A Food Co-Op is . . .

Philosophy, Principles and Governance of a Co-op Explained

By Scott Brix

In simplest terms, a food co-op is a business that buys food and household items for its members. 

The co-op helps members obtain high-quality products at the best possible price.

Food co-ops offer consumers a retail environment free of coercive sales influences and with full disclosure of product quality and value. Food co-ops typically operate retail stores.

Many food co-ops offer a wide range of products and services aside from groceries. These might include cooking and nutrition classes, housewares, and catering.

Most food co-ops are open to anyone who wants to shop at the store, although stores may provide special services, prices, or benefits to members only. Any shopper can become a member by joining the co-op, which usually involves making a one-time equity investment.

Approximately 350 food co-ops operate in the United States. The majority of these stores primarily focus on natural foods. However, a number of food co-ops offer a full line of mainstream groceries in addition to natural foods.

Philosophy and Principles

Co-ops worldwide share a common creed. They share a fundamental respect for all human beings and a belief in people’s capacity to improve themselves economically and socially through mutual help.
This basic philosophy has been developed into a list of seven principles that serve as guidelines for how cooperatives do business. Two of the seven principles describe who owns a co-op; two describe how decisions are made; and three list specific ways that co-ops put their beliefs into action.
The principles were originally developed in the mid-1800s by groups struggling to provide unadulterated, quality food at fair prices at a time when the market offered few options. As times have changed, the principles have been modified slightly, but the basic concepts have remained the same for more than 150 years. In the 1990s, the International Co-operative Alliance (ICA) reviewed the cooperative principles and reformulated them. The modern co-op principles are:

1. Open and voluntary membership  (ownership)

Co-ops do not limit, for any social, political, or religious reason, who may join and become a co-owner of the co-op. Co-ops are open to all who can make use of their services and are willing to accept the responsibilities involved.

2. Member economic participation (ownership)

This principle combines many concepts, all based on the basic idea that co-ops—and their money—are owned and controlled by their members. Members provide the basic capital (money) to start and operate the co-op. If co-ops pay dividends to their member-owners, the rate must be limited. Surplus, or profit, resulting from the operations of the co-op belongs to the members, and they control how it will be distributed. If a co-op’s surplus is returned to members, it is distributed in proportion to the amount of business each member has conducted with the cooperative.

3. Democratic member control (decision making)

All co-op members have equal voting and decision-making power in the governance of the business, on the basis of one vote per member.

4. Autonomy and independence (decision making)

Cooperatives are independent, self-help organizations controlled by their members. They limit the influence of outside agencies or business partners to ensure their independence.

5. Education, training, and information (special practices)

Co-ops have an obligation to educate members about cooperative business. This mandate also encompasses educating the general public, young people, and community leaders about the nature and benefits of cooperation.

6. Cooperation among cooperatives (special practices)

To bring the theory of working together full circle, co-ops recognize the vital importance of working with other co-ops—locally, regionally, nationally, and internationally. Through these efforts, co-ops try to help each other—to strengthen their economic positions and to contribute to the co-op movement. This principle of “cooperation among co-ops” extends the idea of working together to the organizational level.

7. Concern for community (special practices)

While member needs are their primary concern, cooperatives also work for the sustainable development of their communities.

In addition to reformulating the co-op principles, the ICA created the following “Statement on the Cooperative Identity.” Approved by ICA members in September 1995, the statement defines the standards by which all co-ops should operate:

Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility, and caring for others. 

Co-op Governance

In the corporate world, the board of directors is responsible for a corporation’s actions and for ensuring that the business is managed soundly. The co-op world is no different. The co-op board of directors is an elected body responsible for overseeing the affairs of the co-op on behalf of the owners (members). The board must act as whole; individual directors have no authority outside of board meetings, except as delegated by the board as a whole.
Generally, only members in good standing may serve as directors of a cooperative. State law defines the basic roles and responsibilities of a board of directors. Most commonly, state statutes say that a board member is required to act “in good faith, in a manner he (or she) reasonably believes to be in the best interests of the corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances.” All directors are required to meet this standard. Directors have three primary responsibilities: 
  • To act as trustees on behalf of the members. Directors do this by carefully monitoring the co-op’s financial status, hiring auditors to review financial records, reporting on the status of the co-op to members regularly, and making sure the co-op follows its bylaws, policies, and appropriate regulations.
  • To ensure sound management of the co-op. Directors are responsible for hiring and supervising the co-op’s management. Supervision includes reviewing management reports, monitoring key indicators (such as inventory turnover, sales trends, and other financial ratios), and evaluating management performance.
  • To set long-range goals and plan for the co-op’s future. Directors do this by holding strategic planning sessions, approving yearly and long-range plans, and setting performance goals.
The board is accountable to the members. It hires management, and management is accountable to the board. In some cases, directors may wish to contract with consultants or have volunteers to do some work on their behalf. Effective boards avoid micromanagement. They focus their discussions and decision making on two things: 
  • Clearly defining results to be achieved by management or others responsible for a project
  • Setting limits needed to guide management’s performance
Most boards meet monthly or at regular intervals. Boards elect officers—president, vice president, secretary, and treasurer—to organize and coordinate their work. Effective boards get regular training to make sure directors understand and can fulfill their responsibilities. Boards that stay focused on providing overall direction and monitoring the co-op’s performance play a key role in the success of every co-op.
This information provided complements of Cooperative Grocer Network

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