Reinventing Co-operatives Seamus O'Donohoe National Rural Network  Secretary Annual Conference ICOS Ltd Tuesday 1 st  Dece...
Cooperative Definition <ul><li>“ A cooperative is a user owned and user controlled business that distributes benefits on t...
The Co-operative Identity IMPROVE MEMBERS INCOMES/SERVICES PIONEER NEW DEVELOPMENTS IMPROVE THE SOCIAL  ENVIRONMENT A BUSI...
Co-operatives – a Neglected Option <ul><li>Co-operative way is worth a second look </li></ul><ul><li>Not just a particular...
Co-operatives Suffer From Poor Visibility! <ul><li>Poorly understood </li></ul><ul><li>Company is the choice of default </...
Communication Challenges <ul><li>Greater requirement for communication and education in the co-operative model </li></ul><...
The Business Model <ul><li>Entrepreneurship </li></ul><ul><li>(Risk, Innovation, Market Demand) </li></ul><ul><li>Manageme...
Similarities To Companies <ul><li>Legal Framework </li></ul><ul><li>Board Of Directors </li></ul><ul><li>Mission / Objecti...
Choice of Co-op Legal Form <ul><li>Industrial and Provident Societies </li></ul><ul><ul><li>Form Most Commonly Used for re...
Co-operative Organisation <ul><li>Traditional co-operatives </li></ul><ul><li>New generation co-operatives </li></ul><ul><...
When Does the Co-op Model Fit Best? <ul><li>Fits best where; </li></ul><ul><ul><li>Where the perspective members are have ...
Diversity of Co-operative Ventures <ul><li>Caravan and Camping and Mobile Home Society </li></ul><ul><li>Independent Hoste...
Why Invest In Coops ? <ul><li>One of many alternative uses for time and money </li></ul><ul><li>If market failure occurs <...
Economic Justification I Overcoming Market Failure <ul><li>The Co-operative Role </li></ul><ul><ul><li>Pooling Resources <...
Participation of Other Stakeholders <ul><li>Co-operative may need ‘investors’ other than the members  </li></ul><ul><li>St...
Why Should I Become Involved? <ul><ul><li>Do I want a passive or active involvement </li></ul></ul><ul><ul><ul><li>Price t...
When Does the Co-op Model Fit Best? <ul><li>Matching ambition to capability </li></ul><ul><li>Taking manageable steps v gi...
Seek Advice <ul><li>ICOS </li></ul><ul><li>Solicitor/Accountant </li></ul><ul><li>Teagasc </li></ul><ul><li>Partnership Co...
Goodness of Fit <ul><li>Is the co-op the best fit? </li></ul><ul><li>Has an evaluation been done? </li></ul><ul><li>Develo...
Co-op v Private Company Yes No Audit Exemption No Yes Individual Share Investment Limit No Yes, with permission Funds from...
Co-op v Private Company Yes but constraints Yes Increase /Reduce Share Capital -  Conduct an annual audit  -     Submit an...
Co-op v Private Company No Up to €10,000 Intestacy Memorandum delimits Rules delimit Transfer of Shares No Up to €15,000 P...
Adherence to Values Brings Success <ul><li>Co-operatives are based on; </li></ul><ul><ul><li>Self-help, self-responsibilit...
Conclusion <ul><li>Choices </li></ul><ul><ul><li>Do nothing and take what the market/state is willing to offer on their te...
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Reinventing Co-operatives - Seamus O Donohoe

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Presented at the Irish National Rural Network conference on the 1st of December 2009

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  • There are a number of definitions as to what constitutes a co-operative. The definition that appears to most accurately reflect the ideal which farmer co-operatives is as follows; “ A Co-operative is a user owned user controlled business that distributes benefits on the basis of use ” For various reasons, very few co-operatives can fully accord in practice with this definition in all respects. This definition however, remains a useful yardstick for measuring the extent to which our various farmer owned businesses are attaining this definition of a co-operative.
