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Frances Perkins, Secretary
Isador L ubin, Commissioner


Organization and Management o f Consumers’
Cooperatives and Buying Clubs

B ulletin

lo. 665

(Revision of Bulletin No. 598)

W A S H IN G T O N : 1941

For sale by the Superintendent o f D ocum ents, W ashington, D . C.

Price 15 cents



P e r k i n s , S e c r e ta r y


I sa d o r L u b i n ,
A. F.

H in r ic h s ,

C om m issioner

A ssista n t C om m issioner

Donald Davenport, Chief, Employment
and Occupational Outlook Branch
Henry J. Fitzgerald, Chief, Business
Management Branch
Hugh S. Hanna, Chief, Editorial and

Aryness Joy, Chief, Prices and Cost of
Living Branch
N. Arnold Tolies, Chief, Working Conditions and Industrial Relations
Sidney W . Wilcox, Chief Statistician

Herman B. Byer, Construction and
Public Employment
J. M. Cutts, Wholesale Prices
Swen Kjaer, Industrial Accidents
John J. Mahaney, Machine Tabulation
Robert J. Myers, W age and Hour
Florence Peterson, Industrial Rela­
Charles F. Sharkey, Labor Law In­


Boris Stern, Labor Information Bul­
Stella Stewart, Retail Prices
Lewis E. Talbert, Employment Sta­
Emmett H. Welch, Occupational Out­
Faith M. Williams, Cost of Living

Preliminary survey_______________________________________________________
P art 1.— Consumers’ cooperative buying clubs______________________________
Object and scope__________________________________________________________
Officers and committees__________________________________________________
Goods handled____________________________________________________________
Sources of supply---------------------------------------------------------------------------------------Distribution_______________________________________________________________
Division of net savings-----------------------------------------------------------------------------Larger possibilities________________________________________________________
P art 2.— Consumers’ cooperative associations______________________________
Preliminary organization work___________________________________________
First organization meeting_______________________________________________
Charter and bylaws_______________________________________________________
Rochdale principles---------------------------------------------------------------------------Rochdale practices___________________________________________________
Articles of incorporation_____________________________
Share capital_________________________________________________________
Loan capital__________________________________________________________
Amount of holdings in capital_______________________________________
Withdrawal of capital_______________________________________________
Return on share capital______________________________________________
Membership meetings____________________________________________________
Voting power and method of voting_____________________________________
Questions relating to initial financing and beginning of operations___
Capital requirements________________________________________________
Operating expenses__________________________________________________
Business location and premises_____________________________________
Employees of the cooperative___________________________________________
Store manager________________________________________________________
Other employees_____________________________________________________
Business methods and policies___________________________________________
Cash or credit?_______________________________________________________
Price policy___________________________________________________________
Delivery service______________________________________________________
Fidelity bonds or security guaranties__________________ ;____________





Buying of merchandise and sources of supply__________________________
Meeting competition______________________________________________________
Accounting practices______________________________________________________
Inventory and depreciation_________________________________________
Record of patronage_________________________________________________
N et savings and their disposal___________________________________________
General surplus reserve______________________________________________
Educational funds___________________________________________________
Savings returns or refunds on purchases___________________________
Other uses for net savings___________________________________________
Committee on education____________________________________________
Committee on grades and quality of goods________________________
Committee on audit and inventory_________________________________
Business management committee___________________________________
Educational work____________ :___________________________________________
Sources of cooperative information______________________________________
P art 3.— Appendixes_________________________________________________________
Appendix A .— Directory of cooperative leagues and wholesales_______
Cooperative leagues_________________________________________________
Cooperative wholesales______________________________________________
Appendix B .— Outline for survey of community_______________________
Appendix C.— Suggested bylaws for a cooperativebuying club________
Appendix D .— Suggested bylaws for a consumers’ cooperative asso­
ciation_______ - __________________________________________________________
Appendix E .— Typical bylaws of a cooperative burial association____
Appendix F.— Typical bylaws of a cooperative health association____
Appendix G .— Suggested form for annual financial report____________
Appendix H .— Citations of cooperative laws___________________________
Appendix I.— Text of Consumers’ Cooperative Act of the District of
Appendix J.— Consumers’ cooperation: A selected list of references__



U n ite d S tates D epartm ent of L abor ,
B u reau of L abor S tatistics ,
W a s h m g to n , J u l y



The Secretary of Labor:
I have the honor to transmit herewith the revision of a report
intended for the use of groups wishing to organize cooperative buy­
ing clubs or consumers’ cooperative associations on the Rochdale plan.
Respectfully submitted.
I sador L u r in , C o m m is s io n e r .
H o n . F rances P e r k in s ,

S ecreta ry o f L a b o r.



The present bulletin is a revision of Bulletin No. 598, issued in 1934
at the request of the Consumers5 Advisory Board of the National
Recovery Administration.
At that time, as is always true in times of depression, wage earners
were casting about for ways to make their shrunken incomes cover
the necessaries of life for their families. In such times, also, people
are more willing to accept new ideas and to try new ways. The co­
operative movement, banding people together in their purchases and
returning to them all of the savings effected by quantity buying,
seemed to offer possibilities, and workers became more and more
interested in it as a philosophy and as an economic measure.
Their requests to the Consumers5 Advisory Board as consumers
and to the Bureau of Labor Statistics as wage earners led to discus­
sions between these bodies and to a formal request from the Board that
the Bureau issue material that would be helpful to wage-earner and
other consumer groups desiring to undertake cooperative activities.
The Bureau of Labor Statistics, in the pursuance of its authority
under the act creating it, to “ acquire and diffuse * * * useful
information on subjects connected with labor, in the most general
and comprehensive sense of that word,55 had for many years been
collecting data regarding the consumers’ cooperative movement.
This information covered among other things, statistics of member­
ship and business, methods of operation, and causes of success or
The Bureau’s studies had shown that one of the most prolific causes
of failure o f cooperative associations—resulting in the loss of wage
earners5money, as well as in loss to the creditors of bankrupt coop­
eratives—was failure to organize on the proper basis, i. e., starting
without adequate understanding of the cooperative principles, with
unwarranted expectations as to the amount of savings likely to be
effected, without knowledge of business management, of how and
what to buy, and of proper accounting methods. All of these were
mistakes that could be avoided if proper information on an authori­
tative basis were forthcoming.
To provide that information Bulletin No. 598 was issued. In the
preparation of it, the Bureau drew not only upon its own fund of




information but also upon the practical experience of the Coopera­
tive League of the U. S. A. and its member associations.
The continuous demand for the report ever since its publication
has demonstrated both the need and the desire for information of this
kind. Bulletin No. 598, although reprinted a number of times to meet
that demand, is now out of print. The important changes in con­
ditions and in cooperative techniques that have taken place in the past
few years have rendered misleading and obsolete many of the sections
in the original report. It has therefore seemed desirable to revise
the bulletin so that it will deal with present conditions in a realistic
way. Accordingly the bulletin has been entirely rewritten and re­
arranged. The preliminary draft of the present report was submitted
to about 50 persons, within and without the cooperative movement,
who were qualified on the subject by experience and study. To these
persons, too numerous to mention by name, the Bureau wishes to
make grateful acknowledgment for the many very valuable sug­
gestions received.
I sador L u b in ,

C o m m is s io n e r o f L a b o r S ta tis t ic s .
J uly


Bulletin I'lo. 665 o f the
U nited States Bureau o f Labor Statistics

Organization of a cooperative association is probably easiest in
a group the members of which are personally acquainted. They
may be neighbors or persons bound by some fraternal or racial tie
which gives a sense of kinship, or members of the same labor union,
church, community center, or farmers’ fraternal or marketing or
other organization. On the other hand, in recent years the increas­
ingly widespread consumer consciousness has shown that it is entirely
possible for a cooperative to start among almost complete strangers.
This has been particularly true in urban areas. Indeed, a great
deal may be gained by convincing the community from the start that
membership in the cooperative is not limited to members of a
particular organization.
Before launching a cooperative business the group should meet
regularly for the purpose of studying and discussing the history,
methods, and possibilities of cooperation. Members of the group
should individually obtain as much information on the subject as
possible. This preliminary education1 has been found by experience
to be vital.
The best way to begin is with small study groups, which should
meet frequently in the homes of the members of the group. A dis­
cussion leader should be appointed from the group for each meeting,
and each member should be given some preliminary reading to do.2
Each member should participate in the discussion. A study group
which continues for 6 months or a year will bring about a continuous
increase in the members’ understanding and knowledge of coopera1For an exposition of methods and procedures in cooperative educational work, see
Cooperative Education, by J. P. Warbasse (New York, The Cooperative League, 167 West
12th St.).
2 For selected list of literature on cooperative subjects, see appendix J (p. 97).





tion. About once every 4 or 6 weeks there should be a joint meeting
of all of these small groups in the community, at which time some
common problem should be discussed. Finally, meetings should be
held at which the particular business enterprise to be undertaken
should be the main topic for consideration.
Prelim inary Survey

An advance survey of the proposed field is strongly urged before
any business commitments or activities are undertaken. This should
take into consideration (1) the nature and needs of the group to be
served; (2) local business and other conditions; and (3) the factors
to be considered in the selection of the cooperative enterprise—i. e.,
the possibilities (both advantages and disadvantages) offered by spe­
cific types of enterprise, and the cooperative resources and aids
available in each line.
The preliminary survey should lay the basis for two group
decisions: (1) The initial type of commodities to handle or services
to perform; and (2) whether there is a chance to establish a suc­
cessful store or other full-fledged commercial enterprise, or whether
it may be better to begin with the more informal cooperative buying
club which requires less capital, runs with lower expenses, and offers
fewer technical difficulties.
Nature and Needs of the Group

An association whose members are not familiar with the principles
and methods of cooperation is not on a sound basis. It cannot succeed
without men and women who understand the meaning of distribu­
tion for service. First emphasis should, therefore, be placed on
seeing that the members are imbued with these principles.
It is essential to ascertain what members may be counted upon to
help with the initial problems of organizing the business and what
types of leadership are available. Those most needed are persons
with organizing and teaching or speaking ability, with business
experience and judgment, with bookkeeping or accounting knowledge,
and with legal training.
Survey of Local Conditions

This part of the preliminary survey 3 should furnish the basis for
decision as to whether (1) there is a real need for a cooperative (i. e.,
whether some additional or new economic function could be per­
formed by a cooperative, or whether an existing activity could be
carried on more effectively on the cooperative basis, and (2) the
probable chances of success. Among the points this survey should
8 For outline of such a survey see appendix B (p. 54).



cover are the competition to be met (the existing business agencies
in fields feasible for a cooperative, and their volume of business);
ways in which the cooperative could improve upon the existing situ­
ation; the probable extent of the trading territory available to a
cooperative, and the probable volume of business; whether there are
any other cooperatives in the locality; 4 the probable number of per­
sons who would be interested in a cooperative; whether previous
cooperatives have failed in the territory and the causes of their fail­
ure; and the general characteristics of the community (number of
local clubs, literary societies, labor unions, farmers’ organizations,
whether the population is stable, existence of opposing factions or
cliques, etc.).
Considerations in the Selection of the Cooperative Enterprise

A basic consideration is the selection of the enterprise which will
be undertaken. Generally speaking, it is wiser for a new group to
start with a business activity for which a joint cooperative program
is already under way and in which it can be associated with other
cooperatives rather than to enter a field in which it will function
1. T h e c r e d it rm io n .—Credit unions are cooperative associations for
the encouragement of thrift and for making loans to their members.
They meet a real need in supplying loans at moderate rates to small
borrowers whose choice of sources of credit is very limited. A credit
union may be of very great assistance, also, as an adjunct to a co­
operative store. The machinery to assist in the formation of such
associations exists in the Credit Union Section of the Farm Credit
Administration, Washington, D. C., and in the Credit Union National
Association, Madison, Wis.
2. T h e g a so lin e fillin g s ta tio n .—Throughout the Middle West great
success has attended “ oil associations.” Their success has been due
to concentration of business at one point and to dispensing with
costly services. Bulletin No. 606 of the Bureau of Labor Statistics
(Organization and Management of Cooperative Gasoline and Oil
Associations) deals with this important field.5 The situation for
gasoline distribution has not been so favorable in the East or in the
far West, and today the margins generally are not so high as they
once were. However, a few eastern-city cooperatives have found it
advantageous to add a gasoline service to a store enterprise, or to
make the gasoline station the starting point leading up to a store.
4 If feasible, it is usually better for the prospective cooperators to add their purchasing
power to an organization already existing than to start another small enterprise.
5 This bulletin can be purchased from the Superintendent of Documents, Washington,
D, C,, at 5 cents a copy.



