Case Studies of Organisational Resilience in the Co-operative Business Model
Edited by Tim Mazzarol, Sophie Reboud, Elena Mamouni Limnios and Delwyn Clark
Chapter 22: Governance, organisational design, financial structure and investments in a co-operative firm
The classical co-operative firm was historically characterized by the principle "one head one vote". In most countries, until the 1990s, this principle was associated with limitations in the remuneration of own capital and limitations (if not complete inhibition) in the negotiability of own capital. Apart from some "country-specific" institutional features, the legal constraints on profit distribution created a strong disincentive to invest financial capital in a cooperative firm. Until a few years ago, in many countries, this was partly compensated by some tax advantages, also motivated by the fact that the existence of co-operative firms in various industries and economic activities was theoretically interpreted as a response to the so-called "market failures". For instance, the birth of consumer co-operatives in the 19th century was interpreted as an effect of market power of food retailers and persistently high (and non-flexible) prices in the food industry, and the birth of producers' co-operatives in the same period as an effect of unemployment hysteresis. In other words, the "fourth sector", as opposed to the "non-profit sector", includes firms whose particular governance and ownership structure clearly differ (for economic or institutional reasons) from the ones of conventional corporations, but still face the problems of optimal organisation design, incentive compatible financial instruments and growth.
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