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Key features of traditional cooperatives
- Open membership
- Producer- owned
- Low entry fees
-No or limited return on capital
- No capital gains for members
- Capital often not proportional to patronage
- Each member has one vote
Problems of traditional cooperatives
- Horizon problem - diffucltly in finding capital for growth
- Portfolio problem- diffucltly in rising debt capital
- Free rider
- Influenced cost problems
- control problem- same voting rights
New Generation cooperatives (NGC)
Definition
Cooperatives that are structured to deal with the limits and problems of the traditional cooperatives.
NGC key features
- Members supply capital in proportion to patronage
- There is potential for capital gain on the shares
- There is no substaintial unallocated reserves
- Membership and production may be limited
- New members have to pay for share of capita
- Voting rights will be proportional to patronage and capital
- Have contractual rights and obligation to deliver particular quantity and quality of product .
High capital requirements to finance growth
Example of NGC
Tatua Dairy Cooperative.
-Membership is closed
-Milk supply entitlements have been allocated to existing members depend on the amount of milk solids produced.
-New members can join if they are in the catchment of Tatua and subject to being able to purchase a MSE from existing members.
-The MSE constrains the level of growth in milk that can be supplied to Tatua and which will receive the full payout.
other examples Fonterra and Ravensdown
Example of Traditional cooperative
Westland dairy-
Open membership
Most of the assets unallocated and there are upper limits to shareholders
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