Cooperatives differ from the traditional business model, that organizes from top to bottom, by focusing on a bottom-up strategy. In the traditional structure, the enterprise is owned by an individual or a group of shareholders who take the lion’s share of the profits, and decide how the rest is divvied out; they also hold all the power to make decisions that affect the entire organization without the input of the rest who devote their time and energy into it. Since cooperatives are owned by its members, it flips the common structure on its head, giving each member not only a stake in the enterprise, but a say in how it is run.
Governing Structures
Cooperatives are traditionally divided into three parts; members, management, and the board of directors. This structure is designed for transparency and accountability for all members. Members elect the board of directors, which in turn appoint members to management positions which supervise day to day operations. Since members have the power to elect the board members, they indirectly control the hiring of management.
While this structure is common throughout different cooperatives, careful consideration must be taken in catering to specific needs of the enterprise. Smaller co-ops may operate with a more direct approach, with members taking a larger role in management decisions, while larger co-ops might expand the board of directors, or add an advisory council to help maintain influence over the larger scope of the organization.