Member Economic Participation

4. Member Economic Participation

The third principle states that members contribute equitably to, and democratically control, the capital of their co-operative. Members provide the capital, and they decide together how the surplus is used.

This principle covers three linked ideas:

1. Members provide the capital. The capital of a co-operative comes mainly from its own members, through the share capital they subscribe and their deposits and savings. Because the members themselves finance the society, they retain ownership and control of it. At least part of that capital is usually the common property of the co-operative.
2. Limited return on capital. If members receive any return on the capital they have subscribed as a condition of membership, that return is limited. Capital is treated as a servant of the society, not its master — a co-operative exists to serve its members, not to reward investment with unlimited profit. This is a deliberate check that keeps the profit motive from taking over.
3. Democratic use of surplus. Any surplus (the excess of income over expenditure) is used, as the members democratically decide, for purposes such as: developing the co-operative (often by building up reserves, part of which is indivisible); benefiting members in proportion to their transactions with the society (for example, a patronage bonus or dividend based on how much a member used the society's services, not on how many shares they hold); and supporting other activities approved by the membership. …