Saturday, March 22, 2008

Saving the World with Co-ops

By Elizabeth Archerd

Do you think the title overstates the case? I don't. The cooperative principles require cooperators to take a longer view than businesses that emphasize quarterly financial performance. A case can be made that co-ops form the basis for a sustainable world economy.

Paul Hazen, president and CEO of the National Cooperative Business Association, addressed a United Nations panel at the 46th Session for the Commission on Social Development on February 11, 2008. The following are excerpts from his remarks:

A couple of recent books have argued that global capitalism today is ailing. CEOs see their role as simply to drive up the stock price and don't much care about anything else. Meanwhile, the gap between executive and worker pay gets wider by the day. Incompetent executives receive golden parachutes while high-performing employees get laid off. And that's just the tip of the iceberg.

Well, if capitalism is ailing, co-ops are the antidote.

Co-ops aren't outmoded. They are needed more than ever to balance the scales. They are not simply an alternative business model. They are a better business model.

Let me give you some reasons why.

Cooperatives distribute capital widely among average Americans, while stock companies make the rich richer. Surplus revenues earned by cooperatives are either reinvested in the business or returned to members. With more than 130 million cooperative members nationwide, this distributes co-op revenues broadly among average Americans. Investor-owned businesses, on the other hand, distribute profits to shareholders based on how much stock they own. That means those with the most shares - generally wealthy investors - receive the most, while average Americans get little.

Cooperatives keep capital in the community where it was generated, while stock companies export capital elsewhere. Since they give surplus revenue back to their members, cooperatives keep wealth in their communities. Stock companies do the reverse. By distributing profits to shareholders, they take capital out of the community.

Cooperatives exemplify the Ownership Society, while stock companies concentrated ownership among the investor class. Cooperatives are owned by 130 million members nationwide... those who buy their goods or use their services. That's approximately 40 percent of all Americans, or six in 10 adults. Ownership of stock companies, on the other hand, is concentrated among a small group of outside investors.

Cooperative governance is open and democratic, while stock company governance is closed and easily manipulated. Cooperatives are run democratically, on a one-member, one-vote basis. Board members do not have a business relationship with the co-op, other than being customers of it. In a stock company... boards include members of management and those with financial ties to the organization, such as major contracts.

Cooperatives have both economic and social goals, while stock companies are motivated solely by the need to maximize shareholder returns. This has positive consequences for co-ops and negative ones for stock companies. Cooperatives have multiple bottom lines. In addition to meeting the economic needs of their members, they often have social objectives, such has widening participation in the economic system or promoting sustainable development. Stock companies' focus on shareholder returns often leads to negative outcomes.

Cooperatives largely police themselves while government must provide extensive oversight and control over stock companies. Members provide oversight of cooperatives, assuring that the business adheres to good business practices and cooperative principles. Stock companies must be highly regulated to protect their customers. Still, the stock company world is plagued with scandals, while co-ops are virtually scandal free.

One of the persistent myths about America is that rugged individualism built this country. Don't you believe it. If you look at the critical moments in our history, starting with the Revolutionary War and the writing of our Constitution, it's when we came together that we have been most successful. People working together built our schools and our religious institutions. People working together built our industries, defended us in two world wars and sent men to the moon.

Cooperatives are part of this. They built our farms, brought power and light to our rural areas and provided a place to deposit money in the 1930s when the banking system failed.

Rugged individuals didn't build America... cooperation did. And it's needed now more than ever.

Source. Posted by Wedge Co-op member/owner #252321.

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