Private Policy Implications
The typology described in this paper suggests that agricultural cooperatives are
increasingly relaxing some of the structural constraints imposed by the traditional model. In
particular, restrictions on traditional cooperative ownership rights are attenuated to provide
members with incentives to invest or to acquire non-member capital. This in turn suggests that
departures from the traditional model are motivated by the need to ameliorate perceived financial
constraints.
Our analysis of the emergence of non-traditional cooperative models also suggests that
the solution of perceived financial constraints entails some degree of organizational redesign
rather than the extreme solution of conversion or demutualization. That is, ownership rights
related to residual return and control rights of agents tied contractually to the firm are redefined
and reassigned. However, when restrictions on traditional cooperative ownership rights are
attenuated, new organization costs may surface such as principal-agent costs, collective decision
making costs, and influence costs. More specifically, members may have to share profits and
eventually control rights with outside investors who are not necessarily patrons of the
cooperative and thus may have diverging interests. Conflicting goals between maximizing
returns to investors and maximizing returns to member-patrons may occur as a result.
In other words, there are trade-offs involved in organizational redesign that cooperative
leaders should be aware of. Table 2 presents some advantages and disadvantages associated with
each non-traditional model. It is intended to facilitate a better informed strategic decision
making process between cooperative managers, directors, and members in choosing among
alternative cooperative ownership structures.