This article was contributed by Professor Tim Mazzarol and Dr Elena Mamouni Limnios from the University of Western Australia.

Co-operatives are unique business organisations, owned and controlled by their members. The co-operative enterprise is one of the oldest forms of business and dates back to at least the 15th century. Traditional co-operatives are open to all regardless of race, gender, religion or political persuasion. They are also highly democratic, with a one-member one-vote system of governance.


LIMITED UNDERSTANDING OF THE CO-OPERATIVE BUSINESS

Despite becoming a global movement, co-operative enterprise is not well understood by policy-makers, legislators or the general public. Co-operatives have been termed the ‘enfants terribles’ of economics (Levi and Davis, 2008). They are arguably too social for mainstream economics and business – but too economic and business-oriented for the non-profit sector. Minimal attention has been given in management textbooks and academic curricula to co-operative enterprises. It is also rare to find specialised training programs for managers and executives of co-operatives within Australia. While continuing to be an important part of the world’s economy, co-operative enterprise has been given relatively scant attention within academic research in comparison to other fields of management and economics.

In Australia, understanding of co-operatives is particularly difficult because several member-owned organisations that embrace co-operative principles have historically opted to register under the Corporations Act 2001 (Cwlth) instead of the relevant Co-operatives Acts. The lack to date of national legislation and lack of uniformity of state and territory laws could be a contributing factor. The need to find appropriate governance structures that accommodate the, often conflicting, interests of member democracy and investor returns may be another reason for this trend.


MANAGERIAL CHALLENGES

The unique managerial and governance challenges faced by co-operatives relate to their ability to provide direct and indirect socio-economic benefits to members, whilst retaining or raising sufficient capital to invest in the business in order to ensure its long-term resilience. When a co-operative is generating significant surplus capital, members may request higher compensation by way of reduced transaction costs, lower prices or higher distribution. Members commonly have a shorter investment horizon than the organisation and do not always see a personal benefit from organisational decisions aimed at increasing the business’s competitive position in the market. Their inability to adjust their personal holding in the co-operative and associated investment risk can result in member pressures to streamline the co-operative investment portfolio according to members’ risk profiles.

A multiplicity of ownership, financial and control structures for organisations adhering to the international co-operative principles have generically emerged within Australia and internationally in order to better address internal and external challenges facing co-operatives. These can range anywhere from traditional and proportional investment co-operatives, to publicly traded investor-oriented firms (Chaddad and Cook, 2004).


AUSTRALIAN-LED, INTERNATIONAL RESEARCH PROJECT

The University of Western Australia leads an international research project examining the multiple facets of co-operative enterprises and their impact on organisational resilience. The project will develop an inter-disciplinary research exchange over co-operative enterprise within the wider social enterprise, innovation and economics fields. As part of the project, a conceptual framework has been developed that seeks to understand the co-operative enterprise business model and the forces that influence its membership, governance, organisational structure and interaction with the external environment. A key element of the framework is the need for the co-operative to develop a member value proposition that is built around a clearly identified purpose for which the organisation was established. The co-operative also needs to focus on generating economic and social benefits for its members so as to retain their loyalty and commitment.