18 BULLETIN 860, U. S. DEPARTMENT OF AGRICULTURE. 



Sec. 4. Control of help. — He shall have control over and may employ and dis- 

 miss all agents and employees of the Association not specially employed by the 

 Board of Directors. 



Xote. — The principal responsibility for success falls upon the Manager, and his 

 power should be limited as little as possible. If he can not be trusted to administer 

 the details of all the ordinary and usual business operations, he should be replaced 

 with a Manager who is worthy of full confidence. The Manager and the Board of 

 Directors should work together, but meddling on the part of individual members 

 should not be tolerated. When cooperative elevators become involved in financial 

 difficulty the cause is frequently due to speculation, not in futures nor always inten- 

 tionally, hut simply through failure to know each day the exact status of grain 

 contracts, purchases, sales, and hedges. For this reason the daily grain statement 

 in section 2 should be insisted upon. 



Article VIII. — Earnings. 



Section 1. Apportioned. — At the end of each fiscal year the total net earnings 

 of the Association which remain over and above all expenses and a reserve for 

 depreciation shall be apportioned in the following manner : 



(a) Surplus. — There shall be appropriated for the purpose of creating a 

 surplus not less than [ten] per cent of the net earnings until such surplus shall 

 equal at least [fifty] per cent of the capital stock paid. 



(b) Dividend on capital stock. — There shall be appropriated for the purpose 

 of providing a dividend on capital stock a sum which shall equal but not exceed 

 [six] per cent of the amount of capital stock issued and outstanding. 



(c) Educational. — There may be appropriated for educational purposes and 

 for promoting cooperation and improvement in agriculture a sum equal to [five] 

 per cent of the net earnings. 



(d) Patronage refund. — The remainder of the net earnings shall be appor- 

 tioned upon patronage in accordance with the method stipulated In section 2. 



Sec. 2. Method of refund. — The earnings upon grain operations, the earnings 

 upon miscellaneous products, and the earnings upon supplies and merchandise 

 operations shall be segregated into groups (a), (b), and (c), respectively. 

 Additional groups shall be established only as are necessary to provide for vari- 

 ous commodities handled on widely varying net margins. Special transactions 

 handled on the basis of actual cost of service shall be excluded in computing 

 patronage refunds hereunder. 



(a) Grain rate. — The total net earnings which accrue from grain operations 

 after deducting an equitable proportion of all expenses and the appropriations 

 provided for in section 1 shall be divided by the total number of bushels of grain 

 of all kinds bought by the Association during the year. The result shall be the 

 patronage refund rate per bushel to be applied to grain purchased from members. 



(b) Miscellaneous products rate. — Patronage refund rates for other products 

 bought by the Association shall be determined in the same manner as provided 

 for grain except that they may for convenience be determined upon the basis 

 of money value, instead of per unit, at the discretion of the Board of Directors. 



(c) Mercluindise rate. — The total net merchandise earnings which accrue 

 from merchandise and supplies operations after deducting an equitable pro- 

 portion of all expenses and the appropriations provided for in section 1 shall 

 be divided by the total volume in dollars of the merchandise sales during the 

 year. The result shall be the patronage refund rate in per cent to be applied 

 to merchandise sales. 



Note. — When various kinds of products and supplies or merchandise are handled 

 it may be desirable to establish different rates of refund based Upon differences in 

 margins and handling costs. In tbis case those commodities which carry the same 

 or nearly the same margins and handling costs should be grouped and refund rates 

 established to apply to each group. It will not be necessary except in rare instances 

 to establish different rates of refund for the different kinds of grain handled. It is 



