Introduction Most large-scale enterprise in the United States is organized in the form of the conventional business corporation, in which the firm is collectively owned by investors of capital. Other ownership patterns are prominent in a number of important industries, however. Many firms, for example, are owned by their customers. These include not just consumer retail cooperatives, which are relatively rare, but also business-owned wholesale and supply cooperatives, which are quite common, as well as public utility cooperatives, mutual insurance companies, mutual banking institutions, and cooperative and condominium housing. Further, many firms are owned by persons who supply the firm with some factor of production other than capital. Worker-owned firms, which predominate in professional services such as law and accounting, are conspicuous examples, as are the agricultural processing and marketing cooperatives that dominate the markets for many farm products. Finally, a number of important service industries are heavily populated by nonprofit firms, which have no owners at all. In this essay I explore the economic factors responsible for these different patterns of ownership. In recent years a number of scholars have explored various aspects of enterprise ownership. In particular, Williamson and Klein, Crawford, and Alchian have dealt insightfully with the influence of transactionspecific investments on the assignment of ownership, and I shall draw heavily here on the concepts they have developed. Similarly, a number of writers have looked at questions of ownership in particular contexts.

https://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?article=6052&context=fss_papers

Ownership of the Firm

The share of patronage refunds retained by an agricultural cooperative is modeled as arising from the portfolio decision of its median member. The member is viewed as maximizing expected utility by allocating wealth between investments in farming assets and equity in the cooperative. Determinants of the share of patronage refunds retained are the expected rates of return on these two investments, their variances, their covariance, and the expected future share of patronage and its variance. Empirical examinations of aggregate cooperative data and cross-section analysis of seventeen regional supply cooperatives are found to be consistent with the model.

Understanding Retained Patronage Refunds in Agricultural Cooperatives

A comparison of regional dairy cooperatives with investor-owned dairy firms from the period 1976-87 produced empirical findings that are at variance with the hypotheses suggested by the theory of cooperatives The cooperatives in the sample performed significantly better than the IOFs when compared by leverage, liquidity, asset turnover, and coverage ratios, while the rate of return to equity was not found to be significantly different Techniques are also proposed for valuing the nonmarket aspects of cooperatives that are not captured by financial ratio analysis

Performance of Cooperatives and Investor-Owned Firms in the Dairy Industry

The governance of farmer cooperatives in China is addressed regarding democratic decision-making procedures, participation in decision making, member exit, and profit allocation. Empirical results from a survey of fruit and vegetable cooperatives in the Zhejiang province (China) indicate that the distribution of ownership rights, decision rights, and income rights in a farmer cooperative is quite skewed towards a small proportion of members. Several governance practices by cooperatives are not in line with the requirements specified by the Law. [EconLit classification; D210; Q130].

Governance Structure of Chinese Farmer Cooperatives: Evidence From Zhejiang Province

This article empirically tests the hypothesis that cooperative boards of directors and board size, specifically, can influence firm performance. Most existing studies of cooperative governance rely on qualitative data to draw inferences; however, this chapter uses several USDA data sets and a survey of co-op managers to determine whether above-average board size has a negative impact on co-op performance. This approach is comparable to those found in the corporate governance literature; however, it contributes to the cooperative literature by providing statistically-based findings on optimal board size. Specifically, this study finds that additional board members do eventually reduce some measures of performance; however, board size must be quite large.

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Cooperative Financial Performance and Board of Director Characteristics: A Quantitative Investigation

Cooperatives are under increasing pressure to redeem the equities of former and overinvested patrons. This report discusses the issues concerning equity redemption and describes alternative equity redemption plans and methods that can be used to improve or facilitate redemption. Trade-offs between cash patronage refunds, redemption, and growth are examined, and methods for distributing cash benefits to patrons are compared. Legal and tax aspects and board responsibilities are reviewed, and the influences of federated cooperatives and lending institutions are considered. The impact of proposed mandatory redemption programs is evaluated, and procedures for adopting a voluntary redemption program are detailed.

Equity Redemption: Issues and Alternatives for Farmer Cooperatives

It has been nearly 20 years since a comprehensive study of agricultural cooperatives’ equity redemption practices was conducted. This report, based on 1991 survey data, provides an in-depth analysis of this unique cooperative practice. The study evaluates the importance of cooperative principles in carrying out equity redemption programs and discusses the frequency of use and characteristics of systematic and special equity redemption programs. The primary emphasis is on centralized cooperatives, although federated and mixed membership cooperatives practices are also evaluated.

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Equity redemption and member equity allocation practices of agricultural cooperatives

The Changing Financial Structure of Farmer Cooperatives

The use of marketing agreements adds elements of marketing coordination between members and their cooperatives. Marketing agreements used in this study included both marketing contracts signed with members and bylaw provisions that required members to market with their cooperative. Type of product marketed and related marketing services had a strong influence on the level of agreements. Except for dairy, cooperatives with marketing agreements had a greater proportionate investment in assets, especially fixed assets, than other cooperatives and were more likely to use long-term sales contracts with their customers. Dairy cooperatives had a range of bargaining and marketing relationships with their members that created a more complex asset investment relationship.

Roger A. Wissman

Papers

Equity Redemption: Issues and Alternatives for Farmer Cooperatives

Equity redemption and member equity allocation practices of agricultural cooperatives

The Changing Financial Structure of Farmer Cooperatives

The Changing Financial Structure of Farmer Cooperatives

Marketing Coordination in Agricultural Cooperatives