3. Other enterprises which might be considered are associations for
the provision of medical service, hospitalization, burial service, coal,
milk, housing,6 recreation, insurance, and restaurant or bakery
4. C o n s u m e r c o n tr a c ts .—Cooperative clubs may arrange for a defi­
nite discount on all purchases by their members from local trades­
men— clothiers and tailors, haberdashers, hardware and furniture
dealers, florists, druggists, bookshops, laundries, dry cleaners, and
others—and on mail-order goods.7 Savings made in this way should
be collected through the club, and at least part should be retained by
it in a fund that can later be used to finance a store. In other words,
this joint activity should lead to or supplement a store. Experience
has shown that clubs that confine themselves solely to contract
business do not make much progress as cooperative organizations.
5. T h e c o o p e r a tiv e s to r e .—In canvassing all possibilities, consid­
eration should be given to a program which begins with or leads
directly into the grocery or “general” store. I f the group favors the
starting of such a store, it is important to consider what commodities
most o f the group need and will buy, the quality and prices to which
they are accustomed, the sources of supply, and the commodities
on which a substantial saving can be made. In urban communities
the food store will usually be found most feasible, probably with some
incidental supplementary lines, such as electrical appliances, if these
are carried by the cooperative wholesale in that region. In the coun­
try it will often be advisable to include some farm supplies and
“general merchandise”—work clothes and shoes, underwear, notions,
and household supplies.
There are weighty considerations both for and against the selection
o f food as a starting point in cooperative activity. The margins are
small, and the competition is probably keener in this than in many
other lines. Some cooperative leaders earnestly urge new associations
first to enter other lines with greater possibilities of saving, such as
insurance, gasoline and oil, or, in rural sections, electric power.
On the other hand, a store has certain other decided advantages.
It lends itself readily to the type of neighborhood organization under
which cooperatives function best. Food is the greatest common need
and is the largest item in most family budgets. Even on the farm,
spending for consumer goods considerably outweighs spending for
farm supplies. Therefore, it is less difficult in this field to carry out
• Bulletin No. 608 o f the Bureau o f Labor Statistics (Organization and Management o f
Cooperative Housing Associations) can be obtained free from the Bureau while the
supply lasts, or from the Superintendent o f Documents, Washington, D. C., at 5 cents a
7 There is also a national cooperative organization from which many articles (clothing,
cosmetics, and household necessaries) are available on a mail-order basis, and which sells to
individuals as well as to groups.



the cooperative theory of supplying a “known demand” by organizing
people and a market before incurring the business liabilities which
are involved in supplying it. This is of special value for .safety in
the beginning stages. Food does not present the hazard of great
variation in season or in style, and one selection will meet the tastes
o f a fairly wide group. The interest of the women of the household is
more easily aroused if food is carried than would be true of many
other lines. For these reasons, the grocery store has been the tradi­
tional starting point of consumers’ societies in many countries, and
the Cooperative League of the U. S. A. urges the extension of whole­
sale service in this field. Because of these considerations, much of
the discussion of the business aspects of cooperatives herein relates
to food and general-merchandise stores.
The cooperative movement is not firmly established in any region
until local associations have combined to build strong central organi­
zations which the consumers control and which pool their buying
power, perform many common services, and may later go into pro­
duction to meet their needs. Before this is done the success of a
local isolated association is uncertain, and its continuous expansion
requires even greater effort. Considerable success has attended the
organization of cooperative wholesaling in the United States and
there are in existence a number of regional cooperative wholesales
which not only can act as sources of supply but are equipped to pro­
vide valuable assistance on merchandising problems. Any store
group which is organizing independently should, therefore, find out
(1) what recognized cooperative wholesale is acting in its territory; 8
(2) what commodities and services it handles, and what, if any,
manufacturing or processing it carries o n ; 8 and (3) whether the new
group is eligible for services and for membership in this wholesale.
Usually membership is open to any group (even though small)
organized under Bochdale principles. Some farmers’ wholesales,
however, limit their membership to farmers’ organizations or limit
the proportion of nonfarmer members.
8 F or a list o f cooperative wholesales and the commodities and services available through
them, see appendix A (p. 51).

Part 1.—Consumers’ Cooperative Buying Clubs1
Object and Scope

The consumers’ cooperative buying club is an initial step in cooper­
ative organization. Its immediate purposes are to study cooperation,
to train its members in cooperative methods, to improve the quality of
goods purchased by the members, and to build its capital through
saving its members’ money by the purchase of goods in quantities
sufficient to obtain lower or wholesale prices.
There are other objects of equal or even greater importance. Thus,
it is entirely within the club’s scope to stress the educational and
social function, so as to make the club a natural social center.
The club may exist under a number of conditions, each one of which
must to some extent alter its form and policy. It may be formed among
a group of neighbors, a group of factory workers, among salaried
workers in the large business houses of the cities, or among members
of religious or fraternal groups. In community-center groups where
self-help is taught and practiced, the conditions are favorable for the
growth o f cooperative organizations. Present indications are that
the buying-club idea is also obtaining considerable acceptance among
middle-class and professional people. Much of the new growth in
buying clubs is coming from this source. Whatever the source of mem­
bership, as the goal of t • buying club should be a cooperative store
or other commercial enterprise, it is desirable that its activities be de­
veloped in a residential community and not in a vocational center
which the participants desert for their homes every evening.
It is essential that the cooperative club be made a democratic asso­
ciation. I f every member hold: himself ready to contribute service
when and where needed, the cooperative club may become an effective
agency, and establish the sense of mutuality among the members. It
should be stressed, however, that the buying club should never be re­
garded as an end in itself; it should aim for the eventual establish­
ment, and as early as possible, of a fully developed cooperative busi­
For general considerations which should govern the formation of any kind of consumers’
cooperative organization see Introduction, p. 1.





Buying clubs are generally unincorporated organizations.2 Each
member pays a small initial membership fee (50 cents to $1), to cover
organization expenses and educational work. Many organizations also
require a member deposit of $10, to be used for operating capital which
is converted into share capital when the group incorporates and opens
a store.
It is wise, in order to give the club a good start, for the persons
who are convinced of the feasibility of the plan to try to interest as
many others as possible in the subject before an organization meeting
is called. The meeting having been duly announced and assembled, its
object should be clearly and briefly stated. The chairman should call
for a tentative plan of organization as a means of getting the whole
matter quickly before the meeting, and a tentative constitution and
bylaws should be submitted. A motion is then in order to organize a
consumers’ cooperative club. I f this motion is carried, it may be
moved that a paper be circulated through the meeting for the signa­
tures of those who would like to join.
A further motion may follow, to the effect that a small committee
(5 or 7 are suggested) be appointed by the chairman to draw up a
constitution and bylaws, and that the meeting be then thrown open
to a discussion and criticism of the tentative constitution that has
just been read to the meeting. Such discussion should be of assist­
ance to the new committee in its work.
Although clubs operate on a simple, informal basis, each should
have a constitution and bylaws.3 These should outline a complete
and self-perpetuating organization, and should cover the following
1. Membership open to all who can make use of the services of the associa­
tion, upon approval by the board of directors.
2. One vote and no more, for each member.
3. No voting by proxy.
4. Business for cash and at current prices.
5. Fixed, limited return on capital (i. e., member deposits).
6. Savings (including those made by discounts) distributed in proportion to
patronage, after setting aside reserves for use in a future cooperative business.
7. Adequate and responsible supervision by instructed committees.
8. Religious and political neutrality.
9. Continuous work for education and expansion.
2 But it should be emphasized that in an unincorporated club the members are individu­
ally liable (as partners) for any debts it may incur. If the operations become extensive,
therefore, incorporation is advisable.
3 For suggested bylaws for a buying club, see appendix C (p. 56).



Officers and Com mittees

Officers may be elected either at this meeting or later, when the
constitution and bylaws have been adopted and the organization has
come into existence. They should consist of a president, treasurer,
and secretary-manager to serve for 1 year; or, preferably, a board
of directors may be elected, which chooses the officers from its own
number. The directors may be selected to serve overlapping terms
of 6 months or 1 year, half of them being elected at a time; this
practice insures the club against having only novices in office. In
the selection of officers, care should be taken that not the most popu­
lar but the most capable are chosen.
Two standing committees should be elected—an educational com­
mittee, and a research or investigation committee whose function is
to investigate the quality, price, and conditions of production of the
commodities dealt in by the club. In addition an auditing commit­
tee should be elected to serve for a definite term; its membership
should not include any o f the officers of the club. Another impor­
tant committee is the inventory committee,4 though in a small club it
might be combined with the auditing committee. I f the need arises,
a committee of three may be appointed each month from an alpha­
betical list o f names, to assist the manager (buyer) in checking stock
orders, and in supervising distribution to the members. Some clubs
have a store or business committee which follows operations closely,
though sometimes the board of directors retains this function.
The bonding of the persons (treasurer and buyer or manager)
through whose hands the money and goods pass is an important
guaranty o f safety. It should not be neglected out of a mistaken
consideration for the feelings o f these officials, or because of their
recognized personal integrity, or because of mistaken economy. Ex­
perience has shown that the bonding precedent should be started at
once and never discontinued.5
Goods Handled

The main activity of the club is the pooling of the members’ orders.
This may be done simply by each member’s turning over to the buyer
at stated intervals (weekly or biweekly) a list of the goods and
quantities desired. The buyer then combines the orders and pur­
chases these items to the best advantage. An alternative procedure
* D irections as to the proper taking o f inventory are contained in “ Prim er o f Bookkeep­
ing for Cooperatives,” by Werner E. Regli, published by The Cooperative League, 167
W. 12th St., New York, N. Y.
5 The cost o f the bonds should be borne by the association as a regular item o f expense.



is for the buyer to “ shop” in advance and to circulate among the
members a list of goods available and their prices, the orders being
confined to these items. The latter system allows the group to
concentrate on items on which a considerable saving can be made, but
may have the disadvantage of providing for only a small number
of needs.
It is a serious technical matter to determine the kinds of goods with
which to start a club. Staple articles are best adapted to club pur­
chase. Obviously, most perishables are not suitable for weekly or
semimonthly orders. Canned goods may prove economical, especially
if the club is near enough to a cooperative wholesale to be serviced
by it. Local conditions and margins will largely determine what
the club will purchase, but clubs can obtain lists of suggested com­
modities from the cooperative wholesales that should prove helpful.
Clubs sometimes buy meat successfully. Smoked meat, bacon, ham,
some forms of smoked and cured fish, and sausage meat may be
tried without special facilities for storage; but fresh meat, of course,
must be either cut and distributed without delay or kept under
Lack of space precludes further discussion of the commodities that
may be handled. The commodity reports of one of the agencies
conducting research on consumers5 goods may be useful in this
connection, or lists may be obtained from the nearest cooperative
When the club is small, cash should accompany the order of each
member so that money will be on hand to pay for bulk orders in
advance or on delivery. When the club is large, goods may be
purchased in anticipation of the demand, as a cooperative store does,
but more conservatively. It is a great advantage, of course, to be
able to buy in a cheap market without delaying to secure many
individual orders, but it should be borne in mind that where this
is permitted the members must be ready to share any losses from
mistaken judgment on the part of the secretary-manager or the buy­
ing committee. It must not be forgotten that a cornerstone of
cooperation is cash (i. e., no credit). Persons needing credit can be
accommodated through a credit union organized for the purpose, or
may make advance deposits against which purchases are charged. I f
credit is allowed—and this practice should be vigorously discour­
aged—under no conditions should it be allowed to exceed the amount
of the member’s investment in the club, either as stock or as loan
256781°— 41------ 2



Sources o f Supply

The cooperative wholesale society is the logical source o f supply
for cooperative clubs if it is near enough to make this feasible.6
Cooperatives are not likely to encounter difficulties in obtaining sup­
plies from private wholesalers, but not all of these will sell at
favorable prices. The club should get into contact with local farmers
for as many farm products as possible. The development of mar­
keting cooperatives should enable cooperative clubs to reach groups
of farmers with their orders, and the club secretary should get into
touch with all such groups in the surrounding counties. Facilities
are offered by the express companies as direct middlemen between
producer and consumer, and these companies issue circulars and
price bulletins. Shipping by mail is also possible. A committee
should be appointed to help the secretary study the best buying
practice for the locality.

Distribution may be effected at the club’s regular meeting place
or at some other central location, each person taking charge of his
own purchases; or delivery service may be provided at a nominal
charge. Ordinarily, delivery should not be undertaken by the
cooperative club, but, if provided, should be restricted as much
as possible. The plan of making a small charge for each delivery
avoids the taxing of all those who are willing to carry their purchases
home, but o f course makes concentrated delivery routes harder to
Some clubs operating in a city, with scattered membership, have
found it an advantage to create regional buying units. Deliveries
for the members of the unit are then made to the unit headquarters,
at which the members call for their goods. In the case of a small
neighborhood club, storage room may be hard to find. One of the
members may have a convenient cellar, or the members may take
turns in receiving the goods at their homes and calling the club
together for the distribution. This latter method may be made a
social function. When a neighborhood club becomes so large that
it seems necessary to hire storage room and an attendant, it is time
to consider making the necessary changes in organization to become
a cooperative store society.

More bookkeeping is necessary if savings returns are paid than if
goods are sold to members at cost, but the former practice is pre•For a directory of cooperative wholesale associations and the goods handled by them,
see Appendix A (p. 51).



ferred, for two reasons: Price cutting impairs buying by arousing
local animosity, and it prevents the accumulation of savings that
can be used for the starting of a store. -Several ways of record keep­
ing are possible, the simplest being that by which members save
their receipts and turn them in at the end of the accounting period.
Other practical methods are the cash register slip signed by the clerk,
and duplicate slips, one being given to the customer and the other
filed under the customer’s name. Again, sales books with triplicate
record, obtainable in stationery and some 10-cent stores, have been
used effectively by buying clubs.
Division o f N et Savings

The objective of the club, as already noted, should be the eventual
establishment of a cooperative store or some other fully developed
cooperative industrial or service enterprise. It is advisable, there­
fore, to begin building for such an enterprise at the start. From the
savings made by the club, provision should be made for reserves
and for an educational fund.
The surplus may be returned to the members in proportion to pa­
tronage, but in this connection it is strongly recommended that the
club establish the practice of returning only part of the savings in
cash and retaining the remainder for the purpose of accumulating
capital to be used eventually to finance a cooperative store or other
enterprise.7 A certificate may be issued to each member indicating
the amount of his share in the retained surplus. This practice serves
a double purpose, i. e., it helps to build for the future, and it avoids
members’ disappointment over small returns when the store is finally
started. A high rate of cash return on the comparatively few com­
modities the club can handle establishes a precedent which cannot be
adhered to after the association starts its store and assumes continu­
ing expenses of overhead (rent, labor costs, utilities, etc.), and begins
to handle many items on which the margin is small.
As already emphasized, cooperative clubs may arrange for definite
discounts on purchases by their members directly from local trades­
men, but should not confine themselves solely to this kind of business.
Larger Possibilities

The consumers’ cooperative club should make it a definite policy
to get into touch with other cooperative clubs and with cooperative
stores and to urge pooling of orders and federation among the groups.
This is important especially if there is no cooperative wholesale
The Eastern Cooperative League recommends that the rate of patronage refund in any
form (whether cash, shares, or merchandise) should never exceed 3 percent and that the
remainder should be put into a reserve for future expansion. A maximum cash return of
3 percent is also advocated in Cooperative Buying Clubs, Their Advantages and Their
Weaknesses, by A. W. Warinner (Chicago, Central States Cooperative League, n. d.).



