cooperative. The turnover of the largest three hundred cooperatives in the world reached $2.2 trillion.
Worker cooperatives are typically more productive and economically resilient
than many other forms of enterprise, with twice the number of
co-operatives (80%) surviving their first five years compared with other
business ownership models (44%) according to data from United Kingdom. The largest worker owned cooperative in the world, the Mondragon Corporation (founded by Catholic priest José María Arizmendiarrieta), has been in continuous operation since 1956.
Cooperatives frequently have social goals, which they aim to
accomplish by investing a proportion of trading profits back into their
communities. As an example of this, in 2013, retail co-operatives
in the UK invested 6.9% of their pre-tax profits in the communities in
which they trade, compared to 2.4% for rival supermarkets.
Since 2002, cooperatives have been distinguishable on the Internet through the use of a .coop domain. In 2014, the International Co-operative Alliance (ICA) introduced the Cooperative Marque, meaning ICA cooperatives and WOCCU credit unions can also be identified through a coop ethical consumerism label.
Cooperation dates back as far as human beings have been organizing
for mutual benefits. Tribes were organized as cooperative structures,
allocating jobs and resources among each other, only trading with the
external communities.[citation needed]
In alpine environments, trade could only be maintained in organized
cooperatives to achieve a useful condition of artificial roads such as Viamala in 1472. Pre-industrial Europe is home to the first cooperatives from an industrial context. The roots of the cooperative movement can be traced to multiple influences and extend worldwide. In the English-speaking world, post-feudal forms of cooperation between workers and owners that are expressed today as "profit sharing" and "surplus sharing" arrangements existed as far back as 1795. The key ideological influence on the Anglosphere branch of the cooperative movement, however, was a rejection of the charity principles that underpinned welfare reforms when the British government radically revised its Poor Laws
in 1834. As both state and church institutions began to routinely
distinguish between the 'deserving' and 'undeserving' poor, a movement
of friendly societies grew throughout the British Empire based on the principle of mutuality, committed to self-help in the welfare of working people.
Robert Owen (1771–1858) was a social reformer and a pioneer of the cooperative movement.
In 1761, the Fenwick Weavers' Society was formed in Fenwick, East Ayrshire, Scotland to sell discountedoatmeal to local workers. Its services expanded to include assistance with savings and loans, emigration and education. In 1810, Welshsocial reformerRobert Owen, from Newtown in mid-Wales, and his partners purchased the New Lanark mill from Owen's father-in-law, David Dale,
and proceeded to introduce better labour standards, including
discounted retail shops where profits were passed on to his employees.
Owen left New Lanark to pursue other forms of cooperative organization
and develop coop ideas through writing and lecture. Cooperative
communities were set up in Glasgow, Indiana and Hampshire, although ultimately unsuccessful. In 1828, William King set up a newspaper, The Cooperator, to promote Owen's thinking, having already set up a cooperative store in Brighton.
The
statue of Samuel Jurkovič, national awakener and founder of first
cooperative in Central Europe (Spolok Gazdovský) in Rača, Bratislava
"Spolok Gazdovský" (The Association of Administrators or The Association of Farmers) founded in 1845 by Samuel Jurkovič, was the first cooperative in Europe (Credit union).
The cooperative provided a cheap loan from funds generated by regular
savings for members of the cooperative. Members of cooperative had to
commit to a moral life and had to plant two trees in a public place
every year. Despite the short duration of its existence, until 1851, it
thus formed the basis of the cooperative movement in Slovakia.Slovak national thinker Ľudovít Štúr said about the association: "We
would very much like such excellent constitutions to be established
throughout our region. They would help to rescue people from evil and
misery. A beautiful, great idea, a beautiful excellent constitution!"
Other events such as the founding of a friendly society by the Tolpuddle Martyrs in 1832 were key occasions in the creation of organized labor and consumer movements.
Friendly Societies established forums through which one member, one vote was practiced in organisation decision-making. The principles challenged the idea that a person should be an owner of property
before being granted a political voice. Throughout the second half of
the nineteenth century (and then repeatedly every twenty years or so)
there was a surge in the number of cooperative organisations, both in
commercial practice and civil society, operating to advance democracy
and universal suffrage as a political principle. Friendly Societies and consumer cooperatives became the dominant form of organization among working people in Anglosphere industrial societies
prior to the rise of trade unions and industrial factories. Weinbren
reports that by the end of the 19th century, over 80% of British working
age men and 90% of Australian working age men were members of one or
more Friendly Society.
From the mid-nineteenth century, mutual organisations
embraced these ideas in economic enterprises, firstly among
tradespeople, and later in cooperative stores, educational institutes,
financial institutions and industrial enterprises. The common thread
(enacted in different ways, and subject to the constraints of various
systems of national law) is the principle that an enterprise or
association should be owned and controlled by the people it serves, and
share any surpluses on the basis of each member's cooperative
contribution (as a producer, labourer or consumer) rather than their
capacity to invest financial capital.
The International Co-operative Alliance was the first international association formed (1895) by the cooperative movement. It includes the World Council of Credit Unions. The International Cooperative Alliance was founded in London, England on 19 August 1895 during the 1st Cooperative Congress.
In attendance were delegates from cooperatives from Argentina,
Australia, Belgium, England, Denmark, France, Germany, Holland, India,
Italy, Switzerland, Serbia, and the US. A second organization formed later in Germany: the International Raiffeisen Union. In the United States, the National Cooperative Business Association
(NCBA CLUSA; the abbreviation of the organization retains the initials
of its former name, Cooperative League of the USA) serves as the sector's
oldest national membership association. It is dedicated to ensuring
that cooperative businesses have the same opportunities as other
businesses operating in the country and that consumers have access to
cooperatives in the marketplace.
In 1945 Artturi Ilmari Virtanen received the Nobel Prize in Chemistry for his invention of the AIV silage.
This invention improved milk production and created a method of
preserving butter, the AIV salt, which led to increased Finnish butter
exports. He had started his career in chemistry in Valio,
a cooperative of dairy farmers in which he headed the research
department for 50 years and where all his major inventions were first
put to practice.
The cooperative movement has been fueled globally by ideas of economic democracy.
Economic democracy is a socioeconomic philosophy that suggests an
expansion of decision-making power from a small minority of corporate
shareholders to a larger majority of public stakeholders. There are many
different approaches to thinking about and building economic democracy.
Anarchists are committed to libertarian socialism
and have focused on local organization, including locally managed
cooperatives, linked through confederations of unions, cooperatives and
communities. Marxists, who as socialists have likewise held and worked
for the goal of democratizing productive and reproductive relationships,
often placed a greater strategic emphasis on confronting the larger
scales of human organization. As they viewed the capitalist class to be
politically, militarily and culturally mobilized for the purpose of
maintaining an exploitable working class, they fought in the early 20th
century to appropriate from the capitalist class the society's
collective political capacity in the form of the state.
Though they regard the state as an unnecessarily oppressive
institution, Marxists considered appropriating national and
international-scale capitalist institutions and resources (such as the
state) to be an important first pillar in creating conditions favorable
to solidaristic economies. With the declining influence of the USSR
after the 1960s, socialist strategies pluralized, though economic
democratizers have not as yet established a fundamental challenge to the
hegemony of global neoliberal capitalism.
