Margaret Lund tells how cooperation works in practice.

In theory, there should be no such thing as a multi-stakeholder cooperative (MSC); in practice, it is a popular model of cooperative enterprise, used in a diverse array of industries and settings, in dozens of countries around the world. 

MSCs distribute ownership and control amongst two or more categories of members, each of whom is involved in the governance of the enterprise. This may include producers, consumers, workers or community supporters. Each class of member has a different role in the enterprise, and all share in some equitable (not necessarily equal)  way in benefits and decision-making.

Traditional economic theory holds that this kind of organisation would be highly inefficient, and ultimately unstable. Consumers, the theory goes, want lower prices more than anything else while workers want higher wages and producers want the highest prices. 

Traditional economic theory holds that this kind of organisation would be highly inefficient, and ultimately unstable.

Getting these parties to agree to anything must necessarily waste a lot of time, making the transaction costs of governance unsustainably high. Sooner or later, the theory holds, the strongest group would take over and leave the others behind. 

Except that doesn’t much seem to happen. 

A number of researchers have found, for example, that the additional time it might take MSCs to consult with various stakeholders is offset by the greater efficiencies from the various stakeholders having a more complete understanding of complex issues or situations. Diversity in governance increases the amount and kind of information held by all groups of stakeholders, which, once arrived at, can lead to more efficient implementation of policies. 

Other researchers also note that some MSCs appear to have greater access to resources than their single-member counterparts because of their active engagement with a wider variety of interested parties. Finally, the call to solidarity in MSCs is appealing to many people who are genuinely interested in working with others to address complex community issues that defy solution by a simplistic, market-oriented approach. This may explain why MSCs are particularly popular in the provision of social services and other sectors where the societal impact is high. Indeed these types of industries dominate MSC practice. Whatever the reason, the use of this kind of cooperative structure is on the rise.

MSCs appear to have greater access to resources than their single-member counterparts because of their active engagement with a wider variety of interested parties.

The practice of multi-stakeholder cooperative ownership and governance has been documented in over a dozen countries, although the exact number and nature of these co-ops is difficult to track because most jurisdictions lack separate co-op laws for MSCs. 

However, Italy and Quebec have significant experience with the model, under specific enabling legislation. The Italian MSC law is the oldest, dating to 1991 although the practice of multi-stakeholder cooperatives began at least a decade before. 

In Italy, MSCs are the dominant form of governance for “social cooperatives” – co-ops organised either to provide social, health and educational services, or to meet particular social aims such as work reintegration for marginalised populations. 

Currently there are at least 15,500 such social cooperatives registered in Italy, about 70% of which are MSCs, including workers, consumers, and sometimes community members in their ownership and governance structure.      One quarter of these social co-ops are over 20 years old, proving the durability of the model. One third of them however, have been formed only in the past five years, indicating it is also a structure with current appeal. And as of 2020, close to 20% of social cooperatives had board presidents who were 40 years old or younger, so they clearly attract a new generation of cooperators in a way that some legacy cooperatives do not.

In the French-speaking province of Quebec in Canada MSCs are known as  “Solidarity Cooperatives” under Quebec law. They  have had official legal standing since 1997.

Solidarity Cooperatives can have three distinct membership classes:  workers, users (which could be consumers or producers), and supporters. Originally, the law required that all three groups be included. This proved somewhat cumbersome, and in 2005 the law was amended so that only two of the three classes need be included. After that change the number of solidarity co-ops boomed, becoming the most popular legal structure for cooperatives in Quebec. In the first decade after the change, 60% of all new cooperatives in Quebec chose the multi-stakeholder format. This figure includes new business formation and formerly single-member cooperatives choosing to reincorporate under the new statute. 

Many co-op aficionados consider the Mondragon cooperatives of Spain to be the epicent     er of venerable worker cooperative practice. They are also a center of extensive experimentation with MSCs. Recent research has shown that 25% of the cooperatives in the Mondragon network are actually multi-stakeholder. An underlying ethos of labour solidarity has led the group to include workers as a member-owner category in a diverse array of support sectors including education, banking, research, and the chain of Eroski supermarket consumer cooperatives –  the largest multi-stakeholder cooperative in the world. 

While most MSCs operate in sectors with a social purpose mission, Quebec and Mondragon clearly demonstrate the model is not limited to service-related enterprises. 

In Quebec, MSCs have also been used in recycling, cable communications, and renewable energy, or to maintain a vital local industry such as tourism. In the US, local food has been a focus of MSC development. In some jurisdictions such as France, having a stated social enterprise mission is required by the MSC legislation. In others, such as Quebec and the many countries of the world where MSCs are formed with sector-specific legislation, there is no such formal requirement. Whether required or not, however, most MSCs are formed with some sort of social outcome in mind –  purpose beyond simply enhanced income or lower prices for members. 

In many cases MSCs have developed in response to outside social and economic forces. Examples of such spurs include political pressure to “privatise” government functions like social services for example, or outmigration caused by the decline of local industry or inadequate food, fuel, or utility services in rural communities. In other cases, their development has come from a completely different direction. 

In many cases MSCs have developed in response to outside social and economic forces. Examples of such spurs include political pressure to “privatise” government functions.

In Mondragon, for example, a worker-member classification of ownership has been affirmatively added to every co-op in the network simply because it is seen as the right thing to do. In local agriculture, MSCs are seen as a way to address a system of corporate food production and distribution that has failed to value producers, farm workers, communities or the environment adequately.

The emergence of multi-stakeholder cooperatives in such a wide range of places, industries and circumstances — with or without the support of local enabling legislation — makes it clear that the model has the ability to deliver something to participants that is missing from single-member cooperatives or their investor-owned peers. It is true that inviting differing groups of people to engage in a common pursuit might result in longer meetings. But it is worth noting that MSCs didn’t invent complexity; they just embrace it more than other types of organisations. 

Single-member cooperatives as well as conventional corporations have long been known to produce what economists call externalities — negative repercussions of their behaviour – like pollution, social exclusion, or inequality, that are never adequately acknowledged in the financial or social assessment of the enterprise. Perhaps the most singular innovation of multi-stakeholder cooperatives is their willingness to integrate the cost of such externalities through inclusive design, and by doing so, mitigate them.      The courage and clarity of these cooperators give us much to admire, as well as food for thought on how we might better organise our social and economic lives.

Margaret Lund

Margaret is an independent consultant specialising in the areas of community development finance and shared ownership strategies.  Throughout her 30-year career, Margaret has worked with enterprises in every major cooperative …

Read More »

Leave a Reply

Your email address will not be published. Required fields are marked *