So how are co-ops different from other businesses?
With the “normal” businesses that everyone is familiar with, people either own a business by themselves or with partners (a sole proprietorship/partnership) or the business sells stocks on a stock exchange (an investor-owned corporation). People put money into these non co-operative businesses to make money on their investments. The more of the company you own, the more you make if the business succeeds.
On the other hand, co-operatives (and credit unions) are driven by both economic and social concerns. They are community-based organizations that care not only about the bottom lines of their business, but about the needs of their members and the quality of life in their communities. This doesn’t mean that co-operatives don’t turn a profit. They do and they need to in order to grow and provide their services to the members, but this isn’t the primary reason for their existence.
In essence, co-ops and credit unions
balance their energies between economic
and social concerns.
Simply put, co-operatives and credit unions differ from other businesses in three key ways:
A Different Purpose: The primary purpose of co-operatives and credit unions is to meet the common needs of their members, whereas the primary purpose of most investor-owned businesses is to maximize profit for shareholders.
A Different Control Structure: Co-operatives and credit unions use the one-member/one-vote system, not the one-vote-per-share system used by most businesses. This helps the co-operative or credit union serve the common need rather than the individual need, and is a way to ensure that people, not capital, control the organization.
A Different Allocation of Profit: Co-operatives and credit unions share profits among their member-owners on the basis of how much they use the co-op, not on how many shares they hold. Surplus profits are returned to members and, therefore, remain within the community. Co-operatives and credit unions also tend to invest their profits in improving service to members and promoting the well-being of their communities.