4 BULLETIN" 547, U. S. DEPARTMENT OF AGRICULTURE. 



condition of affairs is the fact that only within the last few years 

 have the laws of the various States made specific provision for the 

 organization of truly cooperative associations, and even at the 

 present time a large number of States do not have special laws for 

 this purpose. The present cooperative laws of some of the States are 

 so general in nature that organizations formed in accordance with 

 them do not necessarily embody the underlying principles of coop- 

 eration. Therefore a large number of farmers' organizations have 

 been formed under general corporation laws. Many organizations 

 that have been formed under general corporation laws might be re- 

 organized under cooperative laws, where such laws have been passed, 

 with benefit to the members. 



Among the general public there is not a clear conception of the 

 differences between the cooperative and noncooperative forms of 

 organization, with the result that noncooperative organizations 

 frequently are called cooperative. Many of these associations have 

 been started by a few persons and are operated for their profit. 

 In support of the practice of paying large stock dividends it usually 

 is stated that, since the stockholders are the ones who are taking the 

 risk and will have to stand any losses that may be encountered, 

 they are entitled to all the profits. Organizations which set aside 

 an adequate reserve to cover any reverses that are likely to be en- 

 countered, protect its stockholders. Such organizations are in a 

 position to distribute the profits on a patronage basis after paying 

 the stockholders a stock dividend that represents a fair rate of inter- 

 est on the money invested. In a noncooperative capital-stock com- 

 pany there is always danger of the ownership of capital stock be- 

 coming centered in one or a few individuals. The men in control 

 may not be farmers, or if they are, they may retire from business 

 or move to some other locality, with the result that the men who 

 patronize the organization have no hand in its management. 



The incentive to buy up a large amount of the capital stock is 

 removed by limiting the stock dividend to a fair rate of interest 

 on capital invested, while the limitation of the number of shares a 

 member may own effectively provides against the possibility of the 

 stock coming into the hands of a few. Some organizations also 

 place restrictions on the transfer of stock in order to keep the shares 

 in the possession of patrons of the association. 



The separation of farmers' organizations in the United States into 

 cooperative and noncooperative groups is by no means a simple 

 task. Some authorities on cooperation insist that an organization 

 must meet all the requirements laid down for cooperative organiza- 

 tions before it can be classed as such; on the other hand, there are 

 persons who class all farmers' organizations as cooperative. If the 

 former method is followed, a large number of the farmers' organiza- 