Democratic member control, with each member having one vote.
Economic participation by members
Autonomy and independence
Education, training and information
Cooperation among cooperatives
Concern for community
Co-op Marque and domain
The Co-op Marque, a symbol used by co-operatives internationally
Since 2002, ICA cooperatives and WOCCUcredit unions could be distinguished by use of a .coop domain. In 2014, ICA introduced the Global Cooperative Marque for use by ICAs Cooperative members and by WOCCU's Credit Union members so they can be further identified by their coop ethical consumerism label. The marque is used today by thousands of cooperatives in more than a hundred countries.
The .coop domain and Co-operative Marque were designed as a new
symbol of the global cooperative movement and its collective identity in
the digital age. The Co-operative Marque and domain is reserved just
for co-operatives, credit unions and organisations that support
co-operatives; is distinguished by its ethical badge that subscribes to
the seven ICA Cooperative Principles and Co-op Values. Co-ops can be
identified on the Internet through the use of the .coop suffix of internet addresses. Organizations using .coop domain names must adhere to the basic co-op values.
Cooperatives as legal entities
Cooperative of agricultural products of Alginet, 1963
A cooperative is a legal entity
owned and democratically controlled by its members. Members often have a
close association with the enterprise as producers or consumers of its
products or services, or as its employees.
The legal entities have a range of social characteristics. Membership
is open, meaning that anyone who satisfies certain non-discriminatory
conditions may join. Economic benefits are distributed proportionally to
each member's level of participation in the cooperative, for instance,
by a dividend on sales or purchases, rather than according to capital invested. Cooperatives may be classified as either worker, consumer, producer, purchasing or housing cooperatives.
They are distinguished from other forms of incorporation in that
profit-making or economic stability are balanced by the interests of the
community.
There are specific forms of incorporation for cooperatives in some countries, e.g. Finland and Australia.
Cooperatives may take the form of companies limited by shares or by
guarantee, partnerships or unincorporated associations. In the UK they
may also use the industrial and provident society
structure. In the US, cooperatives are often organized as non-capital
stock corporations under state-specific cooperative laws. Cooperatives
often share their earnings with the membership as dividends,
which are divided among the members according to their participation in
the enterprise, such as patronage, instead of according to the value of
their capital shareholdings (as is done by a joint stock company).
Cooperative share capital
The cooperative share capital or co-operative share capital (in short cooperative capital or co-operative capital) is the form of capital that the cooperative accumulates from the paid participation shares of its members. The total amount of participation shares the paid to the cooperative constitutes the cooperative capital. The co-operative share capital is usually non-withdrawable and indivisible to the cooperative members.
Types of cooperatives
Co-op City in The Bronx, New York City, is the largest cooperative housing development in the world, with 55,000 people.The two largest supermarkets chains in Switzerland, Migros and Coop, are cooperatives. The third largest bank, Raiffeisen, is a cooperative as well.
The top 300 largest cooperatives were listed in 2007 by the International Co-operative Alliance. 80% were involved in either agriculture, finance, or retail and more than half were in the United States, Italy, or France.
A consumers' cooperative is a business owned by its customers.
Members vote on major decisions and elect the board of directors from
among their own number. The first of these was set up in 1844 in the
North-West of England by 28 weavers who wanted to sell food at a lower
price than the local shops.
Retail cooperative
Retail
cooperatives are retailers, such as grocery stores, owned by their
customers. They should not be confused with retailers' cooperatives,
whose members are retailers rather than consumers. In Singapore, Italy,
and Finland the company with the largest market share in the grocery
store sector is a consumer owned cooperative. In Switzerland both the largest and the second largest retailer are consumer owned cooperatives.
A housing cooperative is a legal mechanism for ownership of housing where residents either own shares (share capital co-op) reflecting their equity in the cooperative's real estate or have membership and occupancy rights in a not-for-profit cooperative (non-share capital co-op), and they underwrite their housing through paying subscriptions or rent.
Housing cooperatives come in three basic equity structures
In market-rate housing cooperatives, members may sell
their shares in the cooperative whenever they like for whatever price
the market will bear, much like any other residential property.
Market-rate co-ops are very common in New York City.
Limited equity housing cooperatives, which are often used by affordable housing
developers, allow members to own some equity in their home, but limit
the sale price of their membership share to that which they paid.
Group equity or zero-equity housing cooperatives do not allow members to own equity in their residences and often have rental agreements well below market rates.
Members of a building cooperative (in Britain known as a self-build
housing cooperative) pool resources to build housing, normally using a
high proportion of their own labor. When the building is finished, each
member is the sole owner of a homestead, and the cooperative may be
dissolved.
This collective effort was at the origin of many of Britain's building societies, which however, developed into "permanent" mutualsavings and loan organisations, a term which persisted in some of their names (such as the former Leeds Permanent). Nowadays such self-building may be financed using a step-by-step mortgage which is released in stages as the building is completed. The term may also refer to worker cooperatives in the building trade.
A utility cooperative is a type of consumers' cooperative that is tasked with the delivery of a public utility such as electricity, water or telecommunications services to its members. Profits
are either reinvested into infrastructure or distributed to members in
the form of "patronage" or "capital credits", which are essentially dividends
paid on a member's investment into the cooperative. In the United
States, many cooperatives were formed to provide rural electrical and
telephone service as part of the New Deal. See Rural Utilities Service.
In the case of electricity, cooperatives are generally either
generation and transmission (G&T) co-ops that create and send power
via the transmission grid or local distribution co-ops that gather
electricity from a variety of sources and send it along to homes and
businesses.
In Tanzania, it has been proven that the cooperative method is
helpful in water distribution. When the people are involved with their
own water, they care more because the quality of their work has a direct
effect on the quality of their water.
Credit unions, cooperative banking and cooperative insurance
Credit unions originated in mid-19th-century Germany through the efforts of pioneers Franz Herman Schulze'Delitzsch and Friedrich Wilhelm Raiffeisen. The concept of financial cooperatives crossed the Atlantic at the turn of the 20th century, when the caisse populaire movement was started by Alphonse Desjardins in Quebec, Canada. In 1900, from his home in Lévis, he opened North America's first credit union, marking the beginning of the Mouvement Desjardins. Eight years later, Desjardins provided guidance for the first credit union in the United States,
where there are now about 7,950 active status federally insured credit
unions, with almost 90 million members and more than $679 billion on
deposit.
Financial cooperatives hold a significant market share in Europe
and Latin America, as well as a few countries in Sub-Saharan Africa.
They also have a strong presence in Asia, Australia, and the United
States. According to the World Council of Credit Unions (WOCCU), there
were 68,882 financial cooperatives in 109 countries in 2016, serving
more than 235 million members, with total assets exceeding 1.7 trillion
dollars. It is worth noting that the WOCCU's data do not include some
major financial cooperative networks in Europe, such as Germany,
Finland, France, Denmark, and Italy. In many high-income economies,
financial cooperatives hold significant market shares of the banking
sector.
