Building Community for Profit
Who Owns, Controls
& Uses the Business
The Sole Proprietorship/Partnership
Examples: Jimbo’s, Blue Stocking Books,
Kung Food, Café India
The Investor-owned Corporation
Examples: Whole Foods, Bank of
America, Shell, Microsoft
The Cooperative
Examples: O.B. People’s Organic
Food Co-op, REI, ACE Hardware,
Tillamook Dairy Co-op
Opening a Business
is Serious Business!
What to Consider:
 Definition of “value” and “profit”
 Consumer need and willingness pay for goods or services
offered
 Consequences of current production processes
 Benefits of natural-based-production
 Capital investment
 Tax and profit benefits of each type of business model
Global Corporate Tenets
& Assumptions 1
Human Labor and Production
 Employers’ view
 Economists’ view
Consumption
 Standard of living
 Financial profit and growth
Global Corporate Tenets
& Assumptions 2
Modern Economics
 Lack of distinction between renewable and non-renewable
materials
 Prices are based on a definition of “cost” which often excludes the
free goods of natural capital
 Industries set financial targets, often without regard to any damage
they might be inflicting on other parts of the economy
 Gives vastly more weight to the short-term rather than the longterm
 Natural attributes such as beauty, health, and cleanliness are
valued only in idealized terms
What’s different about a
cooperative?
Capitalist Model
Cooperative Model
 Capital hires labor
 Labor/owner hires capital
People become another input of
cost, so the whole purpose of
business becomes the generation
of maximum return on
investment for the people who
supply the capital—the
investors.
Capital becomes merely another
resource that the business
requires to do its services, to
provide good terms and
conditions for employees, to be
fair to suppliers, to provide
limited returns on investment for
investors, to support local
communities, and to respect the
environment.
What is a cooperative?
 A cooperative (co-op) is an autonomous association of persons
united voluntarily to meet their common economic, social, and
cultural needs and aspirations through a jointly owned and
democratically controlled enterprise.
 A co-op provides the same products and services as any other like
business. It exists to serve its customers who are the owners of the
business. A co-op allows the people it serves to have a direct say in
business’s policies and practices; rewards patronage instead of
speculative investment and limits each owner to one share.
 A co-op has an operating structure that compensates people based
on experience, level of responsibility and education; a co-op does
not mean that the business ignores a hierarchy of salaries.
What does that mean?
 User-owned—the people who own and finance the
cooperative are those who use the cooperative.
 User-controlled—the people who control the
cooperative are those who use the cooperative.
 User-benefiting—the cooperative’s sole purpose is
to provide and distribute benefits to its users on the
basis of their use.
7 Cooperative Principles
1. Voluntary and Open Membership
2. Democratic Member Control
3. Member Economic Participation
4. Autonomy and Independence
5. Education, Training, and Information
6. Cooperation among Cooperatives
7. Concern for Community
Types of Co-ops
 Consumer Co-ops
Examples: Ocean Beach People’s Food Co-op, REI, and all credit unions.
 Worker Co-ops
Examples: Rainbow Grocery in San Francisco, Bob’s Red Mill Natural Foods,
Equal Exchange
 Producer Co-ops
Examples: Organic Valley, Ocean Spray, Sunkist oranges, Blue Diamond,
Maple Valley Cooperative
 Purchasing Co-ops
Example: ACE Hardware
 Cooperative Organizations
Examples: National Cooperative Business Association (NCBA), whose
mission is to develop, advance, and protect cooperative enterprise. Ex.
Mondragón Cooperative Corporation.
Social/Cultural Values
& Considerations
 How are we going to deal with a new definition of “profit,”
including profits that stay in the community and the 7 Cooperative
Principles?
 How do we re-define the current necessity for growth? How do
profit and growth fit with sustainability? (Prosperity without
Growth, by Tim Jackson, offers some ideas.)
 What needs are important? What desires are important? What
products will serve our needs and desires? (i.e., food, shelter,
clothing, beauty)
 How do we measure returns for our efforts? (i.e., the question of
selling environmental products in order to save the world, such as
T-shirts)
 What skills must we develop in order to succeed in working
democratically? How can we learn to reach consensus?
Case Study:
 1971: Ocean Beach activists create small neighborhood buying club with dreams
for a store that belongs to the community it serves and provides healthy, nonpolluting, cruelty-free foods at a fair price.
 1972: Fast-growing enterprise moves to apartment storefront at 4859 Voltaire
Street. Customers look for perishable foods in the refrigerator and add up their
own purchases for the cashier.
 1973: O.B. People's moves to former pool and dance hall, becomes known as a truly
people-oriented store with a unique selection of foods and uncompromising
standards for quality.
 1985: People’s changes from workers’ collective to food cooperative.
 2002: Co-op moves to new building to meet growing needs and serve as model of
conscious construction.
 Now: Sales—over $14 million per year.
 Now: Ownership—over 12,000 owners. BOD has 9 members.
People’s Organizational Chart
How to Start a Cooperative
 Research cooperative business model choices.
 Form a provisional board and identify possible funding sources.
 Create mission/vision statements and by-laws (membership requirements, duties,
responsibilities and other operational procedures). Comply with state laws, which
differ from state to state.
 Apply for funding from identified sources.
 File articles of incorporation (name, business location, purpose, duration of
existence, names of incorporators, capital structure).
 Create a membership application (include names, signatures of Board of Directors
and member rights and benefits).