service available and in case of perishable or other commodities that
the wholesale may not be able to supply but which near-by groups
can purchase together. A local federation could effect many econo­
mies and would doubtless encourage the promotion of other co­
operative organizations.
Although the club should not be more than a temporary phase of
organization it may be an important phase, and is thus of undoubted
value to the progress of the cooperative idea. The members should
conduct regular meetings for purposes of study and discussion.
Specific problems in cooperation may be assigned to certain mem­
bers, to study and make a report at a later meeting. The history,
principles, philosophy, and methods of cooperation should be studied
and discussed. Speakers may be invited to address the club from
time to time. Cooperative periodicals should be subscribed for and
a library started.8
The question of expansion into other cooperative business should
constantly be before the club. Among the activities that may be
considered are: Distribution of milk, coal, or petroleum products; 9
a cooperative credit union; 10 a bakery, restaurant, or boarding house.
The members may organize for health protection and medical care,
using one o f a variety of plans.11 Cooperative undertaking (funeral)
business is highly successful within large groups.12 Recreation, an
orchestra, a choir, motion pictures, a summer vacation camp, or
farm within reach of the members, also offer possibilities. It is
extremely important, however, that each activity be launched soundly
and operated efficiently before attention is diverted to another project.
The club is not a means of getting something for nothing, but it
is a way of shortening and making more direct (and therefore less
expensive) the route from producer to consumer, of enabling a
group of consumers to pool their buying power for quantity pur­
chasing, and thus saving the consumer money. It can connect the
organized consumers with the organized farmers and other producers,
promoting the economic advantage of both parties, and at the same
time give training in cooperation and mutual aid and prepare the
members for expansion into other cooperative fields.
8 Educational material, speakers, advice, and assistance may be obtained from the
various cooperative leagues and wholesales. The leagues are educational bodies entirely;
the wholesales are commercial enterprises but most of them also have educational depart­
ments. For a list of these associations see appendix A (p. 51).
9 For information on the organization of a cooperative gasoline association, see U. S.
Bureau of Labor Statistics Bulletin No. 606.
10 Information on the organization of a credit union can be obtained from the Credit
Union National Association, 142 Gilman St., Madison, Wis. ; and from the Credit Union
Division of the Farm Credit Administration, Washington, D. C.
11 Information and advice regarding plans of medical care can be obtained from the
Bureau of Cooperative Medicine, 1790 Broadway, New York City. For typical bylaws, see
appendix F (p. 77).
12 For typical bylaws of such an association see appendix E (p. 73).

Part 2.— Consumers’ Cooperative Associations1
Preliminary Organisation W ork
The essentials of a well-informed initial membership for a coop­
erative association will not be met unless many preliminary meetings
for discussion are held and house-to-house canvassing carried on.
This requires volunteer work on the part of the first members, and
some money for printing, hall rent, etc. The money for such organ­
izing should not come out o f share capital contributed by the members
but should be raised through voluntary contributions by all who are
interested, through a per-capita organizing assessment, through spe­
cial social functions, or through the business operations of a buying
club. It is often necessary to get direct contributions and then raise
other money in addition. An organizing fee, say 50 cents for each
member, may be collected.
Those who are to be the active organizers and canvassers should
know what cooperation means. Great injury has been done to the
cooperative movement by organizers who have not understood con­
sumers’ cooperation and who have therefore given a false impression
to the members they enrolled. Organizers should not make exag­
gerated claims of the benefits of cooperation; they should not promise
large patronage refunds, cut rates, rapid expansion to other com­
munities, nor extension of credit. Such promises encourage people
to become members on the basis of false hopes, and when the prom­
ises are not fulfilled the reputation of the association suffers.
Thus there should be careful instruction of the organizers. They
should be familiar with cooperative history and theory. They should
realize that only small benefits are likely to come to the cooperative
membership during the first year. They should convey to others
the ideal of a nonprofit business institution owned by the people
whom it is to serve. I f possible, some of the early members should
attend training schools or the summer institutes conducted by central
cooperative organizations.2 Failing this, they should subscribe to a
*For general considerations which should govern the formation of any kind of con­
sumers* cooperative organization, see Introduction, p. 1.
2 Rochdale Institute, 167 W. 12th St., New York City, gives each year two 5-month
courses (3 months of academic work and 2 months of field work in active cooperative
associations). It also offers a correspondence course. Winter or summer institutes or
courses are also given by the regional leagues and by several of the wholesales. Informa­
tion as to the courses being given or planned at any given time can be obtained from
The Cooperative League of the U. S. A., 167 W. 12th St., New York City.




correspondence course on cooperation. Visits to other cooperatives
are also valuable.
I f the organizers do their work without pay there will be no
charges brought against them later that they were “out to make all
they could get.” However, it is often necessary to pay organizers
enough to cover actual outlay. I f all possible publicity is given to
such remuneration, there is no actual harm done. There should,
however, be no impairment of capital to cover such organizing
As soon as enough intelligent interest has been created and a
sufficient number of members enrolled, the organization of the cooper­
ative association may begin. A preliminary committee should be
appointed. Its duty should consist in securing all available infor­
mation on the details of organization; such information can be ob­
tained from the district cooperative leagues or wholesales or from
the national cooperative organization.3 The committee should con­
sider the qualifications of its members, with a view to making nomi­
nations for the board of directors and the necessary committees at
the organization meeting. It is advisable also, during the prelimi­
nary period, for the committee to give thought to the kind of man­
agerial ability that is locally available. This will have been revealed
through the preliminary survey discussed on page 2. A frequent
mistake is to employ the organizer as manager. The latter position
calls for quite different abilities than organizers generally possess.
First Organisation Meeting

When the preliminary work has been done, when sufficient capital
and an adequate number of members pledged to patronize the store
are assured, an organization meeting should be called, but not until
then. Until final organization is effected, the meetings should be
informal and directed by a temporary chairman and secretary elected
from the floor.
The business to be transacted at the organization meeting may

Explanation of the purposes of the meeting, and discussion.
Adoption of temporary bylaws.
Election of board of directors.
Election of committees.
( a ) Committee on incorporation and preparation of charter
and bylaws.
(&) Committee on membership.
( c ) Committee on education.
( d ) Committee on research and quality of goods.

8 For directory of cooperative wholesales and leagues see appendix A (p. 51.)



The conveners of the meeting should come prepared to explain in
detail the purposes of the meeting and the reason for organizing
a cooperative association, and they should invite all the discussion
possible. I f those present do not seem sufficiently interested in the
idea, committees may be appointed for further canvassing or a more
complete survey, but no actual organization should be attempted.
However, if those present are strongly in favor of proceeding with
organization, regular committees should be appointed as outlined
above. Tentative rules or bylaws should also be presented at this
meeting so that those present may know how a cooperative associa­
tion is organized. The meeting should not close until everyone pres­
ent has had a chance to raise any questions that seem important.
Better results will often be obtained if some other entertainment or
social diversion is planned to follow the meeting.
The committee on incorporation will take up the question of incor­
poration under the laws of the State in which the proposed enterprise
is to operate.8® It should prepare a charter or articles of incorpora­
tion and a tentative set of bylaws. This committee should write to the
secretary o f state and to the nearest district cooperative league for
information, and again for approval of the bylaws when completed.
These precautions insure their legal correctness and their adherence
to cooperative principles and practices, but it is a good plan to have
a local attorney also scrutinize the bylaws from the legal standpoint.
The committee on membership will seek new members. The com­
mittee on education will plan further meetings o f the present
members, with adequate educational programs. The committee on re­
search and quality of goods will investigate the sources of quality
goods, the conditions under which goods are manufactured, etc.
The directors will look into such matters as location for the store,
fixtures, types of merchandise to be carried, type of store service,
manager, and bookkeeping methods.
Charter and Bylaw s

Articles o f incorporation (the charter) should be drawn up and
filed with the proper State office4 and a set of bylaws should be
adopted before the association begins business. (For suggested by­
laws, see p. 59.) The form of the articles of incorporation is usually
established by the laws of the State and must be closely followed,
although the details are determined by the association to meet its own
M An excellent law (76th Cong., Pub. No. 642), passed in 1940 by Congress for the
District of Columbia, is broad enough in its terms to permit incorporation by groups in
other States. Groups in States with no consumers’ cooperative act, or having legislation
not satisfactory from the cooperative standpoint, might consider the question of incor­
porating under the District of Columbia Law, the text of which is given in Appendix I
(p. 86).
* Usually there is a fee for filing both the charter and the bylaws.



particular needs.5 It is recommended that both the articles of in­
corporation and the bylaws be printed or mimeographed and sup­
plied to all the members. I f this is done, many of the provisions of
the articles need not be. repeated in the bylaws; this has the further
advantage that if, later, it is desired to amend the articles, similar
amendments will not have to be made in the bylaws also. Rochdale
principles and methods should be incorporated in the articles and by­
laws and strictly adhered to in the administration of the society.
Rochdale Principles

1. Open membership, without restriction as to race, sex, religion, or
political, or other affiliation.
2. Democratic control. One vote only for each member, regardless
of number o f shares held. No voting by proxy.6
3. Limited return on share capital (if any is paid),7 at not more
than the current rate in the territory where the association is located.
Share capital should never rise above par.
4. Net surplus savings 8 returned to members as patronage refunds8
in proportion to the patronage of each member, or retained in the
association’s treasury as share or loan capital credited to the mem­
bers’ accounts, or to be used collectively for the general or social good
o f the members, or to be credited to the reserves or surplus, or to
remain temporarily undivided.
5. Neutrality, on the part of the association, on political, religious,
and other extraneous matters on which individual members may
entertain different opinions.9
Rochdale Practices

1. Business done for cash, and continuous educational work
carried on in favor of this practice.
2. Ample depreciation. Reserves appropriated from net savings,
before declaring patronage refund.
* Copies of the cooperative laws of the individual States can be obtained from the U. S.
Bureau of Labor Statistics, Washington, D. C.
There appears to be some confusion as to the difference between voting by mail and
voting by proxy. A member who votes by mail votes on a specific question, concerning
which he is notified in advance, thus expressing his own conviction on the matter at
issue; one who votes by proxy, by the act of giving the proxy, appoints another to act in
his stead on any matter that may arise at the meeting and thus relinquishes his own right
of decision. However, even voting by mail is not so desirable as voting in person because
members voting by mail do not have the benefit of the discussion at the meeting before
casting their votes.
7 No return should be paid unless the association shows an operating surplus.
•These correspond to profits and dividends, respectively, in private business.
* Regardless of the political affiliation of the individual members, the cooperative associ­
ation should wear no political labels. Directors, members, and employees should see to it
that the association keeps clear of political entanglements. Factionalism and dissension
arise from the misguided zeal of members who are adherents of particular sects or parties
and who want to commit the entire organization to their faith. Such action discredits
the cooperative throughout the community.



3. Goods distributed at current market price—not at cost.
4. Continuous education in history, economics, and practices of
5. Efficient bookkeeping and accounting, outside audits, and regu­
lar, understandable, and complete reports to members.10
6. Bonding of manager, treasurer, or anyone else handling money.
7. Continuous expansion of existing services and addition of new
services as fast as feasible.
8. Honest and full information to members about merchandise,
maintenance of quality standards, and purchase of supplies (as far
as possible) made under good labor conditions.
9. Affiliation as soon as possible with the nearest cooperative league
and with the nearest cooperative wholesale.
Articles of Incorporation 11

Associations should write to the secretary of state at the State
capital for a copy of the law governing cooperative associations. In­
corporation limits the liability of the individual members and gives
certain other legal advantages.
In some States the cooperative law is very weak from the coopera­
tive standpoint, and in such cases the group may decide to incorpo­
rate under the 1940 District of Columbia Consumers’ Cooperative
Act (see p. 86), which permits incorporation by nonresidents.
An alternative though much less satisfactory course, in a State
without a cooperative law or with an unsatisfactory one, would be
to incorporate under the general incorporation act, placing the co­
operative provisions in the articles of incorporation or bylaws. The
drawbacks in so doing are that it makes more difficult the establish­
ment of the traditional Rochdale principles of one vote per member,
no proxy voting, etc. For instance, the business corporation law
generally requires that voting be on the basis of the number of shares
held by the members. One possible means of avoiding this require­
ment, in organizing under the business corporation law, is to organ­
ize (if that law permits it) as a nonstock corporation; in that way,
each member could have one vote. Nonstock corporations may also
be exempted from certain State taxes based on capital stock of cor­
porations, and are more likely to be regarded as “ nonprofit” corpora­
tions entitled to exemptions accorded to such groups from various
regulatory laws. It should be noted that many existing consumers’
cooperative laws, also, permit the formation of nonstock as well as
stock corporations.
10 For suggestions on the form that such a report may take, see Appendix G (p. 80).
11 Advice on incorporation may also be obtained from the various district leagues
regional wholesales listed in Appendix A (p. 51).




Even under the business corporation law it may be possible for a
stock corporation to retain the one-vote principle, but under some
business corporation laws it may be impossible to avoid the applica­
tion of the proxy-voting provisions, or to safeguard the right to
make refunds on the basis o f patronage.
Also to be considered is the possibility of using the so-called “ non­
profit” statutes of some States, applying to the incorporation of edu­
cational, scientific, mutual benefit associations, and like organizations.
The number of incorporators required varies from State to State,
but usually the application must bear the signatures of 3, 5, or 7 per­
sons. Such information as the following may also be required; if not,
it may be included in the bylaws:
Exact name of the association.
Purpose for which it is formed.1*
Powers of the association.12
Whether it is to be a stock or a nonstock corporation.
The amount of capital stock (if a stock corporation).1*
The par value of a share and the number of shares to be issued.
Limitation of interest on share capital.
Limitation on the number of shares to be owned by one person.
The minimum amount of stock with which the association begins business.
Limitations of voting power.
Methods of disposing of earnings.
Time and place of annual meeting.
The name of the city or town, and county in which the head office is to be
The length of time for which the articles of incorporation are to be valid.
The number of its directors, with their names and addresses.
The names and addresses of the incorporators, with number of shares for
which each has subscribed.
Rights of members and patrons, on dissolution.

