8 BULLETIN 394^ U. S. DEPARTMENT OF AGEICULTURE. 



that the average manager secured by cooperative stores lacks the 

 business ability necessary for the management of more than one store. 

 Hence, although the policy of establishing branches is right in prin- 

 ciple, as shown in numerous cases under private and corporate man- 

 agement, notably the well-known chain stores, the results of this 

 survey would indicate that a cooperative store should consider the 

 matter with the greatest care before undertaking the establishment 

 of branches. 



It will be noticed that most of the stores have the usual officers 

 and board of directors. The most conmion number of directors is 5 

 and the usual term of office is 1 year. Questions directed upon this 

 policy seem to indicate that the 1-year term does not give sufficient 

 stability of policy. Of course, it frequently happens that old direc- 

 tors are reelected; but in many instances new directors are elected 

 at the end of each year, and it is stated that by the time they leave 

 office they are just beginning to gain the experience necessary in order 

 to be of real value to the association. In the case of one of the most 

 successful stores many of the officers and directors had served for 

 over 20 years, and the by-laws provided that only one-third of the 

 directors should be elected annually. Even if new directors were 

 elected, which did not often happen, at least two-thirds of the board 

 were always made up of experiesnced men. It was found that in some 

 associations the president was elected directly by the members and 

 was ex officio member of the board of directors. In the majority of 

 cases, however, he was elected by the members of the board from 

 among their number. It would appear that on the whole the latter 

 plan makes for greater efficiency. 



It is a common practice for the by-laws to provide an auditing com- 

 mittee of two or three, to be elected from among the membership at 

 its annual meeting. More rarely the auditors are appointed by the 

 board of directors. The experience gained by those making the sur- 

 vey leads to the conclusion that the auditing committee should act 

 as a connecting link between the membership and the management, 

 keeping check at all times upon the business practice of the associa- 

 tion and counseling the directors whenever the condition of the busi- 

 ness appears to demand special attention. This would indicate that 

 the auditing committee should be elected by the members at their 

 annual meeting and be made directly responsible to them. 



As will be more fully discussed in a later section, the results of the 

 survey bring out very clearly that one of the greatest weaknesses of 

 cooperative stores lies in the lack of thoroughness in their audits. 



OPERATING ORGANIZATION. 



The business organization of a cooperative store does not differ 

 materiallv from that of anv other retail store. The business is usuallv 



