Revolving Cooperative Equity - a Generation of Misunderstanding

About mid-semester each fall, I introduce to my undergraduate students the general topic of “cooperative finance.” By this time, the students have already been exposed to cooperative principles and have a basic-level grasp of operational practices. As I begin my lecture on revolving cooperative equity, one can tell by the perplexed expressions on the students’ faces that my message is not being clearly received. Forgetting for the moment my instructional deficiencies, one presumes that the subject is unusually complex or confusing. As college sophomores and juniors, these students associate with the terms “equity capital” those monies generated by corporations through their direct sale of common/preferred stock to prospective private investors. As these students soon discover, the acquisition and maintenance of adequate equity capital by cooperative businesses is quite a different matter. The cooperative peculiarities are both numerous and varied. They comprise the basis for a generation of misunderstandings with regard to cooperative operations and they account, in large part, for the confused looks on the faces of my agricultural economics students. The objective of this discussion is to point out those major cooperative peculiarities as they relate to the generation and maintenance of equity capital. We shall discuss reasons why a cooperative’s equity capital base must continue to grow and alternative means for securing this growth. Finally, we shall address a basic cooperative conflict that ultimately evolves between a cooperative’s operational needs and its philosophical underpinnings.