A seal should be designed and provided.
B ylaw s

Whereas the articles of incorporation establish the legal status of
the association, the bylaws are the common as well as the legal rules
governing the relations of the members, their officers, and their em­
ployees; they bind these members together in a voluntary association.
The chief points to be covered in the bylaws are the follow ing:
N a m e .— This should be the same as given in the articles of incorporation and
should include the word “cooperative,” if the law permits. The word “ associau It is desirable to include all the purposes enumerated in the State law.
In most States it is not required that the entire amount of capital for which the
association is incorporated shall be raised before starting business; therefore it may be
wise to set this figure in the articles of incorporation and/or bylaws much higher than
actual immediate requirements, so that it will not be necessary to go through the
troublesome process of increasing the authorized capitalization within 2 or 3 years (since
a cooperative is not permitted to sell stock in excess of its authorized capitalization).
The laws of the State on this matter should be consulted before this amount is established.



tion” or “ society” is better than “company.” The name may also include tjie
name of the city or district where the association is located. It is generally
desirable to add the abbreviation “ Inc.” to the name to indicate that the
association is incorporated.
P u rp ose.
M e m b e r s h ip . — Qualifications, responsibilities, and privileges.
C ap ita l. — How subscribed and paid, limitation on shareholding and on interest
to be paid, etc.
M e e tin g s . — Date, how called and conducted, quorum, special meetings, etc.
D ir e c t o r s and o fficers. — Number, how elected, duties, and disqualifications of,
vacancies, meetings, etc.
V o tin g . — Method, limitation on number of votes, etc.
N e t s a v in g s. — Distribution to interest, reserves, education, and returns on
M a n a g em en t.
C o m m itte e s . — Designation of and duties.
M is c ella n e o u s provisions, such as bonding, fiscal year defined, cash sales or

limitations upon credit, amendments, dissolution.

Those matters included in the articles (or charter) do not need to
be repeated in the bylaws; if, however, they are repeated they should
be exactly as given in the articles, as the latter control.
Cooperative associations are benefited by increase of membership.
New members (with their patronage and shares) not only make the
group stronger but keep the association from being an exclusive and
closed corporation run in the interest of a few.
Some associations exclude from membership all individuals who
are engaged in a business competing with that of the cooperative, or
who directly benefit from such competing business. This rule should
be adopted only where there is real danger of injury to the associa­
tion or interference with its development.
The store may sell to nonmembers, and such patronage is a valuable
means of interesting them in the organization and its purposes. A l­
though the law in some States provides for the payment of patronage
refunds in cash to nonmembers, it is preferable (where it can be
done legally) to credit the nonmembers’ refunds on the purchase of
a share, so that they eventually become members.15
No eligible person with purchasing power should be refused ad­
mission because he has not the money to buy the required shares of
stock. Such a person should be permitted to join upon the payment
of $1, or whatever amount he can pay; this to be the first payment
on a share. The refunds due him from his patronage should be
applied as further payments on his stock. He becomes a member
with full privileges when the necessary amount of stock has been
paid for. Care should be taken to see that this privilege is not
15 See also discussion, pp. 42-44.



2 .— C O N S U M E R S *


abused, however, and some reasonable time limit may be placed
during which to accumulate the price of the share.
It is impossible to lay down any hard and fast minimum as to the
number o f members the new association will need to be successful.
The number will necessarily depend on several factors: The local
conditions, the amount and variety of merchandise to be carried
(i. e., whether the members can buy a large part of their household
supplies at the store, as in a general store, or only groceries), whether
other sources of supply are readily available to the members, etc.
Experience has shown that in a rural community as few as 75 to
100 families may successfully undertake the operation of a coopera­
tive store if they are familiar with the methods of cooperation and
can obtain efficient and economical management, but that in a city
there should be 100 or more members. It is well to bear in mind,
however, that some of the early members may desert the organiza­
tion or may provide little patronage and that a small membership can
rarely provide sufficient volume of business so that the margin be­
tween wholesale cost and retail sales will cover the overhead expense
of operating a store. For these reasons an initial membership of at
least 150 (rural) and 200 (city) persons would provide a better
assurance of success.
It should be remembered that continuous patronage is essential to
the success of the association. Every member should patronize his
store faithfully. Without such support, store sales may fluctuate so
badly that effective operation becomes impossible and capital will
automatically be depleted.
The best cooperatives provide for means of buying back the stock
of inactive members and reselling it to active patrons who have not
yet become members. This eliminates the “ dead wood” within the
association and insures an active membership.16 In a consumers’ co­
operative association the body of patrons and the body of share­
holders should be as nearly identical as possible.

Share Capital

The price of a share in a store association is sometimes specified by
the cooperative law of the State. Where this is left to the discretion
o f the association the amount of the share should range from not less
than $5 to not more than $25. Shares of moderate value are to be
preferred, in order that persons of small means may not be debarred
“ Under one such plan, called the “ rotating-capital plan,” the patronage refunds each
year are paid partly in cash and partly in new shares. The amount o f capital needed
fo r the ensuing year is decided by the membership, and any surplus funds are used to
retire old shares in the order o f issue. This results in eventual elimination of dead wood,
fo r in order to retain membership, continued patronage is necessary, as only thus can new
shares be acquired.



from membership. Each member should be required to subscribe for
one or more shares, which may be paid for in installments. A part
of the amount subscribed should be paid in at the time the organiza­
tion of the store is being planned, and at least three-quarters (but
preferably all) the subscribed capital of each member should be paid
up before the store is opened for business.17 Cash refunds on
patronage and returns on shares (and in some instances voting priv­
ileges) are usually withheld until the shares are fully paid for.
It is a fundamental of consumers’ cooperation that shares shall
never be given a value above their par or original value.
The importance of adequate capital should be emphasized, as a store
well supplied with funds can buy to better advantage than one with
too little capital, and in many other ways will work more effectively.
Members should be encouraged to subscribe for more than the mini­
mum number of shares, required by the bylaws, as inadequate capital
has contributed to the failure of many associations and has been a
handicap to countless others. Only with efficient management, ex­
treme economy of expenses, and maintenance of a small inventory can
the poorly financed store become successful, even with proper support
and cooperative understanding among the members. I f sufficient
capital cannot be raised at the outset it is wiser to postpone starting
than to let the enterprise fail later for want of it.
Loan Capital

Additional capital may be obtained later if the members allow their
interest on shares and returns on patronage to remain on deposit with
the association in the form of share or loan capital. Lpan capital
may also be borrowed from members and nonmembers, but expansion
o f activities on this basis should be undertaken only with extreme
Amount of Holdings in Capital

The amount of share capital that any person may hold should be
limited to $500 or less. Loan capital should also be definitely
17 Before issuing share certificates, the association should consult the office of the Gen­
eral Counsel of the Securities and Exchange Commission, Washington, D. C., to ascertain
whether the association is subject to the Federal Securities Exchange Act.
18 One cooperative leader sets forth his opinion, based upon years of practical experience,
as follows: “ I have seen cooperative stores destroyed by the withdrawal of loan capital
upon which they had depended for years after they had expanded beyond what their
original capital would permit. I have seen even worse abuse, by members’ controlling the
whole store practice by threat of withdrawing loan capital which would destroy the co­
operative if withdrawn. I have seen wholesale concerns suddenly curtail the credit of an
institution when it has been suggested to them, by members having loan capital, as a
means of making the cooperative conform to the will of those who have the loan capital.
No wholesale house will knowingly extend desirable credit to a concern which makes
use of any substantial amount of loan capital unless it is in the form of preferred stock
or some contract whereby it cannot be withdrawn until the creditors are all satisfied. I
think it is an extremely dangerous practice for a cooperative to expand its operations
based on loap capital.”




restricted; it is suggested that the amount of such capital from any
one person should not exceed 5 percent of the total paid-in capital nor
should the entire amount o f loan capital from all sources exceed 50
percent of the paid-in capital.
Withdrawal of Capital

Withdrawal of share capital should not be allowed unless it can be
done without injury to the association. The board of directors may
allow a member leaving the community, or one in distress, to transfer
his shares to another member or to a person satisfactory to the asso­
ciation; or where the law does not expressly forbid, the board may
purchase such shares out of the surplus funds of the association, if
such surplus exists. Unless there is a rule against unrestricted with­
drawals, anyone may invent a pretext for withdrawing. This permits
enemies or dissatisfied members to spread false or discouraging reports
and start a run on the association, possibly wrecking it by rapid with­
drawal of capital.
Loan capital should be withdrawable in small sums on 7 days5notice,
but in large sums only on 60 or 90 days5 notice; otherwise there is a
danger of a run on the loan fund in time of strike, other unemploy­
ment, or trade depressions. Preferred stock is a safer form of capital,
for it cannot be withdrawn on such short notice. However, neither of
these forms of supplementary capital should be allowed to become
large; the chief reliance should be placed upon the ordinary share
capital of the members.
Return on Share Capital

At the time of starting the association, the maximum rate of return
on share capital should be decided upon. The rate should never vary
with the surplus savings, though it may vary as the association itself
needs more or less capital and thus increases or decreases this form of
investment by the members. The rate paid should not exceed the
current rate. In the absence of any legal requirement on this point,
the association may decide to pay nothing on amounts less than $100,
or even to pay no return at all. No return on shares should ever be
paid unless the earnings of the business are sufficient to permit.
Before any decision is made regarding the rate of return, the coop­
erative law should be examined, as some States set specific maximum
rates which may be paid on share capital.19
Thus, the rate is set at not over 5 percent in California and Massachusetts; 5 percent on
ordinary and 6 percent on permanent stock in Pennsylvania; not over 6 percent in Dis­
trict of Columbia, Minnesota, Montana, New Mexico, North Carolina, and Vermont; not
over 7 percent in Michigan (or not to exceed 6 percent if section 10057 is adopted) ;
at not to exceed 8 percent in Alaska, Iowa, Nebraska, New York, Nevada, North Dakota,
Oklahoma, Oregon, Virginia, Washington, and Wisconsin; and at not to exceed 10 percent
in Missouri and South Dakota. In the other States this point is left to the discretion
of the membership.



The board of directors may consist of from 5 to 11 members,20
elected by ballot on nominations from the floor or proposed by a
nominating committee, or by both methods. An alternative and very
democratic method is that by which each member states his personal
choice on a secret ballot. If, on tabulation of these votes, no candi­
date has a clear majority, additional votes are taken until a majority
is obtained. (For persons unable to be present, provision for voting
by mail on specified candidates may be made if care is taken to
insure secrecy of ballot.)
It is advisable for the directors chosen at the first election to serve
for different periods: One-half for 1 year, and one-half for 2 years;
at all subsequent regular elections, one-half of the board should be
elected for a full 2-year term. Some associations, however, adopt a
straight 1-year term for all directors, reasoning that an able director
can be reelected if the membership so desires.
A small board of 3 or 5 elected for short but continuous service
can often act more quickly and to better advantage, but a larger
board (7 or 9) serves to hold the interest of more members, makes
possible board committees to handle certain phases of activities, and
is more likely to represent the views of the entire membership.
It should be definitely established that no individual on the board
of directors is himself engaged directly or indirectly in the making
of profit from any enterprise buying from, selling to, or operating in
competition with the cooperative. Some associations pay a nominal
amount to directors for attendance at meetings, so as to insure the
presence of the full board, but the amount should not be large enough
to tempt even the poorest members to seek the office for the sake of
its financial rewards; $1 to $2 per meeting is probably enough.
The board should be so selected that every large element within
the membership is represented by at least one director. In the case
of large associations, directors should be chosen by districts, so that
better, more direct, and more responsible representation of the mem­
bers may be had. They should be persons who can devote sufficient
time to keep well posted on the operating problems of the association.
It is also desirable if these directors supplement one another; thus,
at least one might be efficient in bookkeeping, another in merchan­
dising, another in educational and propaganda work, and another
Many State laws set a minimum or maximum number which must be observed. Thus,
the directors must number not less than 3 in Kentucky, Montana, Oregon, and Washing­
ton ; 5 in Oklahoma; not less than 5 in Alaska, Arkansas, Connecticut, Illinois, Iowa,
Kansas, Michigan, Minnesota, Missouri, New Jersey, New York (stock), New Mexico, North
Carolina, North Dakota, South Dakota, and Wisconsin; not less than 5 nor more than 9 in
South Carolina ; not less than 5 nor more than 25 in California ; and 6, 8, or 10 in Pennsyl­
vania. In the remaining States the matter is left, either specifically or by implication, for
the membership to determine.



in legal problems. The directors should not devote themselves
entirely to the theoretical and educational activities of the organi­
zation, but neither should they be so engrossed in the commercial
aspect of cooperation that they neglect their opportunity to develop
interest and enthusiasm in the subject o f cooperation among the
employees as well as the members. They should have a good knowl­
edge of practical affairs as well as cooperative history and principles.
They should be chosen for their good judgment, knowledge, and
ability, and not for their capacity to talk. Their selection should
be a matter of serious concern, for upon them rests a heavy
In general, the directors have three chief duties: To develop policies
based upon an accurate knowledge of the operations; to employ per­
sons to carry out those policies; and to see that the policies are carried
out. Among their specific duties are the following:
1. To engage a staff to undertake the work of the association, with suitable
heads of departments, or a manager over all, and to determine the duties and
salaries of each and provide for the bonding of all those handling money.
2. To provide suitable premises, machinery, and plant to conduct the associa­
tion’s business.
3. To insure that the business is carried on in accordance with the bylaws.
4. To control all investments, whether in shares and loans or in land, property,
and fixtures.
5. To consider and pay the administrative expenses, such as wages, rent,
repairs, telephone, light, heat, delivery, insurance, taxes, etc., or to see that
the manager takes care of these items.
6. To administer the distribution of the earnings, such as for interest, reserve,
patronage refunds, and educational funds.
7. To provide good conditions and wages for workers in the association’s
employ; 21 to demand and secure equivalent results in superior service, faithful­
ness, and diligence.
8. To convene the regular meetings of the membership, provided for in the
bylaws, call special meetings, and render full and informative reports thereto.
9. To maintain a direct and vital connection with other cooperative organiza­
tions both in this country and abroad.
10. To foster a spirit of enthusiasm for cooperative work both in the staff and
in the members of the association, and to identify themselves with every good
feature of cooperative activities.

