Cooperatives: A New Model of Social Economy

In this post, we are going to analyze how cooperatives work and its relationship with new corporate forms. Therefore, we will review its main values and the way in which it operates. At the same time, we will focus on how this corporate figure fits perfectly into the business system of the XXI century.

Thus, we will finally get to the conclusion that cooperatives are suitable as organizational forms within today´s entrepreneurial world.

In first place, we shall have to remember that the first cooperatives were created during the Industrial Revolution (specifically, at the beginning of the XX century), with the aim to achieve a higher commitment of its partners workers, as well as to improve competitiveness, productivity and to get better pricing and consumption conditions for company workers.

Spain have developed a large number of cooperatives, highlighting the success of some of them in the Industrial, pharmaceutical and food sector. A great example of that is the Mondragón group.

On the other hand, we need to emphasize that a cooperative is a voluntary and independent union of workers, those who become partners, to achieve, by democratic ways, shared benefits regarding its activity (salaries, prices, absence of intermediaries, credit access, etc.). As a result, the cooperative acquires a legal form different from common companies, on the topic of labor market regulation, being able to exclude such regulation in its operation, replacing the protection of the worker partner by the corporate Law. Besides, you should be aware that there are several types of cooperatives, almost as many as activity sectors.

At this point, it is convenient to review the classic values on any cooperative, which remain relatively unalterable in time: 

– Mutual assistance: As a more effective way to solve common problems common of the group or its individual partners. 

-Liability: Mainly, at merit and ability levels as well as to be responsible for their acts ant to understand that the association is more important than personal interests. There is a moral commitment oriented to the institution future. The partners will face the losses caused, eventually, every year.

-Social liability: Before, we were talking about an “indoors” liability but now we are referring to an “outdoors” liability. A cooperative is integrated and participate into its company of reference, committed in its solidarity mechanisms.

-Democracy: Collective decisions are taken between partners horizontally, so they take authority and standing through participation. 

-Equality: All the partners share the same rights and obligations.

-Equity: Liquidity surpluses are distributed between the partners equally.

-Solidarity: The cooperative is a community of purposes and interests and its partners cooperate to solve any problems.

-Transparency and honesty: All cooperative must to operate upholding the values of dignity and advertising, rejecting any attempt of hiding information. The confidence between partner must to prevail.

-Culture of the effort: The motivation and the sacrifice are essential values to acieve the cooperative purposes. 

On the other hand, other relatively common principles of cooperatives are: 

-Open and voluntary adherence: The acceptance of responsibilities is the only entrance requirement since there are no any type of discrimination. 

-Democratic control of partners: The cooperative work with the formula “one vote for each member” and full equality among them, being responsible at the same time, to give explanations to the general Assembly. 

-Economic participation: It articulates depending on equity and limited compensation criteria. Regarding the liquidity surpluses, the education solidarity are taken into considered. 

-Independence and autonomy: It is essential that the cooperative does not rely on externa interest, in other words, third organizations. In this case, the operation guidelines above-referred would be voided.

-Training and information: Both between workers and its relationships with the community of reference. 

-Cooperation: The development of cooperatives requires collaboration and coordination between existing associations.

-Community engagement: It is what today we know as corporate social responsibility. In this regard, it is highly value sustainability criteria.

We would also want to emphasize the validity of the cooperative model. The cooperatives are not only emergency solutions to keep employments of companies in crisis, cooperatives are not only legal formulas of business organization related to subsistence economy. So, it is important to tackle the cooperatives future without prejudice, in fact nowadays some new technologies startups are structuring as cooperatives. Consequently, an evolutionary definition of cooperative, must to consider this type of organization as a competitive alternative in a market society.

We also must to remember that under the form of cooperatives it is possible to take some specific tax and legal advantages such as, subventions for social economy companies, limited liability over social participation, to be able to choose the social security regime of partners, or inclusive, the non-application of the employment relationship regime, if it is the case, bonus of the 95% in the IAE, taxation up to 20%, exemption of the tax on assets transfers and legal acts documented in the constitution, enlargement of capital and others legal acts. 

In final, the cooperative can serve also for the establishment that hinder it competition and create image of brand, a mark of identity that made visible a difference positive. 

In the end, cooperatives may be useful to create image of the brand, a sign of identity which will highlight a positive difference.