According to the European Association of Cooperative Banks, the
market share of cooperative banks in the Small and Medium Enterprises
(SMEs) credit market by the end of 2016 was 37% in Finland, 45% in
France, 33% in Germany, 43% in the Netherlands, and 22% in Canada. In
Germany, Volksbanken-Raiffeisen banks have a market share of
approximately 21% of domestic credit and domestic deposits. In the
Netherlands, Rabobank holds 34% of deposits, and in France cooperative
banks (Crédit Agricole, Crédit Mutuel and BPCE Group) possess more than
59% of domestic credit and 61% of domestic deposits. In Finland, OP
financial group holds 35% and 38% of domestic credit and deposits,
respectively, and in Canada, Desjardins holds around 42% of domestic
deposits and 22% of domestic credit.
There are many types of cooperative financial institutions with
different names across the world, including financial cooperatives
('cooperativa financiera' is the Spanish term used in Latin America),
cooperative banks, credit unions, and savings and credit cooperatives
('cooperativa de ahorro y crédito' in Spanish or 'coopérative d'épargne et de credit' in French-speaking countries).
Cooperative banking networks, which were nationalized in Eastern
Europe, continued as cooperative institutions. In Poland, the SKOK (Spółdzielcze Kasy Oszczędnościowo-Kredytowe) network grew to serve over 1 million members via 13,000 branches, and was larger than the country's largest conventional bank.
The oldest cooperative banks in Europe, based on the ideas of Friedrich Raiffeisen, are joined in the 'Urgenossen'.
Community co-operative
A
community cooperative is owned and governed by members of a local
geographical community. It is established to meet the community's needs
by providing goods or services that are not available or affordable
through traditional market channels. This is distinct from meeting
individuals' needs as individuals.
The aim of a community cooperative is often to create a more
equitable and sustainable economy that serves the needs of local
residents, rather than generating profits for external shareholders. By
working together and pooling resources, members can often achieve
economies of scale, negotiate better prices, and develop services that
better meet the needs of their community. Community cooperatives can
also help to build social capital and foster a sense of community
ownership and pride. They have been successful vehicles for rural
development in the Gaeltacht in Ireland and the Highlands and Islands of Scotland.
A worker cooperative
or producer cooperative is a cooperative owned and democratically
controlled by its "worker-owners". In a pure worker cooperative, only
the workers own shares of the business on a one person, one vote
basis, though hybrid forms exist in which consumers, community members
or investors also own some shares (though these shares may or may not
have voting power). In practice, control by worker-owners may be
exercised through individual, collective or majority ownership by the
workforce, or the retention of individual, collective or majority voting
rights. A worker cooperative, therefore, has the characteristic that
the majority of its workforce owns shares, and the majority of shares
are owned by the workforce. Membership is not always compulsory for
employees, but generally, only employees can become members either
directly (as shareholders) or indirectly through membership of a trust
that owns the company.
The impact of political ideology on practice constrains the
development of cooperatives in different countries. In India, there is a
form of workers' cooperative which insists on compulsory membership for
all employees and compulsory employment for all members. That is the
form of the Indian Coffee Houses. This system was advocated by the Indian communist leader A. K. Gopalan.
In places like the UK, common ownership (indivisible collective
ownership) was popular in the 1970s. Cooperative Societies only became
legal in Britain after the passing of Slaney's Act
in 1852. In 1865 there were 651 registered societies with a total
membership of well over 200,000. There are now more than 400 worker
cooperatives in the UK, Suma Wholefoods
being the largest example with a turnover of £24 million. There also
exist some pseudo-cooperatives, such as the John Lewis Partnership,
where profits are distributed to the workers, but at the discretion of a
senior elected board.
Business and employment cooperative
Business and employment cooperatives
(BECs) are a subset of worker cooperatives that represent a new
approach to providing support to the creation of new businesses. Like
other business creation support schemes, BEC's enable budding
entrepreneurs to experiment with their business idea while benefiting
from a secure income. The innovation BECs introduce is that once the
businesses are established, the entrepreneurs are not forced to leave
and set up independently, but can stay and become full members of the
cooperative. The micro-enterprises then combine to form one
multi-activity enterprise whose members provide a mutually supportive
environment for each other. BECs thus provide budding business people
with an easy transition from inactivity to self-employment, but in a
collective framework. They open up new horizons for people who have
ambition but who lack the skills or confidence needed to set off
entirely on their own – or who simply want to carry on an independent
economic activity but within a supportive group context.
A "purchasing cooperative" is a type of cooperative arrangement,
often among businesses, to agree to aggregate demand to get lower prices
from selected suppliers. Retailers' cooperatives are a form of
purchasing cooperative.
Agricultural service cooperatives provide various services to their individual farming members, and to agricultural production cooperatives, where production resources such as land or machinery are pooled and members farm jointly.
Agricultural supply
cooperatives aggregate purchases, storage, and distribution of farm
inputs for their members. By taking advantage of volume discounts and
using other economies of scale,
supply cooperatives bring down members' costs. Supply cooperatives may
provide seeds, fertilizers, chemicals, fuel, and farm machinery. Some
supply cooperatives also operate machinery pools that provide mechanical
field services (e.g., plowing, harvesting) to their members. Examples
include the American cranberry-and-grapefruit cooperative Ocean Spray, collective farms in socialist states and the kibbutzim in Israel.
Producer cooperative
Producer
cooperatives have producers as their members and provide services
involved in moving a product from the point of production to the point
of consumption. Unlike worker cooperatives, they allow businesses with
multiple employees to join. Agricultural cooperatives and fishery cooperatives are such examples.
Agricultural marketing cooperatives operate a series of interconnected activities involving planning production, growing and harvesting, grading, packing, transport, storage, food processing, distribution and sale. Agricultural marketing cooperatives are often formed to promote specific commodities.
Commercially successful agricultural marketing cooperatives include India's Amul (dairy products), which is the world's largest producer of milk and milk products, Dairy Farmers of America (dairy products) in the United States, and Malaysia's FELDA (palm oil).
Producer cooperatives may also be organized by small businesses
for pooling their savings and accessing capital, for acquiring supplies
and services, or for marketing products and services.
Producer cooperatives among urban artisans were developed in the mid-19th-century in Germany by Franz Hermann Schulze-Delitzsch, who also promoted changes to the legal system (the Prussian Genossenschaftsgesetz of 1867) that facilitated such cooperatives. At about the same time, Friedrich Wilhelm Raiffeisen developed similar cooperatives among rural people.
Multi-stakeholder cooperatives
Multi-stakeholder cooperatives include representation from different stakeholder groups, such as both consumers and workers.
Cooperatives traditionally combine social benefit interests with
capitalistic property-right interests. Cooperatives achieve a mix of
social and capital purposes by democratically governing distribution
questions by and between equal but not controlling members. Democratic
oversight of decisions to equitably distribute assets and other benefits
means capital ownership is arranged in a way for social benefit inside
the organization. External societal benefit is also encouraged by
incorporating the operating-principle of cooperation between
co-operatives. In the final year of the 20th century, cooperatives
banded together to establish a number of social enterprise
agencies that have moved to adopt the multi-stakeholder cooperative
model. In the years 1994–2009 the EU and its member nations gradually
revised national accounting systems to "make visible" the increasing
contribution of social economy organizations.
A particularly successful form of multi-stakeholder cooperative is the Italian "social cooperative", of which some 11,000 exist.