The directors should always bear in mind that they are acting for
the association and are responsible to the members for the loyal per­
formance o f these duties. Each director shall also be expected to
give loyal patronage to the cooperative store, but should not be allowed
to purchase on credit.
It is pointed out by some cooperative leaders that in the early days of a new associa­
tion employees may be called upon for some sacrifice, while the association is getting upon
its feet. Once that is done, the association should provide as good working conditions as
possible, always bearing in mind that the association is operating in a competitive field
and that wages substantially above those paid by its private competitors may prove a
fatal handicap.



The directors may elect an executive committee to which certain
special functions may be delegated, or to act for the board in emer­
gencies. The board itself should meet frequently (say once each
week) for the first few months, and once or twice a month thereafter.

Officers should be elected from and by the board of directors rather
than by the membership at large for the directors are usually better
qualified than the members to know which of their number will fill
the various positions most efficiently. The usual officers are president,
vice president, secretary, and treasurer.22
The duties of the president are to preside at all meetings, carry
out the will of the members, and watch over all affairs of the associa­
The vice president takes over the responsibilities of the president
in the latter’s absence.
The secretary may also be treasurer in the early years of an associa­
tion.23 He serves as secretary both at the meetings of the directors
and at members’ meetings. In small associations his duties are to
keep the minutes and records, attend to correspondence, and keep
watch over the bookkeeping and accounts. He should also be the
custodian of the seal, the stock book, and the membership rec­
ords.24 The election to these offices of persons deficient in knowledge
of accounts and business procedure is unwise.
The accounts should be correctly balanced by the treasurer, who
pays such bills as the board may direct. The treasurer should
also render periodic reports to the membership. The board may di­
rect that certain bills may be paid by the manager and that these
accounts should be reviewed by a committee of the board. The di­
rectors should fully inform themselves from week to week how the
association stands in its finances.
Membership M eetings

It is customary to hold general meetings of the members quarterly
or semiannually. Monthly meetings may be held if speakers or ma­
terial for interesting discussion are available.
The Wisconsin law permits the board to appoint a secretary or treasurer from out­
side the board. In actual practice this usually results, for practical reasons, in the man­
ager’s acting as treasurer as well. See footnote 51 of bylaws (p. 70).
28 This may be legally questionable in Connecticut, Montana, New Jersey, Pennsylvania,
and Washington, where the law makes no provision for combining the two offices.
24 An alternative method, especially in large associations is to have two secretaries— a
recording secretary and a corresponding secretary— thus dividing the responsibilities of
the office.
256781°— 41----- 3



The annual meeting is the most important of all, for here the elec­
tions take place, and the annual financial report,25 manager’s report
for the year, and other important matters come up for review.
The business transacted at all meetings usually consists of reports
o f officers, committees, and manager; discussion of reports; action
upon directors’ recommendations regarding disposal of net surplus
savings for the period in review; elections; and new business. Notice
o f regular meetings should be sent out at least 6 days in advance. The
date for the annual and semiannual meetings should provide a suffi­
cient interval after the close of the fiscal period to allow the auditor
time to prepare his report for consideration at the meeting.
The number of members constituting a quorum should be set by
the bylaws. In small associations it may be 30 or 40 percent of the
membership or even less; in large ones it may be as low as 10 percent.
In some States the minimum is established by law. I f permissible
under State law, associations too large for a members’ meeting should
be divided into district sections, each having local autonomy and
delegate representation in the central society’s meetings.
Special meetings may be called from time to time, but should take
up only such business as is specified in the call.26
The privileges of the membership meeting should be clearly under­
stood. The membership should not vote upon questions requiring
expert knowledge and concerning which it is not well informed. I f
the directors have been properly chosen they are the representatives
of the members, and are charged with the responsibility of developing
policies based upon the full information which they have had the
opportunity to acquire. Having chosen such persons, then the mem­
bership need only review the policies of the board and management,
discuss them, and express approval or disapproval. I f the meeting
disapproves, it should not attempt to dictate specific acts to either
directors or manager, but may in extreme cases (if provision has
been made therefor in the bylaws) recall the entire board of directors.
Questions requiring expert or technical information not possessed
by the board should be referred to a qualified individual or com­
mittee, with instructions to report back to the membership with
recommendations and reasons therefor. The membership can then
vote to accept or not to accept the recommendations.
Good speakers may be invited to address the meeting when such
are available, but discussion of political, religious, or other nonco­
operative questions upon which the membership may be divided
should not be permitted; such discussions cause internal strife and
may do much harm to the organization.
*“ For suggestions as to the form such a report may take, see page 80.
••For discussion of the reason for this, see footnote 45 of bylaws (p. 68).



Meetings should be called by one or more of the officers. Special
meetings may be called by the directors or by petition of a specified
number of members, according to the bylaws.
Following the business meeting it is good policy to have an edu­
cational session, and occasional entertainment, with music, dancing,
movies,6 or refreshments. The members should feel that this is their
social center.
V otin g P ow er and M ethod o f V otin g

Equal representation should be insured by limiting each member to
one vote irrespective of the amount of share capital owned by him.
This prevents unequal privileges, insures democracy, and provides
that membership shall always remain open to newcomers on equal
terms with the founders of the association.
All subscribers to the share capital who have paid in full for one
or more shares should be entitled to vote, except as any member
may have been deprived of this privilege (under the provisions of
the bylaws) by action of the board of directors for some heavy in­
debtedness to the association, which has practically destroyed the
value of his share capital investment. In some States full voting
power must be granted when shares are subscribed for, and the
subscriber immediately has full membership privileges. Unless the
law specifically grants such privileges, however, it is well to with­
hold them until the qualifying shares have been paid for and a
share certificate issued.
Voting may be by show of hands or by “ aye” and “ no” vote,
except in the case of election of directors or other matters on which
there is a demand for a secret ballot.
Questions R elating to Initial Financing and Beginning
o f Operations

Several important factors of success should be considered and dis­
cussed thoroughly, in advance:
(1) The amount of capital that will be required to start the
(2) The kind of merchandise to be handled or services to be
(3) The probable monthly business and average patronage per
(4) The probable trading income from such business, considering
local competitive conditions.
b Films on cooperative subjects are obtainable through The Cooperative League, 167
West 12th St., New York City.



The probable cost of operations and the resulting margin for
safety, on the basis of ( a) cash and carry service or ( b ) delivery
service, and ( c ) credit cost (if any credit is given).
Capital Requirements

The amount of capital required will differ according to the nature
and needs of the business to be undertaken. A bakery requires
much more capital than a restaurant or store. A housing associa­
tion will need a very large initial capital. A credit union or a buying
club, on the other hand, can start with only a few dollars. The
following discussion is based upon the requirements of the coopera­
tive store association.
The general merchandise store is generally impracticable in a
large city. It will usually be found advisable for the city associa­
tion to begin with dry or canned groceries only, later adding meat
and fresh produce. It should be stressed that the handling of meats
involves special problems of merchandising. In the country com­
munity or mining town the addition of work clothes, shoes, under­
wear, work tools, general household supplies, small hardware, no­
tions, perhaps some stationery, and electrical appliances, will often
be advisable.
The amount of capital needed will depend upon the number of
members, the expected patronage, and the expected turn-over27 of
merchandise, as well as upon the location of the store (whether rural
or urban) and the lines of goods handled. The savings made by
the association are dependent on the rapidity with which the stock
is sold as well as on the efficiency of the administration. No associa­
tion, however small, should run a grocery business on a turn-over
of less than 12 times a year, but a store carrying a more general
line of merchandise may have a turn-over of fewer than 8 times
per year.
It should be emphasized that no hard and fast rules as to capital
requirements can be laid down. Each group before starting will
have to take into consideration the local conditions and any special
circumstances that may be present. The following suggestions
are based upon cooperative experience in various parts of the United
On the basis of cooperative activities in the East, the Eastern
Cooperative Wholesale (Brooklyn, N. Y .) places the minimum capital
requirement for a $300 weekly volume at $1,600, used as follow s:
271, e., the rate at which the merchandise is sold (turned over). Rate of turn-over
equals inventory (merchandise on hand) at beginning of period, plus purchases of mer­
chandise, minus inventory at end of period, divided by average inventory during period.
(Average inventory equals inventory at beginning plus inventory at end, divided by 2.)

Fixtures and alterations-------------------------------------------------------------Initial inventory--------------------------------------------------------------------------Initial working capital---------------------------------------------------------------Initial investment inthe wholesale-------------------------------------------Initial incorporation--------------------------------------------------------------------



The following suggestions, based upon the experience of its mem­
ber associations, are made by the Central Cooperative Wholesale,
Superior, Wis., as minimum requirements for successful operation
in the Middle West for city stores handling groceries only and for
general stores in country districts. In all of these examples the
amount of initial installment credit28 that may be safely used in
the purchase of equipment and fixtures, without entailing heavy
installment payments, is calculated at 20 to 25 percent.
C i t y s to r e w it h m o n t h l y sales o f $ 3 ,0 0 0 — g r o c e r ie s o n l y .—It is
desirable to have 150 to 200 members and pledged patrons before
starting, estimating average per capita purchases to be at least $20
per month.
The examples given on page 30 are for two grades of operation—
ordinary and good—based on stock turns of 12 to 15 and 15 to 20
times, respectively.
Although the ideal start would be made by having enough share
capital to pay cash in full for every item of opening stocks of
merchandise, and all fixtures and equipment, installment credit of
20 to 25 percent is readily offered by equipment distributors and
this may be used without entailing unsound commitments.28 For
instance, in store A below, although the total cost of fixtures and
equipment is $1,250, $250 of this may be set to time payments on
scales, cash register, etc.29 Consequently, although the total worth
o f initial stock equipment and operating fund is $3,500, this amount
may be acquired safely when $3,000 to $3,250 share capital has
been raised.
_ „ „
Store A
Store B
(stock turn-over (stock turn-over
12-15 times)
15-20 times)

Opening stock---------------------------------------------------------------Fixtures and equipment_______________________________
Working capital-------------------------------------------------------------

1, 250

1, 000

3, 500

2, 750

Approximate amount of cash needed, using 20 to 25
percent credit for equipment and fixtures_________ 3, 000-3,250

2, 500-2, 600

Total on hand at sta r t-

28 It should be emphasized that this discussion relates only to equipment and fixtures
purchased at the time of entering business. Continuous use of credit thereafter is
29 Associations should be cautioned against loading up with high-priced fixtures and
equipment which will absorb too much of the association’s funds.



The foregoing figures assume that groceries, including fresh fruits
and vegetables, are carried, but not fresh meats. The initial stock
of $l,500-$2,000, if well chosen, will be varied and adequate. For
net sales of $3,000, the wholesale cost of goods sold during the month
would be $2,460 on a gross margin of 18 percent figured on net sales,
and therefore $2,460 worth of goods must be purchased during the
month to replace merchandise sold and to have again a stock o f
$1,500-$2,000 on hand on the first of next month.
It is advisable to figure on a gross margin of 18 to 20 percent
for a city store, to be on the safe side at the start, but this should
decline as the period of operation lengthens. Also, it is recommended
that calculations be based upon a total expense of 15 percent, although
even this should be reduced when the business is well established.
Country stores may have expense rates as low as 9 to 10 percent and
those for city stores may run to 12.5 percent or even higher.
The rate o f turn-over of goods will depend not only upon the effi­
ciency o f operation but also upon the type of goods handled. The
above calculations would permit satisfactory operation with a stock
turn-over of 15 times. However, associations are urged to strive for
a turn-over of 18 to 20 times from the beginning.
C i t y s to r e w i t h m o n t h l y sales o f $ 8 ,0 0 0 — g r o c e r ie s o n l y .—For
sales of this size the association should have 350 to 500 prospective
members and patrons.
Using the same calculations as in example 1, with turn-over of
15 to 20 times, and a gross margin of 18 percent to start with, the
suggested minimum figures would b e:
Store A
Store B
(stock turn-over (stock turn-over
12-15 times)
15—20 times)

Opening stock---------------------------------------------------------------------Fixtures and equipment----------------------------------------------------Working capital------------------------------------------------------------------

2 ,0 00

1, 750

Total on hand at start_____________________________


6,2 50

Approximate amount of cash needed, using 25 percent
credit for equipment and fixtures----------------------------------

7, 000

5, 750

In store B, during the month, the cost of goods sold will be
$6,560, which amount must be bought during the month, as sales
bring in cash, so that a stock of $4,000 will again be on hand at the
first of the next month. With a gross margin of 18 percent and
expenses of 15 percent, the net saving of 3 percent would bring
$240. Expenses may be brought down to 12 percent (city) and 8
to 10 percent (country).
In each case, with business done only for cash, one-half or more of
the merchandise purchased during the month for replacement stocks
can be paid for on receipt of invoice, and goods purchased in the



last days of the month can usually be paid for before the 10th of
the following month, to receive cash discounts. It is very desirable
that the financing of the business be such as to permit the taking of
discounts for cash. This practice builds up a firm credit and is a
substantial source of saving.
C o u n t r y s to r e w it h m o n t h l y sa les o f $ 5 f i 0 0 — g e n e r a l m e r c h a n ­
d is e .—To do a general business of this size the country store should
have 150 to 200 members and prospective patrons to start with, and
average per capita purchases of approximately $30 per month. Sales
o f $5,000 per month are taken here as more suited for average situa­
tions than calculations upon larger businesses. Stores usually do and
should start small, though they should not be so small as to be
Using the same figures as in example 1, if using allowable install­
ment credit of 20 to 25 percent (preferably 20 percent), the asso­
ciation should start with $6,000 or more in funds on hand: Initial
stock worth $4,000, fixtures and equipment not to exceed $2,000, and
$500 in cash.
In the country store, no fresh-meat department is included. Stocks
would include groceries, work clothing, work shoes and rubber foot­
wear, underwear, some children’s clothing, women’s house dresses,
etc. (no bolt goods), general household supplies, small hardware,
and notions. I f there is farm trade, feeds would be included, which
would tend to reduce the average gross margin. The association
should figure on a turn-over of 10 to 12 times and a gross margin
of 15 percent, although the gross margin may vary, under different
circumstances, from 13 to 18 percent and still represent efficient
Operating Expenses

The percentage of operating expenses to sales will vary according
to localities and according to the volume of business. As the amount
of business increases, the percentage of expenses should be automati­
cally reduced. Expenses should be considered in advance and made
to conform as nearly as possible to the following, which is figured on
a basis of $8,000 monthly business in a store handling groceries only
and giving neither credit nor delivery service:
Percent of

