Finance and co‑op principles

Finance for co‑op organisations should be guided by the seven co‑op principles that are protected by the International co‑op Alliance. 

The following states the seven co‑op principles (with their definition in italics), with some added commentary for platform co‑ops.

The seven co‑op principles – and what they mean for platform co‑ops

1. Open and voluntary membership

Co‑ops are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination. 

For platform co‑ops, external finance should not impose restrictions on membership, and it should avoid exclusionary conditions, for example high membership fees or share prices.

2. Democratic member control

co‑ops are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. 

Members’ voting rights are independent from the number of shares they hold in the business – “one member, one vote” instead of “one share, one vote”. This makes co‑op businesses very different from conventional businesses and can be a deterrent for funders who want to have control over a business.

As long as co‑ops are run democratically, they can choose to form more or less complex democratic structures, with elected representatives accountable to their members. 

Members can be also divided into stakeholder groups whose votes are weighted differently to reflect the way founding members would like power to be distributed in the organisation. This type of structure – called a multi-stakeholder co‑op – is very common among platform co‑ops.

3. Members' economic participation

Members contribute equitably to, and democratically control, the capital of their co‑op. Members allocate surpluses for any or all of the following purposes: developing their co‑op; benefiting members in proportion to their transactions with the co‑op; and supporting other activities approved by the membership.  

Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. When issuing shares, interest and dividends should be just high enough to attract and retain capital. Fundamentally, a co‑op cannot be set up with the main aim to generate profit for its shareholders.

At least part of that capital is usually the common property of the co-operative and must be used to further its purpose. A co-operative can specify in its governing document details about the indivisible reserves, which can also be protected by a Dissolution clause, prohibiting its distribution among members should the co-operative be dissolved. This is sometimes referred to as an asset lock.

4. Autonomy and independence 

co‑ops are autonomous, self-help organisations controlled by their members. If they enter into agreements with other organisations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co‑op autonomy.

The co‑op needs to be confident that large investors cannot have too much influence on the co‑op. That might mean restrictions on the proportion of share capital that can be held by one person or organisation, or a veto on the transfer of shares to persons that the co‑op does not approve of. 

In any case – no matter how many shares an investor holds in a co‑op – they will have only one vote. This can be a deterrent for funders such as Venture Capitalists, that require to have some control over the company. 

5. Education, training and information 

Co‑ops provide education and training for their members, elected representatives, managers and employees so they can contribute effectively to the development of their co‑ops.

This should include providing education, training and clear and accessible information to members on financial issues, so they can fully understand the financials of their business and be actively involved in financial decision making. 

Training and education should include and follow co‑op principles and values.

6. Co‑operation among co‑ops 

Co‑ops serve their members most effectively and strengthen the co‑op movement by working together through local, national, regional and international structures. 

Co‑operation can come in the form of investment of one co‑op into another – or of pooling of resources between existing co‑ops for a common purpose, like in the case of platform co‑ops that use a federated model. 

7. Concern for community

Co‑ops work for the sustainable development of their communities through policies approved by their members. 

Co‑ops tend to undertake activities that benefit and have a social impact on the wider community as well as its members. A co‑op’s rules must preclude investors from pursuing short term profit over the long term interests of the co‑op and concern for the community.