"Type A" social cooperatives bring together providers and beneficiaries
of a social service as members. "Type B" social cooperatives bring
together permanent workers and previously unemployed people who wish to
integrate into the labor market. They are legally defined as follows:
no more than 80% of profits may be distributed, interest is
limited to the bond rate, and dissolution is altruistic (assets may not
be distributed)
the cooperative has legal personality and limited liability
the objective is the general benefit of the community and the social integration of citizens
those of type B integrate disadvantaged people into the labour
market. The categories of disadvantage they target may include physical
and mental disability, drug and alcohol addiction, developmental
disorders and problems with the law. They do not include other factors
of disadvantage such as unemployment, race, sexual orientation or abuse.
type A cooperatives provide health, social or educational services
various categories of stakeholder may become members, including paid
employees, beneficiaries, volunteers (up to 50% of members), financial
investors and public institutions. In type B cooperatives at least 30%
of the members must be from the disadvantaged target groups
voting is one person one vote
SCIC
The SCIC – Société coopérative d'intérêt collective
(co-operative society of collective interest) is a type of
multi-stakeholder co-operative structure introduced in France in 1982. A
SCIC must have at least three different categories of members,
including users and employees. Other stakeholder groups that may be
represented are volunteers, public authorities and other individual or
corporate supporters. Voting is on a 'one member, one vote' basis,
though voting in colleges is also provided for under certain
circumstances.
SCICs must have a 'general interest' objective. Public bodies can
subscribe for up to 20% of the capital. The status allows an
association to convert into a co-operative without having to change its
legal form. The relative rigidity of the structure, combined with the
government's failure to grant tax relief, has limited its take-up.
Multi-stakeholding in retailing
Multi-stakeholder co-operatives also exist in the retail sector. An example is Färm,
a Belgian wholefood retailing cooperative founded in 2015 which favours
organic and local produce. It operates 16 shops, of which 11 are in
Brussels.
Categories of members:
The cooperative brings together all the participants in the food
chain from farm to fork, represented by six different categories of
members:
A Investors: the people providing the financial means
necessary to achieve the enterprise's ambitions, currently four of the
project's founders. This category holds 94% of the shares but only
exercises 50% of the votes. The board will consider applications from
people wishing to invest in excess of €25,000;
B Managers: the members of Färm's management;
C Workers: members of staff working at Färm, who currently number 36;
D Sympathisers: clients and people who want to support the
project without having a contractual or commercial relationship with it.
Anyone can become part of this category by buying shares worth a
minimum of €105 (currently 5 shares of €21), and a maximum of €5,000. As
of September 2020 the cooperative was not accepting new members;
E Suppliers and producers: there is no obligation to hold
shares in order to collaborate commercially with Färm, but the
enterprise finds it nice that the two groups support each other;
F Supporters: self-employed people who have opened a store under the Färm brand.
Governance
Each member has one vote. The members elect the board of 10 at
the annual general meeting. Each category of members has at least one
board member to represent them.
An innovative governance provision ensure that no one group of
members can dominate the others. In practice board decisions are taken
by consensus. In the event of a vote, each director has one vote, and
except where the cooperative's registered or internal rules provide
otherwise, decisions are taken by simple majority of those present or
represented. But in the event of a tie, if the votes of a group of
voters all belong to the same category, the votes of the other
categories prevail.
To ensure that members are committed to the cooperative's values,
vision and objectives, to guarantee its long-term finance and to limit
financial speculation, shares are not transferable for a period of four
years.
Members receive a 2% discount on purchases.
New generation cooperative
New generation cooperatives
(NGCs) are an adaptation of traditional cooperative structures to
modern, capital intensive industries. They are sometimes described as a
hybrid between traditional co-ops and limited liability companies or
public benefit corporations. They were first developed in California and
spread and flourished in the US Mid-West in the 1990s. They are now common in Canada where they operate primarily in agriculture and food services, where their primary purpose is to add value to primary products. For example, producing ethanol from corn, pasta from durum wheat, or gourmet cheese from goat's milk.
A platform cooperative, or platform co-op, is a cooperatively owned,
democratically governed business that establishes a computing platform,
and uses a protocol, website or mobile app to facilitate the sale of
goods and services. Platform cooperatives are an alternative to venture
capital-funded platforms insofar as they are owned and governed by those
who depend on them most—workers, users, and other relevant
stakeholders. Proponents of platform cooperativism claim that, by
ensuring the financial and social value of a platform circulate among
these participants, platform cooperatives will bring about a more
equitable and fair digitally mediated economy in contrast with the
extractive models of corporate intermediaries. Platform cooperatives
differ from traditional cooperatives not only due to their use of
digital technologies, but also by their contribution to the commons for the purpose of fostering an equitable social and economic landscape.
Volunteer cooperative
A
volunteer cooperative is a cooperative that is run by and for a network
of volunteers, for the benefit of a defined membership or the general
public, to achieve some goal. Depending on the structure, it may be a collective or mutual organization,
which is operated according to the principles of cooperative
governance. The most basic form of volunteer-run cooperative is a voluntary association. A lodge or social club may be organized on this basis. A volunteer-run co-op is distinguished from a worker cooperative in that the latter is by definition employee-owned, whereas the volunteer cooperative is typically a non-stock corporation, volunteer-run consumer co-op or service organization, in which workers and beneficiaries jointly participate in management decisions and receive discounts on the basis of sweat equity.
In some cases, cooperative societies find it advantageous to form cooperative federations
in which all of the members are themselves cooperatives. Historically,
these have predominantly come in the form of cooperative wholesale
societies, and cooperative unions. Cooperative federations are a means
through which cooperative societies can fulfill the sixth Rochdale Principle, cooperation among cooperatives, with the ICA
noting that "Cooperatives serve their members most effectively and
strengthen the cooperative movement by working together through local,
regional and international structures."
A
second common form of cooperative federation is a cooperative union,
whose objective (according to Gide) is "to develop the spirit of
solidarity among societies and... in a word, to exercise the functions
of a government whose authority, it is needless to say, is purely
moral." Co-operatives UK and the International Cooperative Alliance are examples of such arrangements.
Cooperative political movements
In some countries with a strong cooperative sector, such as the UK,
cooperatives may find it advantageous to form political groupings to
represent their interests. The British Co-operative Party, the Canadian Cooperative Commonwealth Federation and United Farmers of Alberta are prime examples of such arrangements.
UK
The British cooperative movement formed the Co-operative Party in the early 20th century to represent members of consumers' cooperatives in Parliament, which was the first of its kind. The Co-operative Party now has a permanent electoral pact with the Labour Party meaning someone cannot be a member if they support a party other than Labour. Plaid Cymru also run a credit union that is constituted as a co-operative, called the 'Plaid Cymru Credit Union'. UK cooperatives retain a strong market share in food retail,
insurance, banking, funeral services, and the travel industry in many
parts of the country, although this is still significantly lower than
other business models.
Former leader of the British Labour Party Jeremy Corbyn has publicly expressed support for worker cooperatives.
Working conditions
Cooperatives
have been traditionally seen as an alternative to the traditional
business model, in which a capitalist has the private ownership of the
monetary capital and of the means of production and workers have to sell their labor force to the capitalist to earn a salary.
Cooperatives are often said to offer better working conditions than regular firms.
This is demonstrated by the fact that cooperatives have a lower
turnover rate (rate of workers leaving a firm) compared to regular
firms.
