Democracy in Cooperatives

Abstract: A cooperative is an enterprise owned by a society of members. It advances the interests of the members, individual as well as social. Members of a cooperative differ from shareholders of a corporation by having an ownership and a transaction relationship with the cooperative, while shareholders have only an ownership relationship with the corporation. Most countries have incorporated cooperatives under the Association law, i.e. a cooperative is legally an association of persons, and the members run an enterprise within the legal entity of the association. However, countries differ regarding the freedom allowed to structure the bylaws. Some countries specify various ideological and societal objectives to be included in the bylaws, while other countries have a focus on facilitating different types of entrepreneurial activities for the members. Many countries specify the one-member-one-vote rule, but there are also countries allowing proportional voting. We highlight how the interplay between the society of members and the cooperative enterprise will channel participatory activities in cooperatives compared to corporations. Various attributes of participation are distinguished: voting, voice procedures, information exchange, decision making (bodies), CEO power, and training / education. Participation in successful cooperatives and corporations consist of aligned attributes in the (participatory) system, but the choices regarding the various attributes differ between organizational forms. However, behavior in terms of production technologies and product portfolios may be quite similar, despite the governance structure differences.