Wages and salaries1-----------------------------------------------------------------Kent (in cities and large tow ns)-------------------------------------------Fixed charges, such as heat, light, telephone, wrappings,
interest, taxes, insurance, repairs, depreciation, leakage—




2 -4


$400- $560
160- 240
240- 820

1 In cities the proportion spent for wages and salaries may run higher than the per­
centages here given.

3 2


Rents in small country towns should not be more than 1 percent of
sales, and possibly even less.
I f delivery is undertaken, its cost must be figured additionally,
ranging from 2 to 4 percent of the business done. Granting credit to
customers may increase the expenses another 2 or 3 percent.30
The sales made by each clerk should average at least $55 per day
on poor days, about $1,500 a month. Cash-and-carry operation will
increase the average. I f delivery orders must be put up and credit
accounts kept, the average volume of sales per clerk may be reduced
50 percent by the extra labor involved. A high volume of sales per
employee is obtained by education of clerks and members, economical
arrangement o f goods, good lay-out o f the store, elimination of deliv­
ery and credit service, and by other labor-saving policies.
Business Location and Premises

The location of the store or other place of business should be given
careful consideration. Generally it should be placed within easy
reach of the majority of the members, otherwise the members will
go elsewhere after their first cooperative enthusiasm has waned. It
is not wise to place the new cooperative in a high-priced location
with the purpose of catching transient trade and thus building up
a large volume of sales with nonmembers. The cooperative is first
o f all a membership organization, and nonmembers should be sought
only with the idea of making them members, not with the idea of
making money from them.
As a rule the new cooperative association should not at first buy or
erect a building. It should rent its quarters and thus be in a posi­
tion to move if the location does not prove desirable. Only in a
very small country community where there is no danger of a mistake
in location is it advisable to purchase or build at the outset. Some­
times a substantial saving may be effected by the purchase of mod­
ern second-hand equipment,32 but care should be taken to have such
equipment inspected and approved beforehand by a competent, dis­
interested person. Past experience indicates that the purchasing of
the business of an established grocer is usually not advisable. Such
a business will have a reputation for being a profit-making enterprise
and this reputation may carry over, regardless of the fact that the
members know it has been bought out by the cooperative. How80 A study made by the Farm Credit Administration showed that extension of credit
cost the cooperative associations $2 for every $100 of sales; on the basis of credit sales
only the cost was $3.80. (See Preliminary Report on Credit Practices and Problems of 58
C. C. A. Local Petroleum Associations, by Joseph G. Knapp, Washington, Farm Credit
Administration, 1938.)
82 One danger in buying used equipment is that if it is not up to date it may have a
noticeably unfavorable effect upon the appearance and operating efficiency of the store and
consequently upon its success.




ever, if this is done, the grocer’s liabilities should be investigated to
insure that the association is not assuming unknown debts.
I f the enterprise carried on is a cooperative store, it should be re­
membered that the interior arrangement is as important as the site.
A clean, attractive store is possible with only moderate expenditure.
Advance consideration should be given to such matters as the rela­
tive advantages of service or self-service, store lay-out, types of
shelving, and modern counter arrangements. Suggested sources of
advice and assistance on these points are the various cooperative
wholesales and the pamphlet “Principles of Store Arrangement”
(issued by the Bureau of Foreign and Domestic Commerce of the
United States Department of Commerce).
Employees o f the Cooperative
Store Manager

The ideal store manager is one who combines knowledge of co­
operation with technical skill in storekeeping, in the buying and
selling of goods, and in the keeping of store records and accounts.
I f an experienced groceryman trained in profit business is hired, he
should be under the close supervision of an alert, well-informed
board of directors with a cooperative background. On the other
hand, the idealistic cooperator, direct from the ranks of the wage
earners or farmers, may make serious business mistakes which may
plunge the association into bankruptcy before he acquires the tech­
nical knowledge o f his position. The required combination of co­
operative understanding with administrative ability is rare but it
is being developed among many of the younger people working in
cooperative stores and studying in the cooperative training schools.33
The manager should be able to delegate responsibility to those
under him so that he does not carry the entire load of duties on his
own shoulders. It is essential that he have financial and business
judgment and tact, and that he be able to win and hold the respect
of patrons, employees, and business houses with which he deals.
The wise manager will not employ any member of his own family
nor let himself be influenced to employ a favorite of any of the
directors. I f he permits himself to be so influenced he greatly weak­
ens the spirit and morale of the store, for no matter how good his
motives it will be said that he is showing favors.
Neither he nor any employee should be a relative of any member
o f the board of directors.
D u t ie s o f m cm a g e r .—In the small store the manager has to be a
jack-of-all-trades; he must know something of buying, selling, bank88 See footnote 2, p. 13,



ing, investing, credit, supervising work of others, bookkeeping, driv­
ing a truck, etc. In consultation with the board of directors, he buys
the merchandise, decides the mark-up, and hires and fires the clerks.
He must meet and deal tactfully with complaints from all directions,
exact discipline and at the same time inculcate cooperative enthusi­
asm in his employees, watch carefully the many places where leaks
and losses to the business occur, and understand the value of pub­
licity and advertising whether in the store windows or in the local
press. He must plan the store for the economic handling of goods
and plan storage space so that each kind of merchandise shall be kept
where it is easily reached and not suffer from dampness, vermin, or
excessive heat or cold. He should render regular reports to the
directors and meet patiently their many criticisms. He should hold
regular meetings with his staff of employees for discussion of both
business problems and cooperative principles. He should cultivate
good relations with the membership and the general public, and give
the utmost possible support to the central educational league and
cooperative wholesale of his district.
It is important that the manager should not become obligated to
the salesmen of any particular private wholesale house. A manager
who accepts gifts from such tradesmen should be promptly dismissed.
Other Employees

Clerks and deliverymen are the most important individuals in the
store, from the point o f view of contact with the membership and the
general public. The spirit of the cooperative store will be inter­
preted by the purchasers in accordance with their opinion of these
employees; they will judge of its efficiency almost entirely in terms
o f their efficiency. There can be no adequate means of educating
the buying public to the meaning of cooperation unless these workers
are taken into the confidence of the educational committee and made
partners in the educational program. This one principle should
always be borne in mind: No store is truly cooperative until its
clerks learn to think of themselves not as salesmen trying to dispose of
goods to the public but as partners of the public in the common effort
to obtain quality goods at fair prices and to build a united coopera­
tive movement. It is important that they learn to conduct them­
selves not as sellers, but as buyers for the members. Generally, also,
the workers are members as well as employees of the association.

At the beginning of the association’s existence, it may be neces­
sary for both members and employees to make some sacrifices in order
to get the organization on its feet. Once that is done, the associa-



tion should provide good working conditions. Managers’ salaries
should not be below the standard set by profit business. A good
manager deserves good pay and a poor one should not be employed
at all. Other employees should receive wages at least equal to the
current union scale for similar work. I f there is no union in the
neighborhood, wages should, whenever possible, be slightly higher
than those o f employees of the profit business firms for the same kind
o f work. The payment of straight wages without any bonus or com­
mission on sales is recommended.84
Affiliation with the labor union should be encouraged, provided
the union is a bona fide one and not unfriendly to the cooperative.85
Business M ethods and Policies

Cash or Credit

A ll business of the society, both buying and distributing, should be
strictly for cash. This cannot be emphasized too strongly, for credit
selling and credit buying have been among the most frequent causes
o f cooperative failure in America.
The following are some of the reasons most often advanced for per­
mitting credit to customers:
Competitors grant credit; we must do the same, competition compels it.
Our people are accustomed to credit, we must meet the demand; it is their store.
Unemployment or other hard times force us to give credit; many members
have no money, and the cooperative cannot turn them away.
This store has always given credit; it is impossible to change the habit now.

On the other hand, the following arguments may be advanced in
opposition to credit trading:
The extra expenses involved require charging higher prices for goods.
More capital is required by stores giving credit. The purpose of the cooperative
store is not to supply credit but to supply goods or services. Credit is a banking
function for which it is not equipped.
Credit in large amounts quickly dissipates the capital of the society, for a con­
siderable proportion of the accounts will not be collected and ultimately must be
written off as bad debts. The member who takes away goods without leaving
money to replace them damages the supply to just that degree.
Credit to customers usually means that bills of wholesalers cannot be paid
promptly, the store cannot take its discounts for cash, and the members must pay
higher prices for goods.
Credit encourages extravagance on the part of weak-willed patrons.
The credit system is undemocratic. I f credit is given to one member of a cooper­
ative it should, in fairness, be given to all, and to the same amount. Yet this is
impossible, for it would bankrupt the store. Thus credit involves extending to
some members favors that others do not receive.
84 But the laws of Alaska, North Carolina, Pennsylvania, South Carolina, Virginia, and
Washington require the distribution of part of the surplus savings as bonuses on wages
to employees ; those of Montana and Wisconsin authorize this practice.
85 In some countries (as in Great Britain) cooperative employees have their own union.



Credit puts the debtor in bondage to his society. Many workers have lived most
of their lives in such bondage; the cooperative should help to free them, not add
to their burdens.

For many years it was supposed that the giving of credit could not
be eliminated. Now we know that this was a mistake. Many associa­
tions have proved that dealing for cash only is not only possible but
There are several methods of eliminating credit trading from the
cooperative. Obviously, the directors cannot merely issue an edict and
expect the members to accept it meekly. The latter should be educated
to see the dangers of credit business and they will then, in membership
meeting, vote to end it. As an alternative for those who still need
credit, a credit union or small savings and loan association may be
organized and needy members may borrow from it. A ll members may
learn to deposit special loan capital with the society during good times
and draw against this when times are bad.
In order to avoid credit trading in connection with delivery, mem­
bers should be required to deposit sums approximately equal to the
week’s needs in advance; or they may arrange to have the money ready
when delivery is made. Under no circumstances should credit be
extended to any member o f the board of directors. In fact, this should
be expressly forbidden in the bylaws.
Eeliance of the association upon credit from wholesale supply houses
after the association is once under way, is equally bad. It means loss
of the special discounts offered by the latter for prompt payment of
bills, and such discounts mount up in the course of the year to many
hundreds and sometimes thousands of dollars. It necessitates charging
correspondingly higher prices to patrons. It is better to borrow extra
loan capital from members and pay interest on it than to lose dis­
counts from wholesalers and also lose the confidence which the latter
should have in the business integrity of the cooperative society.
Price Policy

A fundamental principle of cooperation is that goods should not be
retailed at cost or even at cost-plus.36 Nor should temporary underpricing o f neighboring stores be advocated, except possibly to meet
unusual conditions. Cooperative stores that fall into this error do not
succeed in the end.
Sale at cost is inadvisable for the following reasons: (1) Actual
costs cannot be accurately estimated in advance and such a policy
therefore increases the danger of an operating loss; (2) sale at cost
also increases the hostility of the private merchants; (3) it deprives
the association of surplus; (4) it makes savings returns impossible;
86.This term is used to designate the practice of a mark-up only sufficient to cover the
cost price to the association plus a percentage estimated as representing the cost of
handling, overhead, etc.



(5) it prevents the accumulation of a reserve fund for development
and expansion; and (6) there will be no money for social,
recreational, and educational work.
D elivery Service

Not only is delivery service expensive, but also, frequently it is
unnecessary and is maintained only through force of habit of mem­
bers and manager.
It is strongly urged that everything possible be done to reduce to a
minimum the delivery of goods to members’ homes, but, of course,
not to the point of driving patronage away from the store. I f de­
livery is encouraged and passively permitted, even those members
who otherwise would carry their groceries will begin to demand
delivery and soon most of the sales will be handled in this expensive
A small charge made for delivery (or for delivery on orders below
a specified amount) may help to eliminate unnecessary service of this
kind. However, an organization expecting to cover a considerable
area and with its members scattered throughout this area must con­
sider the fact that some of the distant members often go to consider­
able inconvenience to patronize the store. Imposition of a delivery
charge may discourage this patronage.
I f delivery service is undertaken, the most economical kind of truck
should be purchased; it should be depreciated rapidly on the books
of the association, and replaced by a new one before it is badly worn
and its turn-in value reduced too much.
Delivery routes should be carefully zoned so that there is no dupli­
cation of roads covered and so that all patrons may be served at
approximately equal intervals of time. In the case of an association
with a widely scattered membership, a schedule of delivery days for
the various sections can be worked out. Members should be trained
to adhere to the schedule established and not ask for special trips for
articles forgotten or neglected.
The employee making deliveries should not only be efficient in
handling his truck, caring for his merchandise, and keeping records
of orders and routes; he should also be a genuine cooperator. The
latter qualification is often more essential in the deliveryman than
in the store clerk, for he is frequently the only person from the asso­
ciation whom some of the members and customers see, and their
opinion of the entire cooperative will often depend upon the contact
they have with him.
Fidelity Bonds or Security Guaranties

All persons handling the funds of the association should be bonded
to the full amount of money or property handled. A security com-



pany bond, which is preferable to a personal bond, costs from $4 to
$10 per $1,000. Even lower rates can probably be obtained from the
central cooperative organization for officers or employees of its affili­
ated associations, if their books are being audited by its accountants
or other reliable auditors.
B uying o f Merchandise and Sources o f Supply

Details o f buying merchandise cannot be discussed here. It
should, however, be a fundamental rule of every cooperative associa­
tion that its manager shall give all possible support to the nearest
cooperative wholesale association, and the directors should require a
regular report from the manager on this point.
I f there is no such wholesale association in the territory, several
cooperative stores should combine their purchases and gradually lay
the foundation for such a wholesale.
It has been reported that wholesale houses sometimes discriminate
against cooperatives by higher prices or inferior service. The blame
for this cannot always be placed upon those firms themselves; they
may have had poor treatment from cooperatives or may have had
difficulty in collecting accounts due. Cooperatives should strive for
good credit rating and for sound business relationships with the local
banks, and should in other ways demonstrate that the cooperatives
are efficient and trustworthy. Once such a reputation is established,
cooperative managers will complain less of discrimination.
M eeting Com petition