However, cooperatives do not always show improved working conditions
compared to traditional businesses. In fact, the different nature of
cooperatives imply that the nature of the working conditions within the
cooperatives is also different.
According to Kunle Akingbola,
working conditions are "the core elements of work relationships
determined by the social, psychological, and physical factors that
influence the workplace and the interaction that employees experience at
work" and "typically include the nature of employment, working hours,
job characteristics, compensation, work interactions, physical work
environment, and written and unwritten work expectations".
According to Pam a Pam,
a cooperative has good working conditions when it has stable contracts,
working days consistent with the volume of tasks, and offers a higher
salary than the established in the collective agreement of the sector.
Wages
In 2021, Hanson and Purushinkaya performed a survey on working conditions of cooperatives in the US,
in which cooperativists expressed that they were making wages above the
minimum for good living conditions. According to the report, they
received, on average, 3,52 $/hour more than at their previous job.
Research shows that, in the US, the 77% of the cooperatives have a 1:1 or 2:1 top-to-bottom pay ratio, whereas the average large corporation in the US has a CEO-to-worker pay ratio of 303:1.
This means that in worker's cooperatives there is much more
distribution of wealth between the members of the cooperatives, which
means that workers that are at the bottom of the organizational pyramid
make more money than workers that are at the bottom of the pyramid but
that are in conventional firms.
Research also shows that the effect of output price changes on
wage variations is positive for both conventional firms (CF) and
cooperatives (WC), but larger in WCs than in CFs.
This means that, because the distribution of wealth is much greater in
WCs, an increase in the benefits of a WC usually is reflected in a
proportional increase in the wages, whereas in CF this increase in the
wages is much smaller (since the wealth is accumulated by people in the
higher position, or is saved for new corporate investments).
However, the fact that the wealth is distributed between the
already hired workers has the downside of preventing the cooperatives of
hiring more workers, thus having a rate of creation of new jobs that is
lower than CF. However, in WC changes on output prices does not
translate in more employment, whereas in CF it does (CF create less
employment).
Research shows that in times of crisis, employment and wages are more protected in WC than in conventional firms;
since the focus of WCs is on protecting employment and because the
workers that control the WC do not want to lose their jobs, WC are
generally more willing to protect them. This does not happen so much in
CF, where the focus is on maintaining the margin of benefits and not
employment, which is considered a cost in times of crisis.
Research also shows that the difference of wages between workers
hired by the cooperative and workers that are members of the cooperative
is small (a worker can work for the cooperative but not be a member of
it).
Two explanation have been proposed: the first one is that the spirit of
cooperativism also extends to hired workers; and the second that
sometimes employees are needed for highly skilled jobs, which provides
them with strong bargaining power enabling them to defend their
employment positions and to compensate for their lack of formal control
rights over the firm.
Stability of contracts
The
formation of cooperatives has been used many times to create jobs in
economically depressed sites. The communalization of wealth in poor
areas often allows them to make the first investment in capital, which
allows them to set the cooperative and start having benefits, thus
producing an inflow of wealth in the community, which then is
redistributed within the members of the cooperatives. This scheme of
using cooperatives to create wealth and job opportunities in depressed
areas has been famously used, for example, by the Mondragon Corporation, which has provided long term stable jobs for the population of Mondragon (Euskadi) since the mid 50s.
The focus that cooperatives have in protecting jobs is reflected
in research. Hanson and Prushinkaya have showed that, in the US,
turnover rates are lower in WC than in CF (the turnover rate is the
percentage of employees leaving a company within a certain period of
time). Jobs at workers’ cooperatives tend to be longer term.
There are several explanations for this: higher compensation and
wages for workers; higher job satisfaction; greater adaptability to
crisis and economic difficulties, etc.
Research shows that WC show higher adaptability to crisis and economic hardships than CF. During negative demand shocks, WCs contain employment drop and allow a greater downward wage adjustment
(the workers themselves decided to lower their own wages to keep the
jobs). Another adaptability mechanism is the mutual support between WCs.
The case of Cooperativa Mondragón is paradigmatic in this sense: during
the 80s, some cooperatives were experiencing financial difficulties,
and Mondragon redeployed workers in the struggling co-operatives to ones
that were better off. Those who were not redeployed were given income assistance that equaled 80% of their salary.
The central control structure of Mondragon allowed for this to happen.
This would have been unlikely to happen in unorganized and autonomous
co-operatives. This same scheme to save employment prevented Fagor
cooperative workers from losing their jobs when Fagor went bankrupt:
they were relocated to other cooperatives of the Mondragon group.
Workload
Overworking
due to the need for competitiveness applies to cooperatives as well.
Some authors argue that the limitation of working hours in a cooperative
should only apply for non-members workers of the coop (hired workers),
whereas member workers should be allowed to work as much as they want,
allowing the cooperative to collectively take those kind of decisions if
they only apply to member workers.
According to Pam a Pam,
having internal democracy is not limited to having communal spaces of
debate and decision making, but also ensuring that the participation in
those spaces is not limited by issues of positionality, privilege, or
rank.
For example, one of the basic issues with internal democracy is
to make sure that every worker has access to all the information of the
cooperative, and that is aware of every debate that is happening within
the cooperative. It is important to make sure that all important
decisions are taken in formal spaces, and avoid using informal spaces in
which not everyone might be present to take those decisions.
This issue of having access and voice in the formal spaces for
decision making of the cooperative becomes more important the bigger the
cooperative gets. Research shows that, in larger cooperatives, member
participation is lower than in smaller cooperatives, and there is a
deterioration of internal democracy and working conditions for
cooperative members and employees.
Mark Kaswan describes William Thompson’s
theory concerning cooperatives as: "[T]he cooperative structure alters
the socio-economic relations of their members, aligning their interests
with one another on the basis of a strong principle of equality. It is
this alignment of interests on the basis of equality that gives
cooperatives their strongly democratic character." According to Kaswan himself, internal democracy is mostly defined by the type and the size of the cooperative.
Mark Kaswan argues that the type of activity developed by a
cooperative is one of the main factors that determines how democratic it
is. For example, in worker cooperatives, the workers spend a lot of
time in contact with each other, having a high level of both interaction
and interdependency. In consumer's cooperatives, both the frequency and
the intensity of the encounters is lower, thus reducing their
democratic participation.
The size of the cooperative is considered to be one of the most important factors for internal democracy. For example, Robert Dahl
argues that, as paraphrased by Kaswan, "assembly-style direct democracy
can only effectively function in fairly small organisations".
Kaswan states: "Increasing size also increases the complexity of
management. […] This can lead to the problem of 'managerialism', or the
development of powerful officials whose concerns and interests may be
different from those of common members." If the manager is already a
worker-member of the cooperative, the problem might be resolved; but if
the manager is hired specifically for managerial purposes, some
hierarchies can arise. The contradiction with the issue of size comes
with the social impact of the cooperative: greater size usually means
greater social impact, but also has a toll on internal democracy.
Suggestions to improve internal democracy within a cooperative
Facilitation of all meetings/assemblies is rotated among all
members of the coop; training and coaching in facilitation will be
provided.
Permanent and external facilitation (from a specialized process work
paradigm external coop) on emotions, conflicts of power, informal
hierarchies.
Any decision made by a coop member can be recalled if 50% of coop members request it.
