COOPERATIVE ORGANIZATION BY-LAWS. 5 



savings for its members. If the farmers, through cooperative col- 

 lective bargaining, are able to effect economies in the matter of the 

 sale and distribution of their products and the purchase of their 

 supplies, to that extent each member is benefited by his proportion 

 of the savings. If the organization takes out only what is necessary 

 to cover the cost of operation and to provide adequate maintenance 

 and reserve funds, and prorates the balance among the members and 

 other patrons, in accordance with the amount of patronage which 

 each has given the organization, it is believed that it is not being con- 

 ducted for profit. In that case the so-called "patronage dividend" 

 is only a refund to the member or patron of what the year's business 

 experience has demonstrated to be an overcharge for services rendered 

 the member. In this way the member makes savings only and the 

 association never can make profit. 



DEALING WITH NONMEMBERS. 



If an organization handles the products of both members and non- 

 members, and prorates any surplus it may accumulate among the 

 members only, it is neither strictly mutual nor nonprofit and therefore 

 does not measure up to the requirements of section 6. It follows 

 that an organization transacting business with nonmember patrons 

 must deal with such patrons on the same basis, with respect to its 

 charges for services rendered and the distribution of savings effected, 

 as it does with its members. 



The test of mutuality and equality is to be found in the fact that 

 the association does not charge the nonmember patron for services 

 rendered to him more than the actual cost of such service, including 

 his prorata part of all overhead expenses. This must be so, or 

 otherwise a small group of farmers could organize an agricultural 

 association, and, by doing a large business with nonmembers, make 

 large profits for themselves. It is thus seen that section 6 makes it 

 obligatory for every organization, desiring to secure its benefits, to 

 treat all patrons alike, in the matter of charging for services rendered 

 and distributing savings made. 



The necessity for mutuality and equality, exacted by section 6, 

 makes it highly desirable, if not obligatory, to have all patrons enrolled 

 as members, as this removes any doubt which might otherwise exist 

 as to whether or not the organization complies with the provisions of 

 section 6. This presents a problem of some difficulty, for there may 

 be instances where a nonmember desires to deal through an organiza- 

 tion without becoming a member. The best way to meet the dif- 

 ficulty is to make it as easy as possible for anyone eligible to mem- 

 bership to unite with the organization. Then if such person does not 

 want to become a member, it may be advisable for the association to 

 refuse to act as his agent. 



