149 



active producers, the membership ceasing to exist when the pro- 

 ducer withdraws from the organization, and whose earnings are 

 distributed on the basis of the product, rather than on the capital 

 contributed by each member, after a fair rate of interest is paid 

 for the use of capital actually employed in the business, if any, 

 and other overhead charges are deducted. A co-operative organ- 

 ization, therefore, is not a corporation in w^hich the capital is con- 

 tributed primarily in order that it may earn a profit ; nor one 

 composecl of producers and non-producers ; nor one in which the 

 producer's product is handled by a corporation for the benefit ot 

 the stockholders rather than for that of the members ; nor one in 

 which the producer's product is handled by a corporation for the 

 benefit of the stockholders rather than for that of the members; 

 nor one in which the membership is not under the control of the 

 organization ; nor one in which the members do not actually con- 

 trol the organiza'tion. It is an association of farmers who unite 

 in an efifort to handle their common interests through an agency 

 which is controlled by them, on the principle of an industrial 

 democracy, and exclusively for their benefit. 



FORM.S OF COOPERATIVE ASSOCIATIONS. 



A cooperative association may be incorporated as a capital 

 stock corporation or as a non-profit corporation without capital 

 stock. If formed as a capital stock corporation it may still be 

 legally cooperative if the laws under which it is formed permit 

 the members to manage its affairs along cooperative lines, or if 

 the statute provides the method of voting, the method of trans- 

 ferring stock, the limitation of membership and the distribution 

 of earnings according to cooperative principles. There has been 

 little effort by the states to enact laws that will permit the organ 

 ization of purely cooperative associations of farmers. It is 

 therefore impossible in most states for an association to be form- 

 ed that can operate securely along cooperative principles, though 

 as a matter of fact many associations so formed do, by the con- 

 sent ()f the stockliolders, actually operate cooperatively. 



A STOCK CORPORATION NOT THE FORM FOR A COOPERATIVE 

 ORGANIZATION. 



The stock corporation as defined by the statutes of most states 

 is not the form under which to incorporate a farmers' business 

 organization, though most of the so-called cooperative associa- 

 tions have been incorporated under the stock corporation statutes. 

 The stock corporation laws have been enacted primarily to meet 

 the needs of capital, not primarily for the benefit of those 

 who may use the facilities of the corporation. The mem- 

 bership in such organizations is not under f-egal control, 

 because the right to sell the stock is a legal incident of -its 