Create a space where members can propose improvements and a committee reviews and prioritizes them.
Revise periodically how the flow of information goes, and see if
there are individuals or segments of the coop excluded from this flow,
for whatever reason (lack of proper access, unclear messages, technical
jargon, excessive workload, etc.), and define collective measures to
define what is relevant information (and what is not) and guarantee a
full access to it.
Legal status of cooperative workers: employees or employed?
There
is a legal debate on whether to consider being a member of a
cooperative as a formal worker or not. For instance, it has been claimed
that “the relationship of the worker-member with their cooperative
should be considered as distinct from that of conventional wage-based
dependent work and self-employed work”. Some authors argue that
cooperatives should have their own legal status differentiated from the
legal status of a conventional firm, in order for them to get
recognition and adapt the law to its unique features.
In Argentina,
lawyers have debated whether the relationship between members in the
worker cooperative also constitute an employment relationship to which
the rules governing pais dependent work are applicable. Some say yes,
mainly based on the argument that participation in the management and
direction is not incompatible with the condition of subordination and
that the individual is subordinated to the majority vote. However, other
interpretations say that the link between members and the worker
cooperatives is not a labor relation. In many law cases it has been
widely adopted that the size of the cooperative is decisive for this
question since the personal contribution of members is more important in
small cooperatives.
In the US, the Internal Revenue Service determines whether a worker is an independent contractor by considering the degree that the worker:
Receives less extensive instructions on the work to be done, but not how it should be done;
Receives training from the business about required procedures and methods;
Has significant investment in the work;
Is not reimbursed for some business expenses;
Has the opportunity to realize a profit or incur a loss;
Receives benefits from the business;
Has a written contract that shows the relationship the worker and business intend.
The following factors are generally considered when determining whether an employment relationship exists under the FLSA:
Is the worker performing work that is an integral part of the business?
Do the worker's managerial skills affect the worker's opportunity for both profit and loss?
What kinds of investment does the worker make in facilities and equipment compared to the employer?
Does the worker exercise independent business judgement and initiative?
Is the relationship with the employer indefinite, which suggests an ongoing employee relationship?
What kind of control does the employer have about how the work is
performed, pay amounts, hours worked, and whether the worker is free to
also work for others and hire helpers?
The problem of labour fraud
However,
the recognition of cooperatives as different entities than conventional
firms sometimes creates a legal void that has been used regularly for
labour fraud. For example, in Spain, cooperatives are not subjected to the sectoral collective agreements of each sector.
In some cases, businesses take the form of a cooperative to avoid being
subjected to collective agreements gained through trade unionism and syndicalism,
thus being able to pay lower or have worse labor conditions than the
ones stipulated in the collective agreement, while at the same time
retaining the same power and salary pyramids.
Many cooperatives are accused of being instruments to be used to
lay off workers, to out-source and to exploit workers and small
producers. The "cooperativatisation" of both public and private sector
activities in some countries has been accompanied by a deterioration of
working conditions. This is due both to the perversion of the
cooperative form and to weak labour regulations applied to these kinds
of work forms.
Usually, the law establishes that a cooperative is required to
have a minimum percentage of workers-owners (usually 33%). Cooperatives
can hire workers that are not part of the cooperative, but the law
usually establishes a maximum amount of time that they can work in the
cooperative without being members of it; after that, cooperatives are
legally obliged to make those workers part of the cooperative. Some
cooperatives commit labour fraud because they either have a smaller
percentage of cooperativised workers than mandated by law, or they have
people working without becoming members for more time than legally
allowed.
In Spain, since the law does not subject cooperatives to the collective agreements or to the social security
regulations, the following scheme has been used: if a business wants to
pay less than what the sector agreement of its economic sector
establishes, the business can create a cooperative, which is not
subjected to it, hire all the workers using that cooperative, and then
outsource the activity to this cooperative. In this way, instead of
having to hire all the workers directly (thus having to pay the Social
Security fees and the minimum wage established by the collective
agreement), the company only has to use the cooperative as a shell company,
and in this way it does not have to pay according to the agreement, and
since the workers are hired by the cooperative and not by the company,
they are not subject to the either the sector agreement or social
security. This is the case, for example, of Spain's Servicarne Coop, hired by meat industries such as Coren and Sada, which according to the Audiencia Nacional
"does not carry out a cooperative activity" and "has not been
established with the purpose of fulfilling the objectives set forth in
the Cooperatives Law [...] but only with the aim of obtaining certain
benefits that are linked to it, creating a merely formal appearance of a
cooperative", for example, to avoid paying the Social Security fees.
Potential solutions to this fraudulent usage of workers’
cooperatives have been suggested, such as covering the legal void that
allows this to happen, creating cooperative federations that ensure the cooperative identity and its regular functioning, etc.
Suggestions to improve workers’ conditions within a cooperative
Flexible scheduling.
Remote work for all staff, with the possibility to do the full
working week that way, but also putting some mandatory in-person moments
for everyone (conflict resolution, first meetings with new employees,
farewell for leaving employees, conflict resolution, strategically
and/or politically relevant and/or difficult meetings, celebrations in
the coop).
All time on worker cooperative business is paid.
Equal pay for all positions (assuming a balanced share of responsibility and job complexity).
40 days of vacation (at least).
Safe and regenerative working place. Applications based on
biomimicry and biophilia to promote natural, healthy and diverse
environments (different places for calmness, meditation, creativity,
stimuli, team bond generation, individual reflection, exercise,
connection with nature, water, plants, art, etc.).
Economic performance
Job productivity
In
general terms, research shows that productivity in worker's
cooperatives is higher than in conventional firms. For example, Fakhfakh
et al. (2012)
show that in several industries, conventional firms would produce more
with their current levels of employment and capital when they adopted
the employee-owned firms’ way of organising.
One explanation is that commitment to the cause causes more
productivity. The fact that employees can participate in decision-making
motivates them to be more involved with the objectives of the
cooperative.
Another explanation is that the collective work environment
enhances job satisfaction, thus augmenting productivity. Research has
shown that collectivists working in simulated collectivist cultures do
in fact produce more cooperative behavior than do individualists (i.e.,
those low in collectivism) in these cultures.
Furthermore, it has been argued that collectivists’ ideological
commitment to the group members yields higher levels of motivation.
Consequently, in addition to making turnover less likely, high
collectivism in the WC environment should translate to high performance.
Capital and the Debt Trap
reports that "cooperatives tend to have a longer life than other types
of enterprise, and thus a higher level of entrepreneurial
sustainability". This resilience
has been attributed to how cooperatives share risks and rewards between
members, how they harness the ideas of many and how members have a
tangible ownership stake in the business. Additionally, "cooperative
banks build up counter-cyclical buffers that function well in case of a crisis," and are less likely to lead members and clients towards a debt trap (p. 216). This is explained by their more democratic governance that reduces perverse incentives and subsequent contributions to economic bubbles.
In Europe
A
2012 report published by CICOPA (Europe) showed that in France and
Spain, worker cooperatives and social cooperatives "have been more
resilient than conventional enterprises during the economic crisis".
A 2013 report by ILO concluded that cooperative banks outperformed their competitors during the financial crisis of 2007–2008.
