The governance structure of cooperatives is significantly more open, democratic, transparent and inclusive than that of Investor-owned corporations. A recent, national survey indicates that the public views businesses with the co-op governance characteristics listed below as more trustworthy than businesses that lack these attributes.

Ownership

Cooperatives: Owned by members—the people who buy the goods or use the services of the cooperative.

Investor-owned Corporations: Owned by outside shareholders who may or may not use the goods and services of the business.

Control

Cooperatives: Wholly democratically controlled by the members on a one-member, one-vote basis (i.e., all members have an equal voice in the business regardless of their equity share).

Investor-owned Corporations: Controlled by shareholders according to their investment share. Shareholders must meet a threshold of ownership to have any meaningful control over the company.

Board Membership

Cooperatives: Board is made up of the co-op members who are elected by the members. Most, if not all, directors are independent—they are not selected by the CEO and typically do not work for or have any business relationship with the co-op, other than their patronage of it. Management typically does not hold board seats.

Investor-owned Corporations: Board is made up of a combination of independent directors, management and other directors with financial or business ties to the organization. CEOs often serve as board chair.

Board Compensation

Cooperatives: Cost reimbursement for board meetings. Board members typically serve on an uncompensated, volunteer basis.
Investor-owned Corporations: Significant financial compensation provided.

Board Nominations

Cooperatives: Candidates are nominated by membership either directly (including self-nomination), or by a nominating committee made up of the members. Nominating committees may be made up of board members or include other co-op members. They typically issue a call for nominations to the membership prior to each election. Co-ops circulate a single election ballot including all nominated candidates.

Co-op bylaws generally allow any member to nominate a director-candidate. Where a petition is required to place a candidate’s name on the slate, the threshold for signatures is generally low (e.g. 100 signatures or 1% of membership).

Investor-owned Corporations: Candidates nominated by the board of directors and management, often by a nominating committee. Management maintains careful control over board candidates. Board proxy materials include only board nominees.
Shareholders have only limited ability to nominate their own director candidates and must do so on a separate proxy statement that they circulate and tabulate at their own expense, ranging in cost from $100,000 to $1 million. (AFSME, 2003) Shareholders must also execute that separate proxy card to vote for other candidates. Shareholders may recommend nominees to the nominating committee, but companies rarely nominate such candidates. Shareholders may also nominate directors in person at the annual meeting, but few shareholders attend and such nominees rarely receive sufficient support.

Board Elections

Cooperatives: Board is elected by the members on a one-member, one vote basis. Contested elections are the norm, not the exception. Members vote in-person at the annual meeting, by mail, or electronically, or by a combination of these methods.

Investor-owned Corporations: Board elections are better characterized as shareholder "ratification" of the uncontested, management/board-selected slate offered on the proxy statement. Because the board typically nominates only enough candidates, often incumbents, to fill open seats, whether or not a shareholder submits a proxy matters little. Shareholders submit proxy in advance or must attend the annual meeting to vote in person.

Accountability

Cooperatives: Board members are directly accountable to members through these nomination and election procedures. Board members can be, and often are, voted out in contested elections.

Investor-owned Corporations: Election and nomination procedures afford little meaningful oversight to shareholders. It is difficult and costly for shareholders to remove board members.

Dividends

Cooperatives: Any surplus revenues (profits) earned by the co-op are reinvested in the business and/or returned to members based on how much business they conducted with the co-op that year—their patronage—or through lower prices or fees. Many co-ops are obligated to return a portion of their "surplus revenues"—if there are any—to members each year.

Investor-owned Corporations: Profits returned to shareholders based on their ownership share. Corporations are generally not obligated to pay out dividends.

Motivation

Cooperatives: Maximize member-service

Investor-owned Corporations: Maximize shareholder returns.

Structure

Cooperatives: Co-ops operate on a not-for-profit basis. Depending on the type, co-ops can organize under a variety of structures—as co-ops, as non-profits, and as regular corporations. All co-ops operate according to co-op principles.

Investor-owned Corporations: Generally organized as C corporations.