Get to know the different kinds of co-ops, how they work, and how they differ from traditional companies.
Co-ops are a big part of the global economy: they employ 10% of the world’s workforce and over two trillion dollars flow through their doors every year. At a co-op, there’s no single person with overarching, top-down power over everyone else, like a CEO at a traditional company. So what exactly is a co-op and how does it work? Explore the different types of cooperatives and how they operate.
There’s a grocery store in Brooklyn, New York, with sales per square foot 4 times as high as any other grocery store in the area. 10,000 people work there, and it doesn’t have a CEO. This place is the Park Slope Food Co-op, and it’s one of 3 million cooperatives, or co-ops for short, around the world.
Co-ops are a big part of the global economy: they employ 280 million people— 10% of the world’s workforce and the equivalent of over $2 trillion flow through their doors every year. How is it possible that a business with 10,000 workers doesn’t have a CEO? To answer that, we have to talk about what a co-op is and why they were founded. Let’s rewind to 1844. A group of 28 weavers in Rochdale, England came together to create and co-own a store. By buying in bulk directly from suppliers, they could negotiate prices, which allowed all of them to buy stuff they couldn’t otherwise afford. They ran the store collectively and democratically, which was remarkable at the time. The Rochdale Society of Equitable Pioneers wasn’t the world’s first co-op, but it was the first to publicize its principles— principles that guide co-ops to this day.
Today, there are all kinds of co-ops: REI in the US and S-Group in Finland are large consumer co-ops. Credit unions and mutual insurance companies are financial sector co-ops. And when farmers or other producers come together, that’s a producer co-op. And then there are worker co-ops, like Mondragon in Spain or The Cheeseboard in Berkeley, California, which are founded to provide jobs to people in the community. Some consumer co-ops, like Park Slope, require their members to work shifts in the store. In exchange for their work, members pay 15 to 50% less for groceries, and they influence what products are— or aren’t— sold there.
Three crucial things to know about co-ops: first, all co-ops are jointly owned by their members, whether those members are consumers, producers, workers, or whoever. Unlike traditional companies, which can have outside shareholders, all owners of a co-op are also members.
Second, co-ops are not founded to maximize profit. Many do turn a significant profit, but that’s not their core mission.
So evaluating a co-op purely by traditional business metrics ignores the most important reason for their existence: how well do they serve their members? And third: co-ops are controlled democratically by their members.
But how do decisions get made? It varies. At a small worker co-op like The Cheeseboard, day-to-day operational decisions are just made by the workers. As co-ops get larger, they do institute some form of leadership or management. Park Slope has a general manager who leads the 80 or so employees. And the largest network of worker and consumer co-ops in the world, Mondragon, has a president and managers who lead the roughly 30,000 worker-owners and 50,000 contract workers. But leadership roles in a co-op are very different than in a traditional company.
The leadership implements policies that its members or worker-owners have agreed upon, by vote. And at Mondragon workers, can vote to fire the president. At a co-op, there’s no single person with overarching, top-down power over everyone else, like a CEO would have in a traditional company. Meanwhile, in both co-ops and traditional companies, major company-wide decisions are made by voting. But who votes and how is wildly different. In a traditional company, voting rights usually come with shares of stock. The more shares you own, the more votes you have. Take Alphabet, the parent company of Google: there are thousands of shareholders, but the two founders control 51% of the votes and therefore the direction of the company. In a co-op, every member has the right to vote, and in most co-ops, every member gets one vote. That difference results in radically different policies than you’d find at traditional companies.
For example, Mondragon limits the salaries of its management to about 6 times what the lowest paid worker makes. In Spain, CEOs of traditional companies make, on average, 143 times as much as a typical worker. At Park Slope, there’s a monthly general meeting, where any member can show up to vote, and a motion needs a simple majority to pass. It then gets taken up by the Board of directors, which is composed of co-op members, for official approval. At The Cheeseboard, the worker-owners try to reach consensus on major decisions. This means that some decisions can take a long time. For example, in the late 1970s, the workers debated whether to post a sign outside declaring that The Cheeseboard was a collective for one and a half years. But the extensive discussion, and disagreements, around that decision made it a solid one— The Cheeseboard still advertises the fact that it’s a collective almost 50 years later. And that’s not all that’s working well at co-ops. Studies in the UK show that co-op start-ups are almost half as likely to close within five years as traditional businesses. And in one study, researchers polled 600 workers at two in-home healthcare businesses: one was a worker co-op and the other was a traditional company.
The workers did similar work with similar salaries. The biggest difference? Co-op workers were about 40% happier with their jobs.