The cooperative banking sector had 20% market share of the European
banking sector, but accounted for only 7 percent of all the write-downs
and losses between the third quarter of 2007 and the first quarter of
2011. Cooperative banks were also over-represented in lending to small
and medium-sized businesses in all of the 10 countries included in the
report.
A 2017 report published by the Office for National Statistics
found that, in the UK, the rate of survival of cooperatives after 5
years was 80 percent compared with only 41 percent for other
enterprises.
A further study found that after 10 years, 44 percent of cooperatives
were still in operation, compared with only 20 percent for other
enterprises.
In a 2007 study by the World Council of Credit Unions, the five-year
survival rate of cooperatives in the United States was found to be 90%
in comparison to 3–5% for traditional businesses. Credit unions, a type of cooperative bank, had five times lower failure rate than other banks during the financial crisis
and more than doubled lending to small businesses between 2008 and
2016, from $30 billion to $60 billion, while lending to small businesses
overall during the same period declined by around $100 billion. Public trust in credit unions stands at 60%, compared to 30% for big banks and small businesses are five times less likely to be dissatisfied with a credit union than with a big bank.
A 2010 report by the Ministry of Economic Development, Innovation and
Export in Québec found the five-year survival rate and ten-year
survival rate of cooperatives in Québec to be 62% and 44% respectively
compared to 35% and 20% for conventional firms.
Another report by the BC-Alberta Social economy Research Alliance found
that the three-year survival rate of cooperatives in Alberta to be
81.5% in comparison to 48% for traditional firms.
Another report by the aforementioned Research Alliance found that in
British Columbia, the five-year survival rates for cooperatives between
2000 and 2010 to be 66.6% in comparison to conventional businesses that
had 43% and 39% in the years 1984 and 1993 respectively.
Cooperative financing
The
issue of finance in cooperativism is one of the most importance. Since
the failure rates of cooperatives are lower than for conventional firms, the financing schemes used by them are at least as successful as for conventional firms.
One of the success factors lies in the fact that cooperatives use a different arrange of financing schemes
Self financing (social base)
According to Gianluca Salvatore and Riccardo Bodini,
self-financing schemes include the act and the practice of using one's
own capital to provide funding for an enterprise. The main advantage of
self-financing is that it sets the cooperative free from outside
influence and debt, but the capacity to expand the coop might be
constrained by the lack of capital.
This is the main form of financing in cooperatives. Usually, workers
cooperatives do not only socialize the labor force, but also a part of
the economical wealth of each member, that is put in a pool together
with the rest of contributions, and that constitutes the capital of the
cooperative. Usually, future members have to socialize a certain amount
of money to the cooperative before they can become formal members.
The most common way to do it all at once before joining the
cooperative, but other financing schemes have been proposed. For
example, some cooperatives do not ask for an initial investment, but
rather require workers to work for a certain period of time, while
retaining a percentage of the wage, until the worker has paid all the
requirements and can become a formal member of the cooperative.
Usually, when the worker decides to leave the cooperative, all the money invested will be returned to the worker.
The amount required will vary depending on a lot of factors, such as for example:
The type of cooperative: if it is a big industrial cooperative,
the amount required will probably be higher than for a small services
cooperative.
The current budget of the cooperative: if a cooperative is already
economically well established, probably the requirements will be lower.
However, if the cooperative is still young and still requires a lot of
investments, the initial requirement will be higher.
Social loans
Occasionally.
if the situation requires it, workers of the cooperative can decide to
put some more money as an investment, which can later be returned.
Cooperative resources
Gross profits
If
the cooperative is based on selling products or services, a part of the
finance comes from the profits that they get from their activities.
Proceeds from assets
A
cooperative can have different assets from which it can get money
without having to sell those assets. For example, if the cooperative has
money in the bank, and the bank gives interests, it can generate some
more money. Or for example, if the cooperative owns a place and rents
it, it can get some more money out of it.
Balance sheet assets
Assets
can also be converted to money. For example, if the cooperative owns
shares of another company, they can sell them and turn them into
liquidity. Or if the cooperative owns a building, it can sell it.
Different types of assets can be converted to liquidity with different
levels of ease: for example, selling shares is easier and less
time-consuming than selling land, which might take months. Thus, shares
are much more easily converted to liquidity than land.
Financial grants
Financial grants,
that are awards typically given by foundations or governments, can also
be a source of financiation for cooperatives. They differ from loans in
the fact that they under most conditions they do not have to be paid
back. Some grants have waiting periods before the grantee can take full
ownership of them.
They are usually in the form of cash, but can also be in the form of other assets.
Donations are specially recommendable if the cooperative has a strong
aim for social impact and mutual aid, in which case individual or
collective donors might be interested in donating.
Crowdfunding is a way of sourcing money for a project by asking a
large number of contributors to individually donate a small amount to
it. In return, the backers may receive token rewards that increase in
prestige as the size of the donation increases.
A successful example of how to finance a workers cooperative with a crowdfunding is the case of the cooperative of the Collettivo di Fabbrica GKN – Insorgiamo!, who, after occupying and taking back the control of a GKN factory in Florence,
they began a crowdfunding campaign to get the initial money needed to
create a cooperative that included all the workers that previously
worked there. They used that money to make the initial investments to
reconvert the factory to manufacture bicycle parts, with a sustainability goal.
Foundations and Governments financing
Especially for SSE cooperatives, one way to get finance is getting grants
from governments or private organizations. The latter are usually
related to philanthropy. The difference with other types of grants is
that they do not require any previous conditions of challenges that need
to be achieved.
Challenge grants are funds disbursed by governments, foundations and
trusts on completion of challenge requirements. The challenge refers to
the actions or results that must be achieved before money is released.
The challenge could require a new solution to an existing problem that
had been ignored. Additional requirements could be specified, from
programme certification to member participation. An example of a
challenge grant would be money that is given by a bank if the
cooperative increases membership by a certain amount.
Lending
Lending
or debt instruments provide borrowers with funding in exchange for
repayment of this funding along with interest, based on predetermined
timeframes and interest rate terms. The provision of funding might
require guarantees.
Concessional/Flexible Loans
Concessional
and flexible loans include special features such as no or low interest
rates, extended repayment schedules, and interest rate modifications
during the life of the loan.
Crowd lending, also known as peer-to-peer lending,
is the practice of lending money through online services that directly
match lenders with borrowers. Lenders can earn higher returns compared
to savings and investment products offered by banks, while borrowers can
borrow money at lower interest rates.
Social bonds
For
example, when the bank provides sums of money as donations or financing
at competitive conditions in support of initiatives that favour social
innovation.
An equity investment is money that is invested in a company by purchasing shares of that company in the stock market.
Some cooperatives use that as a source of money. In cooperatives equity
investments are usually not used, since it is something that is
generally believed to go against the principles of cooperativism (the Rochdale Principles themselves limit the equity investments).
Direct equity investment
Direct
capital contribution to a project without the guarantee of repayment;
the return on a direct equity investment will depend on the performance
of a project/company over the investment period.
Financing members
Especially
at the start of a cooperative, this is used in some cases. It involves a
person or a legal entity that, with a financial contribution, favours
the establishment of a company and the carrying out of the social
activity. Typically, they make part of the initial investment, and once
the company is established, they resell all or part of the subscribed
shares.
Through
all these financial means, a cooperative can create a financial profit.
