Ownership, Governance and Related Trade-Offs in Agricultural Cooperatives

Abstract

Cooperatives represent a very important organizational arrangement in world food and agriculture.1 A recent, in-depth study of these organizations in all European Union (EU) Member States and selected non-EU OECD countries reveals that there exists not a single country in the world with an advanced food and agriculture system, in which agricultural cooperatives do not play a key role.2 However, a common misconception is that all agricultural cooperatives are the same.3 Yet, even a scant inspection of the extant literature reveals that this is not the case.4 Advances in the theory of the cooperative firm during the last 30 years have shown that cooperatives may differ significantly with respect to their organizational architecture.5 The term organizational architecture refers primarily to two key questions any institutional arrangement has to answer in an efficiency-maximizing way. First, which groups of patrons should be the owners of the organization and, second, how does the organization distribute ownership rights to its owners?6 Based on the single criterion of whether or not nonpatrons are entitled to become owners of the cooperative, we observe more than a few very different types of agricultural cooperatives.7 Considering also corporate governance choices in our inquiry, we find that agricultural cooperatives adopt one out of the four basic corporate governance models or any of the corresponding var-