Financing a Cooperative Organization 85 



ties as contract shippers, but who are not stockholders 

 in the organization. These shippers are likely to become 

 dissatisfied when they learn that a large surplus earning 

 has been accumulated above the cost of operation. The 

 payment of high dividends reduces their proceeds and 

 enriches the growers who have money invested in the 

 organization but who may not have contributed to its 

 success except in the original investment. Another 

 danger in the stock corporation is that the farmers be- 

 come dissatisfied after receiving liberal dividends on their 

 stock when business conditions are such that a dividend 

 cannot be declared. The stock corporation that has had 

 to organize for pecuniary profit can still bring to its mem- 

 bers many of the advantages of the cooperative plan by 

 refusing to pay dividends on the stock as most of the 

 citrus-fruit associations do, or at least by paying a stock 

 dividend not in excess of the customary rate of interest. 

 Any other policy unless carefully guarded is likely to be 

 followed by a loss in the confidence and support of its 

 members and by the ultimate failure of the association. 



A farmers' organization that has been chartered under 

 the corporation laws for pecuniary profit stands on a 

 dangerous foundation because the temptation is always 

 great to pay large dividends on the stock when surplus 

 earnings have been accumulated. An organization that 

 is formed on this basis under the guise of the cooperative 

 plan may prove a menace to the solution of the agricultural 

 problem. If it operates for profit, it is likely to discourage 

 a legitimate cooperative movement. The average farmer 

 has not sufficient information to discriminate between 

 the different kinds of organizations, and he is apt to judge 



