Profit seeking lawyers, Cooperative-ignorant judicial system, and a cooperative that lost its way: A Legal Perspective of the De-Mutulization of the historic Consumers Cooperatives in Israel

The once glorious consumers cooperative chain was de-mutualize in 2002 at a point of great profitability – allowing its 35,000 members to receive a market value of the cooperative's shares – 60,000 NIS (app 15,000 Euros)... [ view full abstract ]

The once glorious consumers cooperative chain was de-mutualize in 2002 at a point of great profitability – allowing its 35,000 members to receive a market value of the cooperative's shares – 60,000 NIS (app 15,000 Euros) each.
The de-mutulization of the consumers' cooperative chain left the Israeli market with only profit maximization retailers which might explain the unafordable prices which were one of the main themes of the 2011 social protest.

The Israeli consumers' cooperative movement first established in 1916, grew in the 1930's and 1940's starting small grocery stores both in rural areas and in the cities and went through many changes in the 1960's and 1970's. In its prime, the cooperative chain had more than 200 stores. Towards the end of the 1970th a new generation of CEO's took over – most of which did not come from a cooperative background and brought different methods of operation. In 1991 a share holders' company owned primarily by the cooperative Society decided to get into the stock market.
Since The Israeli law – The Cooperative Societies Ordinance does not require operating according to the cooperative values and principles – there were no legal limitations that would coerce the cooperative society to maintain its historic cooperative nature.
In 1998 a group of lawyers filed a class action arguing that the cooperative society should be de-mutulized and the market value of its shares should be given to its members. Since according to the Cooperative Societies regulations in a consumers' cooperative society members are entitled only to a nominal value of their shares – a petition was filed to the Supreme Court in order to instruct the Cooperative Societies Registrar to change the society's classification, arguing it is no longer a consumers' cooperative since all its business activities are held by its shareholders company.
The Supreme Court Judges decided the members deserve to get the market value of their investment – unaware to the fact that members' share are not an "investment" and that the goals of the cooperative society never included making profits.
But the argument was not without merit. The cooperative society at that point lost all cooperative characters and it didn't even know who its members were. As of that it was impossible to lead the Supreme Court to acknowledge the importance of consumers' owned stores and it ordered its de-mutualization - a decision all Israelis are still suffering from.