The U.S. Department of Agriculture defines cooperatives as “user-owned and controlled business from which benefits are derived and distributed equitably on the basis of use.” This definition implies that cooperatives are owned by users who are customers. These users are also members, in general, and because they derive the benefits of membership, they are also called patrons because the economic benefits derived from the business done by them as a customer of the cooperative—referred to as patronage—are distributed proportionately based on that patronage. This gets complicated! Being a customer implies that you are also a patron (participate in economic benefits), owner (participate with equity investment), and member (participate in setting policies and governance). The overall purpose of a cooperative, which is often embedded in its mission statement, is to meet the needs of the customer using the cooperative. Patronage, ownership, and control are means to the end. The International Cooperative Alliance (ICA) defines cooperatives as, “an autonomous association of persons
united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.” This definition is wider than the U.S. Department of Agriculture definition in that it encapsulates social and cultural purposes for cooperatives. Another way to think about the relationships implied in this definition is to consider how members participate in the cooperative. Cooperatives and mutuals are participatory organizations.