 Conduct a charter meeting and elect directors.
 Obtain licenses and permits.
 Hire employees.
How might a new co-op look?
People decide they want to operate in a certain way,
and the co-op model makes sense for them.
Example 1: Existing Business
 One-owner salon sells the business to one of the salon workers, and
business remains much the same with some new decorating and other
changes.
 But there is always the chance that the new owner will one day sell, move,
or close the business, and the workers would be at a potential
disadvantage. Why not choose to be a cooperative? What might be the
benefits?
 Once the salon employees decide they want to form a cooperative, they
will need to decide who are the members/owners and what benefits they
want from this cooperative. Will this be a worker or consumer co-op, and
what specific products/services will it offer to its owners?
 Since this is for an already-established business, the process should go
smoothly.
Another Co-op Scenario
Example 2: New Business
 John is a painter, and he knows Lloyd, a plumber. Another friend is Gina; she
installs tile. Frank is a general handyman. At the same time, many of us are
often looking for good handy people. We are concerned with sustainability.
Why not form a worker or consumer co-op? How can we do that?
 Find and identify owners, and fill needs the new business has (i.e., carpenter,
additional skilled labor, secretarial help). Consider a market study. Research
cooperative business models.

Start with a vision/mission statement; write by-laws and determine business plan.

Elect a Board of Directors, whose job it is to hire and monitor the general manager
once the funding is in place for the new co-op.
 Process may take many meetings, but all businesses require planning.
 The commitment here is to agree that you will agree working democratically.
Abolish the “agree to disagree” idea from this process.
How to Work Democratically
and Cooperatively
Democracy must be actively practiced.
Skills need to be developed.
Practice: learning & improving.
Promote: providing opportunities to participate.
Perpetuate: doing it again and continually
improving.
Protect: remain vigilant about how well the
democratic process is working overall.
Money Money,
Who’s Got the Money?
 Member Patron relationships, seed capital contributions
 Non-patron investors
(non-ownership shares, offers set return)
 Venture capital organizations
 Private organizations
(non-profits, foundations, community dev. programs)
 Financial institutions
 National Cooperative Bank (NCB): http://www.ncb.coop/
 National Co-op Grocers Development Fund (TBA)
 Howard Bowers Fund: http://www.cdf.coop/bowersfund/
 Government programs (e.g., U.S. Dept. of Agriculture Rural
Development)
http://www.rurdev.usda.gov/LP_CoopPrograms.html
More
 National Cooperative Business Association:
http://www.ncba.org/
 Cooperative Development Institute:
http://www.cdi.coop/
 Cooperative Development Services:
http://www.cdsus.coop/
 Cooperative Development Foundation
http://www.cdf.coop/
 California Center for Cooperative Development
http://cccd.coop/
 Blooming Prairie Foundation
http://www.bloomingprairiefoundation.org/
Economic Impact of U.S. Cooperatives
Why should a business student care about
cooperatives?
 Nearly 30,000 U.S. cooperatives operate at 73,000 places of business.
 Cooperatives own $3 trillion in assets and generate $654 billion in
revenue and $75 billion in wages and benefits.
 350 million Americans are member-owners of cooperatives, generating
$79 billion in patronage refunds, dividends, and other benefits.
 http://www.iatp.org/documents/research-on-the-economic-impact-ofcooperatives-0
 Relatively small-scale, more easily able to adjust to changing
circumstances, e.g., greater competition, higher energy costs, etc.
 Intentional focus is on local, thus escaping the serious detriments of largescale capitalism and large-scale socialism.
Terms to Define
 “green”
 “sustainable”
 “natural”
 “local”
 “organic”
 “globalization”
Worldview
 Media – Mindwalk
”We have to change everything together at the same time.” Director
Bernt Amadeus Capra, based on The Turning Point, by Fritjof Capra,
author of The Tao of Physics. Nature is treated like a machine; when
something goes wrong, we develop technology to “fix” the
problem. Nature, the capital which provides resources for survival,
doesn’t work like that.
 Garret Hardin—The Tragedy of the Commons
An economics theory according to which individuals, acting
independently and rationally according to each one's self-interest,
behave contrary to the whole group's long-term best interests by
depleting some common resource. The concept is often cited in
connection with sustainable development, meshing economic
growth and environmental protection, as well as in the debate over
global warming. The discussion suggests that common resources
must be managed either through privatization or government
regulation, in the form of taxes, say, or limits on use.
Worldview
continued…
 Elinor Ostrum—Governing the Commons: The Evolution of Institutions
for Collective Action
Examined how people collaborate, cooperate, and organize
themselves to manage common resources like forests or fisheries,
even when governments are not involved. Research overturned the
conventional wisdom about the need for government regulation of
public resources.
 Naomi Klein: This Changes Everything: Capitalism vs. the Climate “I
think we do need to talk about that fundamental issue of whether our
place on earth is to dominate nature—whether we're at war with it.
We need to ask ourselves some really tough questions about just how
smart we are. We don't want to wallow in ignorance, but there are
huge dangers in overestimating our intelligence.”
 Bill Clinton: “The only thing that really works in the modern world is
cooperation.”
An Exercise:
 Imagine three very different enterprises (a small
homemade ice cream shop, a large fish hatchery,
and a home health care agency, for example)
and think about each structured as—
 A sole proprietorship
 An investor-owned company
 A cooperative
 How would the capital structure look different
in each case? What effects might this have on
market development? On operations? Other
issues?