Financing a Cooperative Organization 83 



THE PAYMENT OF DIVIDENDS 



There are several methods used in the distribution of 

 surplus earnings in farmers' organizations. In the asso- 

 ciations that have been formed as stock corporations 

 under the ordinary corporation law for pecuniary profit, 

 the earnings may be apportioned entirely to the stock; 

 or, if the corporation desires to operate for the benefit 

 of the members, it may pay a fixed dividend to the stock- 

 holders, set aside a reserve fund, and a fund to cover 

 depreciation, and then distribute the balance of the sur- 

 plus to the members in proportion to their shipments or 

 dealings with the corporation; or, the corporation may 

 decide to pay no dividends on the stock, and distribute 

 the entire surplus in proportion to the dealings of each 

 member with the association. When the association is 

 a non-profit corporation, the operations are conducted 

 at cost, and the entire surplus, after a reserve fund is 

 set aside, is prorated to the members in proportion to 

 their dealings with the association. 



The payment of high dividends on the capital stock 

 has caused the downfall of many farmers' organizations 

 that are formed as stock corporations, though they may 

 conduct many of their operations on cooperative principles. 

 These organizations are not cooperative, though they may 

 include some cooperative features. They are stock com- 

 panies organized and managed by farmers. The stock- 

 holders retain a proportion of the surplus earnings for 

 money-making purposes or to compensate them for the 

 risk of investing their capital just as is done in any other 

 stock corporation. In some of the farmers' elevator 



