They provide a model we can all look to for the future.
The great recession we've been going through will lead to nothing less than a new era in the economy and culture of America, a time of vigorous prudence and ethical self-regulation. That's the prediction of the writer Kurt Andersen in a recent cover story for Time magazine. Like many cultural prophets, Andersen sees us at the end of the age of limitless greed, McMansions and credit default swaps. He doesn't know what will take their place, but he says he's sure our innovativeness will come through for us.
His cultural reckonings may be true, but he needn't have such a nebulous sense of our economic and cultural possibilities. We don't need vast innovations. We already have a business model--the cooperatively owned business--that has been proven to embody just the kind of corporate social responsibility Andersen espouses, in times of both crisis and prosperity.
A cooperative is a democratically run business whose members are also its owners. Co-ops aren't just for alternative groceries. There are some 29,000 of them in all sectors of the American economy, a recent study by the University of Wisconsin found. They have revenues that exceed $3 trillion and employ 856,000 people. Household names among them include Ace Hardware, Ocean Spray, the Associated Press and Sunkist.
Many co-ops exist to bring services to millions of people who would otherwise lack them. Much of rural America, geographically marginalized, didn't have electricity until residents formed utilities cooperatives during the Great Depression. In the 1970s, communities joined together to create food co-ops, the only stores that would stock natural and organic foods. And in many major U.S. cities, housing cooperatives provide almost the only way people with lower incomes can afford to own homes.
All these cases reflect the basic value that guides cooperatives, a value that has set them apart in the current economic crisis. To put it simply, they exist to serve people's needs rather than to maximize profit.
With their shared ownership, cooperatives serve their members' needs democratically. They offer each member-owner a vote in board elections and a say in the running of the business, thus establishing a greater degree of mutual responsibility and accountability than in investor-owned companies. Member-owners answer to one another rather than to outside investors, and that interrelationship tends to minimize fraudulent, deceptive and damaging behavior.
Investor-owned firms, on the other hand, operate with built-in conflicts of interest as investors dictate the direction of the business and often sacrifice quality or ethical standards to guarantee higher returns. This happened recently on an unthinkable scale in finance and housing. Yet the investors in companies like AIG ( AIG - news - people ) have escaped with a clean conscience, because they don't feel any direct connection to the foreclosures on people's homes that AIG's actions wrought.This wouldn't--and didn't--happen with cooperatives. Co-ops don't have an inherent conflict between their investors and the customers they serve. Their owners are the people who use their services. This personal involvement makes gambling with their fate much less attractive. The only way an individual's fortune will grow is if the cooperative grows; a loss for the cooperative is a loss for each individual. Co-op executives don't have the incentive to pilfer their businesses that executives at investor-owned firms do.
More often than not, co-ops are locally owned and run. For that reason, too, their owners have to bear witness to the effects of their decisions. This isn't usually the case with investors who own shares in public corporations from a geographical and cultural distance.
Paul Hazen is the president of the National Cooperative Business Association.
