When co-op principles collide

By Adam Schwartz

Editor’s note: Adam Schwartz is the vice president of public affairs
and member services at the National Cooperative Business
Association in Washington, D.C. He has served co-ops in a variety
of roles for the past 18 years. He welcomes comments on the issues
raised here, or other co-op topics, and can be reached at:, or (202) 383-5456. For a more detailed
discussion of the co-op principles, visit:

ne of the great strengths of the cooperative movement is that no matter what sector we serve — from a rural co-op serving farm communities to an urban co-op in metropolitan areas — all cooperatives share the same seven guiding 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.
When we are faced with an ethical dilemma, defined as a choice between two appropriate paths, cooperative members, management and boards can consult and reflect on our principles to give us guidance as to the “right thing” to do.

But, what do we do when principles come into conflict with each other or offer conflicting advice? What principle offers advice in such a case?

One of the great benefits of cooperatives is that they are autonomous and independent (the fourth co-op principle). One of the great challenges that co-ops face is also that each co-op is autonomous and independent.

Consider the case of a co-op wrestling over the question of where to source a particular service. Two vendors have bid on the project. Both vendors have demonstrated the quality of their service. One vendor (not a co-op) has offered a better price than did the other vendor, which is a cooperative.

When the board meets to discuss the bids, two board members articulate the principles that collide. One board member has the view that the co-op exists to serve its members and seeks to create policies that set it forth on that autonomous path — member first, member last, member always. After all, that is why the co-op was created. This member advocates taking the lower bid because it is more cost-effective. The board’s fiduciary responsibility to the members should trump other priorities, this director says.

The other board member advocates that buying from another co-op should take precedence. This board member seeks to create a more cooperative economy and believes that the best way to accomplish that goal is for co-ops to practice the sixth principle — cooperation among cooperatives — and thus it should be a priority to do business with other co-ops, even if it sometimes “costs” the co-op a little more money to do so.

How should a cooperative resolve such a conflict? Ideally, for guidance, cooperatives will have in place policies to allow staff or management to act in accordance with the seven principles. If the issue is truly one of strategic importance, the board — as a reflection of the membership — should decide. On rare occasions, the board may need to take the issue to the membership, especially if it involves a true change in the nature of the co-op requiring an amendment to the bylaws.

There is a growing acceptance of using a “triple bottom line” when determining the course of action taken by cooperatives. This involves the standard bottom line of revenues and expenses. But two additional and equally important measures are also considered: the impact the business is having on the community and on the environment. This is a true measuring stick to ascertain the full impact of a business.

By following the sixth principle, cooperatives can improve their portion of the economy and ensure the financial wellbeing of cooperative businesses across the country. Currently, cooperatives contribute about $650 billion annually to the U.S. economy (according to a study published by the USDA and the University of Wisconsin Center for Cooperatives), an impressive figure, but just a small percentage of the overall economy.

By working together and by making the commitment to buy from other cooperatives, we could increase that percentage significantly. Doing so would have profound economic and social benefits for cooperatives, their members and the communities they serve.

As the best business model for economic and social progress, cooperatives are ideally suited to be well served by the triple bottom line measurement of finances, community and environmental impact. The absence of outside shareholders with voting rights allows cooperatives to focus on the members and community.

When the character Gordon Gecko uttered the infamous line “Greed is good” in the 1984 film Wall Street, we knew in our hearts and minds that this was not right (ironically, as I write this, a sequel to this film was recently released). We who work for co-ops are fortunate to work in a business model that promotes economic fairness, because the owners are the people using the goods and services. We need to look no further than our seven principles to give us the guidance we need.

November/December Table of Contents