Co-operative or limited liability company? : a comparative analysis in a Maltese setting

Abstract

Purpose: The objective of this study is to compare the co-operative and limited liability company models from the regulatory, corporate governance, social vs. commercial and cultural perspectives, in order to assess which model is relatively more advantageous. Design: This objective was achieved by carrying out thirty-two semi-structured interviews, twenty of which were carried out with co-operative representatives and twelve with experts in both co-operative matters and the accountancy field. Findings: The study indicates that LLCs have a strong foundation in the Maltese business environment and are more appealing to the individualistic attitude adopted by local stakeholders. On the other hand, co-operatives still strive for a position within an environment that is not sufficiently aware of the potential of the co-operative model. Conclusion: This study concludes that the LLC is more advantageous from three perspectives, these being the regulatory, corporate governance and cultural ones. However, the co-operative is clearly superior in the attainment of the appropriate balance between social and economic values. Therefore, the ultimate justification of entities opting for the co-operative rather than the LLC model varies with the extent to which social values need to be brought into the business equation. Value This study hopes to provide useful insights into the reasons behind the slow growth in the Maltese co-operative movement in comparison with that of LLCs. Recommendations include reforming the restrictive co-operative legislation; rethinking of the role of the co-operative Regulator; dealing with the deficiencies of the committees of management; developing a code for good corporate governance for co-operatives; introducing social audits; and further promoting and supporting co-operatives particularly in the educational field.