Like profit businesses, the cooperative must meet competition, and
this question should be given thought from the beginning and in
the preliminary survey made before the store is opened.
The chain stores have generally been looked upon as the most
severe competitors, but they present a problem which can be met if
the association has the will and ability to do so, and especially if it
is combining its purchasing power with that of other cooperatives
through the cooperative wholesale. Cooperative directors and mana­
gers have acquired the habit of fearing the chain stores and trying
to imitate them, instead of stepping out boldly to make the coopera­
tive society something distinctly different from and better than these
stores. One way to do this is through emphasis on quality rather
than price, or upon quality in relation to price.
The store belonging to the customers may not have large capital
behind it, but it has unique assets that no other corporation can boast.
It should capitalize these, and not try to emulate the wealthy chainstore corporation. The cooperative can specialize in quality and



guaranteed values. It can assure its members not only honesty in
weights and measures but honesty in packaging, size of containers,
etc. It can build up within its membership a sense of direct owner­
ship, loyalty to the people’s store, and pride in creating a business
institution unlike anything else in the community. It can specialize
also in social and fraternal activities to strengthen the bond which
unites the members—entertainments, lecture courses, forums, and
other enjoyable and profitable functions. It can cut some of the
expenses of operation that every chain store must have; it can rely
on its customers for a great amount of self-service; it can call for
volunteer help in making repairs, meeting extra holiday trade, etc.
The cooperative must learn to make full use of its unique oppor­
tunities and assets. Its benefits to members go beyond money sav­
ings or quality values; in addition to these, certain spiritual
satisfaction often results. Its opposition often consists not so much
in the other stores as in the lack of imagination among its own
leaders and lack of loyalty among its own members.
Accounting Practices

As the store grows larger it is advisable to employ a bookkeeper.
The practice o f putting the responsibility for bookkeeping entirely
in the hands of the manager, secretary, or treasurer, even though it
is sometimes advocated, is not a wise one.
The books and records are of such importance that an expert
should be put in charge of them at the earliest possible time. Book­
keeping is for keeping records of the past; even more important,
it is a picture of the present and a chart of the future.
The accounting system should record all cash and credit trans­
actions, and protect the association from fraud on the part of em­
ployees or outsiders and from mistakes of judgment on the part of
the manager. It should be serviceable and economical to handle.
It should give complete information for each department of the store
(meat, grocery, dry goods, etc.), so that the directors may know
which departments are profitable and which are unprofitable. It
should also furnish data on the various aspects (costs of delivery,
credit, etc.), of the store’s service.
I f there is no good bookkeeper available, the association should
select an intelligent and cooperative man or woman and see that he
or she is given the proper training, either by attending cooperative
training courses, by subscribing for correspondence courses, or by
getting direct personal instruction from the nearest cooperative




The regular cooperative accountant,37 or a public accountant if the
former is not available, should be engaged to audit the accounts of
the association annually, semiannually, or even oftener. His report
should be printed and given to each member.
More associations are adopting the practice of having frequent
audits not only of the books and records but of the membership and
store as well. In such cases a regular check is made of the number of
members (both of men and o f women), their holdings in shares, their
loans to the association, their purchases, the length of time they have
been members, their occupations, etc. The store audit gives a check-up
o f the store by an outside expert, to establish its cleanliness, its neatness
o f appearance, the economical lay-out of its fixtures, counters, and
shelves, the reduction of hazards from fire or freezing or exposure to
heat and damp, etc.
A competent auditor, even though his official work is only that o f
auditing the books, will not neglect these other matters but will look
into them at least superficially and then meet with the directors and
discuss with them the various problems that he feels are of impor­
tance. He will be a business adviser to the association as well as its
auditor. His examination will reveal the degree of efficiency o f the
business and his report will give suggestions for improvement, and
comparisons and analysis of methods and their results.
Inventory and Depreciation

An inventory should be taken at least semiannually by both the
manager and the auditing committee. The inventory should be fig­
ured at cost or market price, whichever is lower.38 Overvaluation of
stock should be avoided.
Depreciation should be allowed for in the inventory. Depreciation
on fixtures should be figured at 10 percent per year; on automobiles,
at 20 to 30 percent. The mark-down on goods will run from 2 to 10
87 The following central organizations provide auditing service, and assistance in this
matter can be obtained from them :
Illinois.— Central States Auditing Service, 2301 S. Millard Ave., Chicago.
Minnesota.— Minnesota Cooperative Auditing Service, Broadway and Johnson St. NE.t
Minneapolis; and Farmers Union Central Exchange, Inc., 1200 N. Concord St., South St.
Missouri.— Consumers’ Cooperative Association, 1500 Iron St., North Kansas City.
Nebraska.— Farmers’ Union State Exchange, 39th and Leavenworth Sts., Omaha.
New York.— Accounting Bureau of The Cooperative League, 167 W. 12th St., New York
Ohio.— Farm Bureau Cooperative Association, 246 No. High St., Columbus.
Washington.— Grange Cooperative Wholesale, 3104 Western Ave., Seattle; and North­
west Cooperative Auditing and Service Association, Boyer Ave. and Tucannon St., Walla
Wisconsin.— Central Cooperative Wholesale, 1901 Winter St., Superior.
88 For directions as to the proper methods of inventory, see A Primer of Bookkeeping
for Cooperatives, by Werner E. Regli. New York, The Cooperative League, 1937, p. 40.


percent, depending on their condition, their marketability, etc.
auditor will determine the necessary price revision.


Record o f Patronage

The practice o f returning savings in proportion to patronage neces­
sitates the introduction of some system whereby the association may
determine at the close of the patronage-refund period the trade done
by each member, in order to apportion to him his savings.
Most associations require that the patron shall keep records of
his patronage. He saves his cash-register slips or other evidences of
purchase until the end of the accounting period and then turns them
all in at the store, to be counted, for refunds.
Some associations themselves keep records of patronage by their
members, believing that, although this entails extra bookkeeping
expense, it guarantees a more equitable distribution o f savings. A
satisfactory method is the use of a duplicate- or triplicate-book system
or a billing machine.
N et Savings and T h eir Disposal

In the private store the margin between the cost of the goods
(plus expenses) and the price at which they are sold goes to the
tradesmen or investors, as profit.
The cooperative store appears at first glance to operate like any
other business. Actually there are wide points of difference. The
members have pooled their resources to buy at better advantage than
each could buy alone. Having bought their goods and put them in
their store, they own the goods. Thus, the members do not buy
from their store, nor does the store sell them goods. It buys for
them and distributes to them. When the member takes goods away
from the store, he leaves enough money to replace what he has
taken and also the difference between the cost and retail price. It is
from the latter margin that, after the cost of operation is deducted,
the member receives his savings return.
This collective surplus or saving is the essence of cooperative busi­
ness. The use of this surplus marks the chief difference between the
cooperative and the profit systems of business.
General Surplus Reserve

The net worth of cooperatives consists of (1) share capital owned
individually by the members, and (2) the general reserve owned
collectively by the members. The general reserve represents funds
set aside from earnings to insure the safety of the business and
provide for further expansion. A great many State laws require
that cooperatives shall establish such a reserve. Usually from
5 to 25 percent of the year’s net savings must be added to the fund
until the latter amounts to from 20 to 50 percent of the paid-in
256781°— 41------ 4



capital. Many associations prefer to exceed the minimum, however,
and may accumulate a reserve considerably in excess of their share
capital. Members should be encouraged to be generous to their
reserve and the future security of their association and not divide
among themselves, at the end of the year, all of the savings made.
But the cash reserve should not be permitted to become so large
as to constitute a temptation to the profit seekers who may be found
in the membership, and sometimes in the management, and who
(unless the contingency is provided for in the bylaws) may urge
dissolution, or a course that will bring the enterprise to an end,
in order to divide the reserve.
As mentioned above, the general reserve is the indivisible property
o f the association and is created to safeguard the business and fur­
nish additional capital. In case a cooperative shows an operating
loss, this loss must be charged against this reserve. It is, therefore,
important to build a reserve in good times as a stabilizer to take
care of operating difficulties. Until the entire general reserve will
have been dissipated through operating losses, the share capital still
remains at par. Once the balance sheet reveals a deficit, then the
amount o f the deficit should be deducted from the value of the share
capital, thus showing that the stock is no longer worth its par value.
Naturally, in such case, no patronage refunds can be made, as these
should always come out of net earnings.
Educational Funds

Provision should also be made for educational work, either as a
special fu n d 39 or by payment out of the current expense fund.40
The important thing is that such work be done and adequately
Savings Returns or Refunds on Purchases

After the return on capital, the addition to the permanent reserve,
and the educational funds have been deducted, the remainder of the
net savings may be paid to the members and to nonmember patrons
as savings returns or refunds (“ dividends on purchases” ), according
to the Rochdale method. They are based on the amount of patron­
age (not on the amount invested in share capital, as in profit-making
business). They are usually paid semiannually or annually; the latter
may be preferable because the longer period tends to equalize seasonal
fluctuations in patronage and consequently in earnings (see also
footnote 3, p. 57). Consideration should, however, be given to the
possibility that the longer interval may lead to a loss in membership
39 The laws of Alaska, New Mexico, North Carolina, Pennsylvania, South Carolina, South
Dakota, and Virginia require regular additions to a special fund for this purpose.
40 Income tax must be paid on funds created from previous years’ earnings.



The amount to be returned on patronage may be paid back in
(1) cash, (2) in credit toward patronage at the store, (3) in credit
toward the purchase of additional shares, or (4) as loan-capital cer­
tificates. The first and second methods are usual where the associa­
tion already has sufficient capital for current needs, and methods 3
and 4 where more capital is needed. The decision as to how the
distribution is to be made should be made by the membership, unless
the law specifies otherwise; the directors should only make recom­
mendations. The bylaws should specify that the association has a
lien on the surplus savings of members for any amounts owing to
the store, so that such refunds may be withheld if the member is in
debt to the association. Earnings on sales to nonmembers should not
be paid to members, but should be placed in the educational reserve
if they are not to be returned to the nonmembers themselves.
Mention should be made of the growing popularity of the “revolv­
ing fund” or “ rotating capital” systems. Various methods are used,
all involving the principle of deferring the date for cash distribution
of savings returns. The simplest form is the retention in the asso­
ciation of the savings returns for a fixed or indefinite period of
years; certificates of indebtedness are issued to the member-patrons,
being redeemed at par, in cash, at the end of the period or when
sufficient capital has been accumulated.41 A variation is to have the
savings returns paid partly in cash, and partly in new shares, the
proportions having been fixed at the annual meeting. Any surplus
funds are used to retire old shares in the order of their serial number
or date of issue. The plan is designed ( a ) to weed out members who
are no longer active patrons, and (Z>) to have a member’s investment
status keep pace with his patronage status.
There are at least three methods of treating nonmember pur­
chasers: (1) No returns to such patrons until they have purchased
at least a small amount of stock; (2) refunds at the same rate as
to members; and (3) refunds at half the rate at which members
are paid. The second method is to be preferred from the point of
view of safeguarding the nonprofit character of the cooperative.
Under genuinely cooperative practice the only alternative to return­
ing patronage refunds is to add the earnings from nonmember
patronage to the reserve account. Also, it should be borne in mind
that if nonmember patrons are paid no savings returns or are paid at
only half the rate as member patrons, then it can be said that the
members are “ profiting,” to some extent at least, at the expense of
the nonmembers. This factor has been stressed in the past by courts
An extension of the principle of payment-deferral is represented by the Iowa coopera­
tive law which defers the payment of savings returns until dissolution of the cooperative.
Although the credited savings returns, or the certificates which may be issued to represent
them, do not “mature” until dissolution, they are nevertheless “callable” before that time
at the will of the association.



when considering whether a particular cooperative was eligible for
tax exemption. Accordingly, it has become increasingly common
among cooperatives to grant refunds to nonmembers at the same
rate as to members, the refunds being made in the form of credits
toward the amount of capital necessary for membership. Several
o f the State laws have definite provisions on this point which must
be met.42
Other Uses for Net Savings

There are some associations which either distribute no savings
returns to members or distribute only a very small proportion of
the actual funds available. These cooperatives believe in what is
popularly known as the “Belgian plan,” which is the use o f savings
for the social benefit of the entire membership and even of the
whole community. With these savings there may be established
insurance funds, vacation homes for the women and children, medi­
cal or dental clinics for the members, community halls, libraries,
art centers, the free distribution of papers or other literature, the
employment o f special lecturers, or free scholarships in cooperative
schools. The number of such benefits is limited only by the amount
o f funds available. The objections to this system are that it pro­
vides no economies o f purchase to the individual member and that
those who enjoy most of the benefits may not be the members whose
patronage has created the most of the funds.
Com mittees

There are several special committees required by every efficient
cooperative society. Among them are the committees on education,
auditing: and inventory, finance, business or management, complaints,
relations with other cooperatives, problems of quality and grading of
goods, etc. Some of these committees may be combined; others will
have several subcommittees for specialized work.
Thus, nonmembers are apparently excluded from patronage refunds under the laws
of Arkansas, Connecticut, Iowa, Kansas, and Vermont.
Patronage refunds to nonmembers are required under the laws of Florida, Illinois, Michi­
gan, Missouri, New Mexico, North Carolina, Pennsylvania, South Carolina, Virginia, and
Washington. Michigan, North Carolina, Pennsylvania, Virginia, and Washington provide
for the payment on nonmembers’ refunds at half the members’ rate, but the Virginia act
allows the association to make other provision in its bylaws. The Michigan and South
Carolina acts provide that the nonmembers’ refunds may be applied on stock, and the New
Mexico and Pennsylvania acts require that this shall be done.
In New York they may be paid such refunds at the same rate as members, if their
business with the association has amounted to $100 or more during the year. The Minne­
sota, California, and North Dakota acts permit the association to return patronage refunds
to nonmembers (in Minnesota, at the same rate as members) but all (Minnesota and North
Dakota) or half (California) of such return must be credited on a share of stock. Refunds
to nonmembers are also permitted in Oregon, but the patron’s consent must be obtained
before the refund may be applied toward the purchase of a share of stock. The laws of the
other States permit the payment of patronage refunds to nonmembers, hut leave it to
the association to decide whether this shall be done.



