132 



the ass()ciati()n is both a selhng' and a pro(hicing' concern, the 

 dividends may be on both raw material dehvered and on goods 

 purchased by the patrons." The law provides that no corporatioi 

 or association doing business for profit shall be entitled to the 

 use of the term "cooperative" as part of its corporate or Inisi 

 ness name unless it has complied with the provisions of the act. 



FURTHER DIFFICL LTIES IX THI-: STOCK CORPORATION' I'OR.M OF 

 ORC.AXIZATIOX. 



One of the common difficulties in a so-called cooperative asso- 

 ciation formed as a stock corporation results from the payment 

 of dividends on the paid-in capital above a fair interest for the 

 use of the capital, esjiecially where the capital contributed by the 

 members is not proportional to their individual shipments. The 

 tendency in such organizations is to pay high dividends on the 

 stock. The stockholders generally demand an unusual earning 

 on the capital contributed. They acquire the dividend habit. 

 They deduct an amount from the proceeds from the product of 

 all members, or from the earnings of the company, to pay the 

 dividend, before returning the proceeds to the growers. In some 

 fruit growers' organizations, dividends of 20. 30, or even 50 

 per cent have been paid on the capital st<^ck. 



The difficulty over the payment of dividends usually arises 

 with a member who is a small stockholder and at the same time 

 a large shipper, or when a stockholder ceases to be an important 

 shipper. A grower becomes dissatisfied when he realizes that the 

 payment of a profit to capital, whether taken from the proceeds 

 of his fruit, or made as an earning on his purchases, are used to 

 enrich a stockholder who has mpney invested in the corporation 

 but who has not contributed to its success except in the original 

 investment. Another source of trouble in the stock corporation 

 is that the grower becomes dissatisfied after receiving a liber.ii 

 dividend on his stock, if the business condition of the organiza- 

 tion does not warrant its continuerl {payment. In llie citrus in- 

 dustry these difficulties have usually been avoided 1)\- i)a\ing no 

 dividends on the capital, or at least a dividend not in excess of 

 the customary rate of interest. 



A farmers' organization that has been organized under the 

 usual stock corporation laws, is on an uncertain foiuidation, not 

 alone from the lack of control of the mcmbcrshiix but also be- 

 cause of the conflict between the capital and the i)ro(hict ot tlic 

 members whenever the proceeds derived from the latter are re- 

 duced tf) pay an uimsual rate of interest on the capital contributed. 



There are many so-called coiiperative organizations (shrewdly 

 formed ) that make an earning for the corporation on the product 

 of the grower by retaining the control of the facilities through 

 wliicli the growers' fruit is hanfjled. The packing houses may be 

 coiitrollcd l)y the organizers and a large dividend jiaid out of the 



