4.1.3 Coöperative enterprises

As opposed to a gambling logic, coöperation operates more on a sustainability and welfare logic. Its principal goal is the long-term welfare of its members. This changes the equation, even if the fundamentals of corporate finance are not that different.

The members of a coöperative (whether they are consumers, workers, producers, bank account- or insurance-holders) acquire a share in the enterprise either by purchasing that stake or by using or working for the enterprise. The members become, in effect, the shareholders, and they detain the equity in the firm. In other words, whatever the value of the enterprise is—again, meaning the assets and expected revenues, minus the debt obligations—that value is effectively held by the members of the coöperative.

As the mutual enterprise creates value (say, through profits or selling assets at a higher price), that additional value can either be funneled back into the business or distributed to its members. Nothing here, so far, is technically different than in the publicly traded corporation. The wealth of the coöperative, like the latter, is essentially distributed by means of salaries to the employees, contractual exchanges with customers and providers of goods and services, and distributions and enhanced membership stakes for the members. The flows are similar, though the categories may have different names. Whereas distributions may be called dividends for the publicly traded corporation, they may be called “patronage refunds” in consumer coöperatives or “profit distributions” in worker coöperatives.

A non-profit is not fundamentally different from a coöperative, except that the stakeholders do not receive distributions. The non-profit raises money predominantly through grants and charitable donations, and it distributes value through its operations and as salaries to its employees. It does not distribute any profit to its stakeholders, as a coöperative could if it were making a profit. Extra moneys raised by the non-profit over and above its operating expenses go into an endowment as a reserve for future years or are invested in building and equipment, or just placed in reserve for bad years. Again, the flows themselves are essentially comparable in the different types of enterprises—coöperatives and non-profit institutions.