  • Cooperatives are essentially economic enterprises with a social concern. Most people agree that this is a practical interpretation of the cooperative idea. Members in a cooperative give varying degrees of emphasis to the economic developmental and social role of their cooperative. Most farmers value primarily the strength and control that their cooperative gives them in the marketplace when operating as an efficient business organisation. There is however a recognition that the social and developmental functions of the cooperative are important to members, their families and the community at large. Farmers see co-operation as a more equitable form of capitalism, providing a countervailing force against the concentration of land and capital into the hands of the few.
  • MARKET FAILURE : For most farmers their first choice if they have surplus cash for investment would be to invest it in their own farm enterprise. In Ireland, however as in many other countries there are many constraints on the scale to which the average farm unit can grow. The price of land and quotas are just two examples of resources whose supply is scarce. Even allowing for these barriers why do farmers to invest their savings in cooperatives when other investments appear to give a higher return on capital ? The most common answer provided to this question by farmers is that without some structure in the market place to protect their interests they would be very weak buyers and sellers of goods and services. What farmers are recognising is that markets do not work perfectly and unless they organise themselves in to some form of association, the marketplace will fail to protect their interest
  • THE COOPERATIVE ROLE In all of the above situations an effective cooperative can service farmers without fear of monopolistic profits being extracted. If operated at cost and effectively controlled by farmers, it would bring the benefits of an efficient plant size to farmers without the adverse affects resulting from loss of competition.
  • Reinventing Co-operatives - Seamus O Donohoe

    1. 1. Reinventing Co-operatives Seamus O'Donohoe National Rural Network Secretary Annual Conference ICOS Ltd Tuesday 1 st December 2009 www.nrn.ie
    2. 2. Cooperative Definition <ul><li>“ A cooperative is a user owned and user controlled business that distributes benefits on the basis of use.” </li></ul>
    3. 3. The Co-operative Identity IMPROVE MEMBERS INCOMES/SERVICES PIONEER NEW DEVELOPMENTS IMPROVE THE SOCIAL ENVIRONMENT A BUSINESS ORGANISATION
    4. 4. Co-operatives – a Neglected Option <ul><li>Co-operative way is worth a second look </li></ul><ul><li>Not just a particular corporate form </li></ul><ul><ul><li>A definition </li></ul></ul><ul><ul><li>A set of principles </li></ul></ul><ul><ul><li>A set of values </li></ul></ul><ul><ul><li>Particularly suited to recessionary times </li></ul></ul><ul><ul><ul><li>When the state and markets let you down organise yourself! </li></ul></ul></ul>
    5. 5. Co-operatives Suffer From Poor Visibility! <ul><li>Poorly understood </li></ul><ul><li>Company is the choice of default </li></ul><ul><ul><li>May not suit all purposes </li></ul></ul><ul><li>Public bodies have a responsibility </li></ul><ul><li>Promoters have a responsibility </li></ul>
    6. 6. Communication Challenges <ul><li>Greater requirement for communication and education in the co-operative model </li></ul><ul><ul><li>Co-ops usually have a larger membership, </li></ul></ul><ul><ul><li>Some members less knowledgeable in business </li></ul></ul><ul><ul><li>Public, banking and professions less familiar </li></ul></ul><ul><li>An Investment that can pay for itself </li></ul><ul><li>Success and failure on the part of a co-op is more visible than in a private company </li></ul>
