Co-ops driven by business decisions

Co-operatives are not old fashioned and belonging to one is a business decision and not about ideology, says the New Zealand Cooperatives Association.
Ramsey Margolis, the association's executive director, outlined this sentiment at a Bay of Plenty Federated Farmers meeting in Te Puke.
He said co-ops had been part of rural life for generations, but in recent years corporatisation of the world had led to the view that co-operatives were inferior, outmoded, inefficient and unworthy of consideration or support.
However, the evidence didn't support this, said Mr Margolis.
New Zealand's most successful co-operative is the dairy giant Fonterra which has an annual turnover of $16 billion, 10,537 member shareholders and is responsible for more than a third of international dairy trade.
In 2008, the revenue of the world's 300 largest co-ops and mutuals amounted to close to the total economy of Canada.
The basic difference between a co-operative and other business models is that an investor-owned firm buys cheap and sells dear.
"But a co-operative business either buys dear and sells dear (e.g. Eastpack, Fonterra), or buys cheap and sells cheap (e.g. Farmlands), then rebates members at end of the quarter, or year."
It was member participation which made co-ops successful, said Mr Margolis.
"A co-op is your other business and the benefits you receive are based on your participation.
"Your co-operative is only of value to you as members if you know you are members and are engaged, if you value your membership, if your needs are met now.
"Your co-operative must plan for the future and deal with the hard issues."
A well-run co-op will be beneficial if members maintain control, decide how the benefits flow and can decide to support or withdraw, he said.
Rural co-ops bring farmers together, allowing them to produce and compete more efficiently.
However, co-ops, like any business, can go bad.
"A co-op needs capable management and directors as well as active members.
"It needs to plan and continuously monitor and improve its performance, like any business."
Egos among those around the board table could get in the way of vital decisions such as mergers and acquisitions, which is why it is important for members to be well informed about what is happening in their co-operative, and be actively involved.
Although his role with the association includes encouraging, promoting and advancing co-operative enterprises, Mr Margolis said there were times when he advised against their formation because the co-operative structure would not suit the desired outcomes of its members.
Getting a co-op off the ground could be difficult, especially if there was a lack of critical mass, he said.
There were many kinds of co-operatives, ranging from craft co-ops with a single shopfront, to New Zealand's largest commercial business, Fonterra.
According to the association's website, a co-op can be defined as an organisation owned by and democratically operated for the benefit of those using its services.
The activities can be virtually any legal business operation provided for in the rules of the co-operative, and may be for the supply of goods or services to members and/or for the supply of goods or services to others.
In many ways, co-operatives operated like any other business, but they did have a number of unique characteristics, said Mr Margolis. They are owned and democratically controlled by their members - the people who use the co-op's services or buy its goods - not by outside investors.
They return surplus revenues to their members in proportion to their use of the co-op, not in proportion to their investment or share ownership
Co-ops are conscious of the need to operate profitably rather than at a loss, they meet their members' needs either by buying members' produce at the best price or by providing affordable and high quality goods and services.
They exist primarily to serve their members.
They pay tax on income kept within the co-operative for investment purposes and as a reserve, while surplus revenues from the co-op are returned to members who pay tax on that income.
The member-owners share equally in the control of their co-operative, meeting at regular intervals to review reports and elect directors from among themselves.
The directors in turn employ people to manage the day-to-day affairs of the co-op in a way that serves the members' interests.
To find out more visit www.nz.coop