The next set of critical financial decisions becomes how to distribute
that profit. There are different forms of redistributing the benefit.
Usually, growing the business is not the main goal of a cooperative
(the main goal is to redistribute profit among its members), but
sometimes it is necessary to reinvest a part of the profits in the form
of new capital, which will allow the cooperative to expand its
operations and increase profit in the future. This is especially true
during the initial steps of the cooperative, in which its operations
have to grow to the point in which they have regained the initial
capital investment. The capital reinvestments are decided collectively
through the democratic mechanisms that a cooperative has.
Patronage refund
Patronage
refunds are the distribution of profits to the members of the
cooperative, who have previously invested money in the form of capital
by members and social loans.
The Rochdale principles state that cooperatives should have limited
return on equity investments, so its usual for most of the cooperatives
to not use equity investments, and, if they do, pay few dividends to the
shareholders. The main reason for which they do that is that
distributing profits as dividends reduces the potential amount of
patronage refunds.
Unallocated Retained Earnings, or "cushion fund"
Part of the benefits of a cooperative must be saved as a safe fund, which will allow the cooperative to face unexpected situations and crises if they appear.
Redistribution of losses
In case that a cooperative experiences a loss, there are alternatives to handle them in the most efficient way possible.
Make use of the "cushion funds"
If
a cooperative has had profits at some point, it should have some
savings, which it can use in times of economic losses. In this way, they
can absorb the losses simply with the money they already had, not
having to affect neither wages, employment, or stocks.
Allocate the losses to the members
This
is one of the most common ways to allocate the losses. Making this
decision involves the workers deliberating through the stablished
democratic mechanisms on how are the losses going to be distributed
among membership.
We have already seen that, in times of economical hardships,
cooperatives are more willing to reduce their wages rather than reduce
employment, whereas conventional firms would rather fire some people and
keep the same wages for the rest of them.
Job satisfaction
Castel et al. (2011) performed research on job satisfaction in workers cooperatives, and said that job satisfaction is high in workers cooperatives and that social economy values are a source of job satisfaction. Within those types of organizations there are several intrinsic and extrinsic factors that perform in a very characteristic manner, and which are key for job satisfaction.
The intrinsic factors are characteristics of the work itself, and
Castel et al. proposes that cooperatives create job satisfaction
because they usually involve:
Reducing the gap between the conception and execution of tasks
Increasing task significance (making work meaningful)
Developing workers’ skills
Seeking to benefit the global environment and society while involving everyone
The extrinsic factors that make work in coops satisfying are:
A higher level of shared business culture
Increased confidence in elected management
Greater attention to working and employment conditions following the increased social responsibility of the company
Collective decision-making.
However, Castel et al. also points out that not all of the characteristics of workers cooperatives increase job satisfaction. In fact, they point out that some characteristics are perjudicial for mental health,
such as the perceived increase in work pressure (some workers feel that
since they are the owners of their means of production, they are
pressured into working more by other colleagues), or the ambiguity of
the relationship between other workers (everyone being in the same
decision-making position can create conflicts among workers).
Hanson and Prushinkaya (2021) conducted a survey that found
similar results: they found that, in general, cooperativists state high
job satisfaction, autonomy and voice, and professional development.
They also found that the majority of individual respondents described
their job security, job satisfaction, work effort, and the economic
stability of the company as somewhat or much better than what they
experienced in their last job.
Also, a majority reported the quality of supervision, feedback, and
training was superior in their co-op job. Their research also showed
that within co-ops, training and skill-building matters for democratic
governance: workers who received cooperative-specific training
participated more in workplace decision making.
Another research also shows that worker cooperatives are still
beneficial for job satisfaction even if their activity is in no sense
related to the social and solidarity economy or has no social purpose at
all. According to Hyungsik Eum this is because "in worker cooperatives,
worker-members have a sense of ownership of their own jobs and
workplaces".
Since cooperatives are based on values like self-help, democracy, equality, equity, and solidarity, they can play a particularly strong role in empowering women, especially in developing countries. Cooperatives allow women who might have been isolated and working individually to band together and create economies of scale as well as increase their own bargaining power in the market. In statements in advance of International Women's Day in early 2013, President of the International Cooperative Alliance, Dame Pauline Green,
said, "Cooperative businesses have done so much to help women onto the
ladder of economic activity. With that comes community respect,
political legitimacy and influence."
However, despite the supposed democratic structure of cooperatives and the values and benefits shared by members, due to gender norms
on the traditional role of women, and other instilled cultural
practices that sidestep attempted legal protections, women suffer a
disproportionately low representation in cooperative membership around
the world. Representation of women through active membership (showing up to meetings and voting), as well as in leadership and managerial positions is even lower.
Some of the patriarchal behaviors that can be found in cooperatives involve the formal structures and hierarchy that conform the cooperative:
Non-open and non-democratic decision-making: democratic spaces are often co-opted by white men,
who occupy most of the space, and tend to monopolize the leadership of
those democratic spaces. This can result in women having less voice in
the cooperative decision making, thus having their needs
underrepresented.
Exclusionary leadership: in some occasions, the management of
cooperatives involves electing leaders for specific purposes. The
underrepresentation of women in the democratic spaces can result in them
having a smaller chance of being elected as representatives or leaders.
Statistics show that women are still underrepresented in responsibility
jobs in co-ops.
Interpersonal relationships:
patriarchal behavior can also be found in male colleagues, who often,
for example, act in patronizing ways, or have distrust in women's
capacity to perform certain jobs.
Lesser wages for non-binary people: non-binary people tend to earn less money than cisgender, even in co-ops.
The strongest manifestations of machismo in cooperatives are:
Manifestations of machismo that belittle, offend and detract
from security and autonomy. They involve a higher level of degradation.
Sexual violence:
unfortunately, within workers cooperatives sexual violence happens
sometimes. It is often hidden by the false supposition that in
cooperatives everything is shared and done collectively, which might
create an environment that might hide sexual violence. For example,
under such a climate of trust and confidence, inappropriate pick-up lines, or sexist joke,
could inadvertently pass as normal. In the most extreme cases, sexual
aggressions or even rape is wrongly justified under the excuse of having
trust and confidence in each other.
As of 2012, the number of memberships in cooperatives reached one billion, and so the organizational structure and movement has seeped into popular culture.
However, in comparison with the number of co-operatives, they are rarely the subject of literature. Among these, Ken Follett mentions their role in working-class life during World War I in Fall of Giants (2010), the first volume of his Century Trilogy:
"Where's our mam?"
"Gone down the Co-op for a tin of jam."
The local grocery was a co-operative store, sharing profits among its
customers. Such shops were popular in South Wales, although no one knew
how to pronounce Co-op, variations ranging from "cop" to "quorp".
Less seriously, in Murder in the Collective, Barbara Wilson sets a murder mystery among radical printing collectives in Seattle, while Frances Madeson's 2007 comic novel Cooperative Village is set in the eponymous housing co-operative in New York.
In the HBO drama television series The Wire, several drug dealers create a democratic alliance called the New Day Co-Op with the interests of cutting back on violence and increasing business.
Co-opoly: The Game of Cooperatives is a popular board game by TESA Collective played around the world that challenges players to work together to start and run a cooperative and overcome major hurdles.
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