    7. 7. The Business Model <ul><li>Entrepreneurship </li></ul><ul><li>(Risk, Innovation, Market Demand) </li></ul><ul><li>Management </li></ul><ul><li>Capital </li></ul><ul><li>(sweat equity) </li></ul><ul><li>Labour </li></ul><ul><li>Business Environment </li></ul><ul><li>(Govt. Policy, Grants, Taxation, Credit Policy) </li></ul><ul><li>Communications/Transparency </li></ul>Choice of Legal Structure = Ownership Control Financing Benefit (Profits, Prices)
    8. 8. Similarities To Companies <ul><li>Legal Framework </li></ul><ul><li>Board Of Directors </li></ul><ul><li>Mission / Objectives / Strategy </li></ul><ul><li>Capital </li></ul><ul><li>Managers </li></ul><ul><li>Surplus [Profits] </li></ul><ul><li>Efficient/effective </li></ul>
    9. 9. Choice of Co-op Legal Form <ul><li>Industrial and Provident Societies </li></ul><ul><ul><li>Form Most Commonly Used for registering Co-operatives </li></ul></ul><ul><ul><li>Highly Adaptable, </li></ul></ul><ul><ul><li>Accommodates Many Different Types of Co-operative </li></ul></ul><ul><li>Credit Unions </li></ul><ul><ul><li>A Distinctive Form of Co-operative Society </li></ul></ul><ul><ul><li>Members Save Together and Lend to Each Other </li></ul></ul><ul><li>European Co-operative Statute </li></ul><ul><li>Other Business Forms can be used </li></ul><ul><ul><li>Partnerships </li></ul></ul><ul><ul><li>Companies (several variants) </li></ul></ul><ul><li>Evaluate against business plan! </li></ul>
    10. 10. Co-operative Organisation <ul><li>Traditional co-operatives </li></ul><ul><li>New generation co-operatives </li></ul><ul><li>Subsidiaries with partial public ownership </li></ul><ul><li>Equity seeking joint ventures </li></ul><ul><li>Strategic alliances with plc’s </li></ul><ul><ul><li>Alternative co-operative models differ in the way ownership rights are defined and assigned to stakeholders </li></ul></ul>
    11. 11. When Does the Co-op Model Fit Best? <ul><li>Fits best where; </li></ul><ul><ul><li>Where the perspective members are have more or less the same needs </li></ul></ul><ul><ul><li>Where means exist of ensuring loyalty </li></ul></ul><ul><ul><li>Where the ‘prize’ is worth the effort </li></ul></ul>
    12. 12. Diversity of Co-operative Ventures <ul><li>Caravan and Camping and Mobile Home Society </li></ul><ul><li>Independent Hostel Owners Co-operative Society </li></ul><ul><li>Mean Scoil San Nioclas </li></ul><ul><li>North Kerry Arts and Cultural Society </li></ul><ul><li>Roscommon Retail Therapy Society </li></ul><ul><li>Sligo Football and Sport Development Society </li></ul><ul><li>Alpaca Association of Ireland Co-operative Society </li></ul><ul><li>Regional Airport </li></ul><ul><li>Prayer Group! </li></ul>
    13. 13. Why Invest In Coops ? <ul><li>One of many alternative uses for time and money </li></ul><ul><li>If market failure occurs </li></ul><ul><ul><li>When prices are not fair-to high or too low or </li></ul></ul><ul><ul><li>Goods and services that are demanded cannot be obtained </li></ul></ul><ul><ul><li>Producers, consumers, workers see the benefits of organising themselves </li></ul></ul>
    14. 14. Economic Justification I Overcoming Market Failure <ul><li>The Co-operative Role </li></ul><ul><ul><li>Pooling Resources </li></ul></ul><ul><ul><li>Controlled by Members </li></ul></ul><ul><ul><li>“ Apparently his idea was to induce people to combine for business purposes and thereby to help themselves while they helped one another. Wealth was to be created by thrift, honest dealing and by the loyalty of the participants in the partnership with one another ” RA Anderson “With Plunkett in Ireland” </li></ul></ul>
    15. 15. Participation of Other Stakeholders <ul><li>Co-operative may need ‘investors’ other than the members </li></ul><ul><li>Stakeholders </li></ul><ul><ul><li>The community ( potential customers) </li></ul></ul><ul><ul><li>User firms and businesses ( other private firms, co-ops – hotels, processing co-op’s etc) </li></ul></ul><ul><ul><li>Public sector ( hospitals, schools, local authority housing) </li></ul></ul><ul><li>Creation of membership categories </li></ul><ul><ul><li>Varying rights and responsibilities </li></ul></ul><ul><ul><ul><li>Share type allocated </li></ul></ul></ul><ul><ul><ul><li>Voting rights </li></ul></ul></ul><ul><ul><ul><li>Board representation </li></ul></ul></ul><ul><ul><ul><li>Financial reward </li></ul></ul></ul>
