Farmers worldwide select co-operative business structures when they wish to work together, rather than conventional company structures, because they wish to adopt the following distinct characteristics or principles of co-operatives:
- The primary purpose of a co-operative is to benefit its members through their use of its facilities and services. Return on capital invested in the co-op, although important, is not the main purpose and is not the primary success measure for members. Members measure the effectiveness of their co-op by the profitability of their own businesses, achieved by participation in their co-op.
- The basis of control in a co-op is not one vote per share purchased. Voting is either one vote per member business, or a variation on this that incorporates some degree of scaled voting related to use of the co-op. The principle governing control is equitability.
- Investment and benefit in proportion to use is the usual basis of a co-op structure. Those making more use of the co-op contribute more towards the capital requirements. The principle for capital commitment and surplus distribution is equitability.
Farmers choose co-op structures because their prime motivation is to improve the profitability of their own farm businesses, rather than to create another intermediary, which will itself be a profit margin maximiser. In addition, they require that ‘fairness’ and ‘equitability’ be in-built in the ‘collective’ business, and reassurance that it will not be controlled by a small group, for their own disproportionate advantage.
The International Co-operative Alliance is the guardian of co-operative principles. It has developed, with its membership, seven co-operative principles that are acknowledged internationally. www.ica.coop/en