    16. 16. Why Should I Become Involved? <ul><ul><li>Do I want a passive or active involvement </li></ul></ul><ul><ul><ul><li>Price taker or price maker? </li></ul></ul></ul><ul><ul><ul><li>Service or no service </li></ul></ul></ul><ul><ul><li>Consider joining existing co-operatives </li></ul></ul><ul><ul><li>Might it be easier to restructure than to start anew? </li></ul></ul><ul><ul><li>Start from new? </li></ul></ul><ul><ul><li>A partnership arrangement may be an option? </li></ul></ul><ul><ul><ul><li>Local, Regional and National Public Bodies may be more attracted to a ‘co-operative/partnership model’ when seeking to supply a service </li></ul></ul></ul>
    17. 17. When Does the Co-op Model Fit Best? <ul><li>Matching ambition to capability </li></ul><ul><li>Taking manageable steps v giant steps! </li></ul><ul><li>Beneficiary led is best </li></ul><ul><li>Fits best where; </li></ul><ul><ul><li>Where members are ‘homogenous’ in their needs </li></ul></ul><ul><ul><li>Where a means exists for members to honour their obligations </li></ul></ul><ul><ul><li>Where the business has an attractive risk/reward ratio </li></ul></ul>
    18. 18. Seek Advice <ul><li>ICOS </li></ul><ul><li>Solicitor/Accountant </li></ul><ul><li>Teagasc </li></ul><ul><li>Partnership Companies </li></ul><ul><li>County Enterprise Board </li></ul><ul><li>Registry of Friendly Societies </li></ul><ul><li>Other Development Agencies </li></ul>
    19. 19. Goodness of Fit <ul><li>Is the co-op the best fit? </li></ul><ul><li>Has an evaluation been done? </li></ul><ul><li>Develop business strategy first </li></ul><ul><li>Then examine legal structures </li></ul><ul><li>If co-op is best choice, alignment with business plan will require analysis and planning to ensure viability </li></ul>
    20. 20. Co-op v Private Company Yes No Audit Exemption No Yes Individual Share Investment Limit No Yes, with permission Funds from Public To amt authorised Unlimited Share Capital 1 to 100 7 to No limit Membership One vote per share One man one Vote Voting Private Company Co-op Issue
    21. 21. Co-op v Private Company Yes but constraints Yes Increase /Reduce Share Capital - Conduct an annual audit -     Submit annual return -     Notify changes of directors -    Significant fines/ penalties -     Answerable to DCE -     Conduct an annual audit, -     Submit annual/triennial returns Compliance Burden Same Same Tax Burden € 60, plus cost of model memo and articles plus solicitor/accountants fees € 228 if model rules are used unchanged plus initial administration/affiliation charge to ICOS of €407 Incorporation Costs Private Company Co-op Issue
    22. 22. Co-op v Private Company No Up to €10,000 Intestacy Memorandum delimits Rules delimit Transfer of Shares No Up to €15,000 Powers of Nomination Solicitor/Accountant ICOS Principle Source of Professional Advice -      Customisation of rules -      Registration of the Society -      Interpretation of rules, -      Disputes resolution, -      Attendance at Board & AGM’s Private Company Co-op Issue
    23. 23. Adherence to Values Brings Success <ul><li>Co-operatives are based on; </li></ul><ul><ul><li>Self-help, self-responsibility, democracy, equality, equity and solidarity, honesty, openness and social responsibility </li></ul></ul><ul><li>Where the members can see value in committing for the long term , </li></ul><ul><ul><li>The co-operative model will succeed </li></ul></ul>
    24. 24. Conclusion <ul><li>Choices </li></ul><ul><ul><li>Do nothing and take what the market/state is willing to offer on their terms and conditions </li></ul></ul><ul><ul><li>Become actively involved in the marketplace and have some influence over what you are going to be paid and the terms and conditions that should apply </li></ul></ul>

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