It is customary to have the directors appoint committees whose work
is with the business of the store, and to elect from the membership
those which are to devote themselves to the broader questions of the
membership at large or to check the work of the directors. Thus the
membership meetings may elect the membership and audit committees,
while the board may appoint or elect from among its own membership
or the membership at large the other committees enumerated above.
C o m m it t e e o n e d u ca tio n .—The success of the committee on educa­
tion depends upon efficiency and loyalty. Loyalty depends on mem­
bers who understand cooperation. Thus the perpetual duty of this
committee is to keep on educating itself. It is important that the
membership o f this committee be appointed on the basis of qualifica­
tions for the specific duties to be performed. One member may be
chosen to handle publicity, another study groups, another visual
educational methods, another commodity promotion, etc. Selected be­
cause o f their interest and ability along special lines, the members of
this committee will function much better than if chosen indiscrimi­
nately and given no specific duties. The whole educational committee
should strive to keep the society in close association with the organized
cooperative movement, in the State, the Nation, and the world.
The committee may be large and divided into subcommittees:
The membership subcommittee should bring in new members and
hold and educate the old members. It should work among nonpur­
chasing members who have grievances against the store; among pa­
trons who have not yet become members; among fraternal, religious,
labor, or farmer groups from which new members may be recruited.
Newspapers, the movies, the radio, and the lecture platform are all
good mediums for this work. Effective results are also obtainable
from study groups. The new members drawn into these groups will
enlarge their understanding of cooperation.
The program and entertainment subcommittee should arrange the
program for the members’ meetings, provide for debates, entertain­
ments, speakers, picnics, suppers, and other social affairs, as well as
conduct more serious study courses for members and employees.43
The junior committee should develop interest and loyalty among
children and young people. Literature and books suitable for them
should be read aloud and discussed. Outings, entertainments, and
other young people’s parties and educational meetings should be
arranged. Athletic teams, dramatic groups, and musical organiza­
tions should be fostered.
The women’s subcommittee or women’s guild has the. dual respon­
sibility of stimulating greater loyalty to the store on the part of its
« A pamphlet on “ Cooperative Education” can be obtained from The Cooperative League,
167 W . 12th St., New York City.



present members and of interesting other women throughout the
community. Since it is the wives and mothers who spend most of
the family funds, their earnest support and understanding of the
cooperative are essential. This committee can also be of great service
in criticism leading to improvement in quality of goods, physical
condition of the store, labor policies, etc. It may also be a real force
in community betterment.
The library and literature subcommittee should keep on hand in
a satisfactory place, in the store or close to it, up-to-date magazines,
pamphlets, and books for distribution. This committee should conduct
a library and reading room. It should work to the end that every
member shall subscribe to or regularly receive a magazine or current
periodical devoted to the news and ideals of the cooperative movement.
The issuance of a store bulletin or news letter is a useful function of this
subcommittee. It may also work with public libraries to increase the
supply o f cooperative literature available to the public.
C o m m it t e e o n g r a d e s a n d q u a lity o f g o o d s .—This may be a sepa­
rate committee or a subcommittee of the committee on education.
I f the former, it should work closely in connection with the educa­
tional group. Its function is to stimulate interest in laboratory test­
ing of commodities and in the reports of consumed information agen­
cies, to study the goods handled by the association with a view to
improving their quality, and to work for informative labeling of
goods. This committee may also inquire as to the conditions under
which the commodities carried by the cooperative are produced.
C o m m it t e e o n a u d it cmd i n v e n t o r y .—The committee on audit and
inventory should be elected by the membership. One of the duties of
this committee is to check on the taking and pricing of inventory, to
insure conservative pricing, and to prevent “padding” of figures. As
soon as possible, also, the committee should see that the association
makes use regularly of a certified public accountant, preferably a co­
operative accountant if one is available. Such outside audits by a
public accountant should be quarterly for the first year or tw o; later
they may be at intervals of 6 or 12 months.
B u s in e s s m a n a g e m e n t c o m m itte e .—The business management com­
mittee is usually elected from and by the directors, if the board is a
large one. This is the committee which assists the manager in carry­
ing out the general policies set by the entire board of directors. It
may consist of the two or three directors most conversant with busi­
ness problems. It should meet with the manager at frequent stated
intervals for the consideration of the various problems of finance,
merchandising, insurance, employment of help, relations with whole­
sale houses, enlargement of the business premises, etc.
In the association which has a small board of directors, meeting
frequently, the entire board may act as such special committee.



Educational W ork

The first essential of educational work in the cooperative association
is frankness, open records, and no secrets regarding the conduct of
the business or the activities o f officers and committees. I f the mem­
bers do not have confidence in their leaders, no educational work can be
effective. One of the best ways by which the membership can be kept
informed is through a news letter issued by the association.
The second principle underlying educational work is that such work
be connected closely with the business of the store itself, and not treated
as something divorced from the association’s economic life and the
special prerogative of the educational committee. In order to be
effective, it is important that the handling of merchandise, the creating
o f a cooperative atmosphere, and the dissemination of cooperative
ideas all go along together.
The third essential is that each local association keep frequently
and closely in touch with the nearest educational center of the co­
operative movement, seek its ideas and advice, send to it information
on the local work, and participate actively in cooperative conferences,
conventions, and joint activities among cooperatives.44
Educational work may be divided into three fields—that done among
the employees, that done among the members, and that done for the
community at large.
Education of employees is of two kinds—technical education to
make them more efficient workers, and general education in coopera­
tion. The importance of educating the employees is indicated by
the fact that one statistical bureau found that of the people who
stopped trading at a given store, 33 percent left because of inefficiency
o f employees and another 30 percent because of poor facilities for
service. A substantial percentage of cooperative failures is due in­
directly to lack of cooperative understanding among the workers.
Opportunities for both kinds of education exist within the coopera­
tive movement. Special training schools and summer institutes are
organized by the Cooperative League and its district leagues and by
several of the wholesales. The courses of study are designed both
for the technical training of employees and directors and for instruc­
tion in the general principles of cooperation.45
u Such centers are the educational departments of the cooperative wholesales and the
national and regional cooperative leagues, listed on p. 51. There are also many local
leagues and councils whose activities cover a city, county, or district. The names and
addresses of these local leagues can generally be obtained from the regional leagues or
wholesale associations.
45 For names and addresses of the leagues, see p. 51. Among the wholesales known
to give such courses are the Midland Cooperative Wholesale, 739 Johnson St. NE., Min­
neapolis, M inn.; Consumers’ Cooperative Association, 1500 Iron St., North Kansas City,
M o .; Eastern Cooperative Wholesale, 135 Kent Ave., Brooklyn, N. Y . ; and Central Coopera­
tive Wholesale, 1901 Winter St., Superior, Wis.



2. Educational work for the membership may be carried on both
inside and outside the store. The best work from within is that done
by the employees themselves through the spoken word, the coopera­
tive approach to customers, or the use of posters, bulletins, etc.
Goods packed by cooperative wholesales under special cooperative
labels have value in conveying the cooperative idea.
The work outside the store may be direct and intensive, as in
study classes, distribution of cooperative literature, lectures, and
attendance at cooperative schools and institutes. It may deal with
general consumer activities such as improved regulation of weights
and measures, quality of goods, increased use of Government-graded
meats and canned goods, more adequate food and drug regulation,
etc. It may be general and combined with social and recreational
affairs. Finally, it may accompany some of the direct work of the
cooperative association in its nonmerchandising activities. Thou­
sands have been made better cooperators because of the summer camp
which the cooperative association ran, the library it organized, the
medical assistance it gave to the unemployed, or the lunchroom it
operated for the members.
The small informal cooperative-discussion group, meeting regu­
larly in rotation in the homes of the members for study of coopera­
tive problems is a most successful method of membership education.
These groups are variously styled “ cooperative clubs,” “ advisory
councils,” “ neighborhood clubs,” “ neighborhood councils,” or “fireside
forums.” A number of cooperative wholesales now supply monthly
programs and regular helps for these home cooperative-discussion
3. Work for the community of nonmembers may take the form of
general publicity or advertising. Publicity is designed to acquaint
the public with the idea behind the cooperative and to arouse interest
in its general work; advertising is to focus attention upon particular
commodities. The cooperative movement should make more use of
the former. Cases of goods donated for use of the unemployed,
special assistance to the local hospital or orphans’ home, meetings
planned in the neighborhood church or lodge room—all may be made
effective in spreading interest in the cooperative. The special mem­
bership drive, usually put on during a designated cooperative week
or cooperative month, has proved to be a valuable means of reaching
a new public.
Both the women’s guild and the young people’s league should be
encouraged to take responsibility for educational work among mem­
bers and nonmembers. They often have more and closer contacts
with those who should be reached than have the directors or officers
or even the members of the educational committee.



Two effective ways of reaching nonmembers are the holding of (1)
“ tasting parties,” i. e., sampling cooperative goods at the home of
some member; and (2) food demonstrations at the store.
Sources o f Cooperative Information
C o o p e r a tiv e s o u r c e s .—The Cooperative League of the U. S. A., 167
West Twelfth Street, New York City,46 stands in the position of a
central clearing house for the cooperatives in the United States. It is
the national federation of consumers’ cooperative associations of this
country, and is affiliated with the International Cooperative Alliance.
It provides pamphlets on various aspects and problems of cooperation
and films on cooperative subjects. The League promotes education,
gives advice, and unites the associations for their mutual advance­
ment. Cooperative associations should be affiliated with this federa­
tion of cooperatives for purposes of advice and assistance.
Specialized services are rendered through separate departments of
the league. Thus, the Bureau of Cooperative Accounting makes
audits and analytical reports on financial condition for local associa­
tions making use of its services; it has also issued a “ Primer of Book­
keeping for Cooperatives.” Rochdale Institute is a training school
for (1) cooperative employees and (2) educators to serve in the
cooperative movement. Through the Design Service are issued special
forms of stock certificates; membership buttons bearing the coopera­
tive emblem; transparencies of the emblem to be used on store win­
dows, sides of trucks, etc.; cards for display in stores; small flyers
for insertion in bundles or distribution at meetings; annual calendars
depicting cooperation symbolically; and other educational aids. The
Bureau o f Cooperative Medicine, 1790 Broadway, New York City,
gives advice on formation of associations for provision of medical
care and follows the developments in the medical field.
A ll o f the regional leagues listed in appendix A are in affiliation
with the Cooperative League and offer information on the local
problems o f cooperative business. Much practical advice may also be
obtained from the cooperative wholesales listed in appendix A ; many
o f these have active educational departments which are, in some
cases, o f greater scope than the regional leagues or even replacing
the latter entirely.
The Credit Union National Association, 142 East Gilman Street,
Madison, Wis., and the Credit Union Division of the Farm Credit
46 The headquarters of The Cooperative League have been moved to 608 South Dear­
born Street, Chicago, 111., but all of the departments enumerated here are in New York



Administration, Washington, D. C., can supply information that will
be helpful in the organization of cooperative credit associations.
G o v e r n m e n t a l so u r c e s .—The Bureau of Labor Statistics of the United
States Department of Labor has, in addition to this bulletin, issued two
others dealing, respectively, with cooperative oil associations and co­
operative housing associations. These and other publications of the
Bureau are free as long as the Bureau’s supply lasts; thereafter they
may be obtained for a nominal sum from the Superintendent of Docu­
ments, Washington, D. C. Statistical reports as well as information on
specific points or problems may also be obtained from the Bureau.
A compilation of the State consumers’ cooperative laws and court
decisions was issued by the Consumers’ Project of the United States
Department o f Labor. This publication may be obtained from the
Bureau of Labor Statistics, and the Consumers’ Counsel Division of the
Agricultural Adjustment Administration; it may also be purchased
from the Superintendent of Documents.
Information on foods and their prices—intended especially for
buyers in consumers’ cooperative clubs and other cooperative organiza­
tions—is available in a biweekly digest issued by the Consumers’
Counsel Division of the Agricultural Adjustment Administration.
Articles of general interest, dealing with consumers’ cooperation, fre­
quently appear in the Consumers’ Guide, also issued by the Division.
Both of these publications are free on request.
The Rural Electrification Administration furnishes bylaws and
advice to rural groups wishing to organize associations for the supply
of electric current, and makes loans to approved organizations, for
construction of electric plant, erection of lines, and purchase of
The Federal Farm Credit Administration, besides having charge o f
the administration o f the Federal Credit Union Act, also has special­
ists in auditing, accounting, financing, and purchasing of farm sup­
plies, who may be called upon by farmers’ cooperatives.
Some of the State agencies have also issued helpful material on
consumers’ cooperation. Thus, the Minnesota Department o f Educa­
tion, St. Paul, in 1938 published a “ Course of Study on Consumers’
Cooperation.” The Division of Cooperatives in the North Dakota
Department of Agriculture and Labor, Bismarck, issues current ma­
terial on cooperatives. In Wisconsin the State Superintendent of
Public Instruction has issued outlines and courses of study on coopera­
tive subjects. The Utah Works Progress Administration, Salt Lake
City, has published an excellent series of handbooks covering the or­
ganization of a cooperative health association, a consumers’ cooperative
association, and a producers’ (i. e., self-help) cooperative, and a manual
o f cooperative accounting, as well as a general handbook on coopera­
tive education and one on consumer problems in general.

Part 3.—Appendixes
Appendix A .— D irectory o f Cooperative Leagues and Wholesales
Cooperative Leagues

Below are listed the cooperative leagues.

These are all educational

National league:
The Cooperative League of the U. S. A., 167 W est Twelfth Street, New York
City, and 608 South Dearborn Street, Chicago, 111.
Accounting Bureau, 167 W est Twelfth Street, New York, N. Y.
Bureau of Cooperative Medicine, 1790 Broadway, New York, N. Y.
Design Service, 167 W est Twelfth Street, New York, N. Y.
Research and Information Service, 726 Jackson Place N W ., W ash­
ington, D. C.
Rochdale Institute, 167 W est Twelfth Street, New York, N. Y.
District leagues:
Associated Cooperatives of Southern California, 7218 S. Hoover Street,
Los Angeles.
Associated Cooperatives of Northern California, 372 Fortieth Street,
Georgia: Southeastern Cooperative Education Association, c /o Edward
Yeomans, Carrollton.
Illinois: Central States Cooperatives, 2301 South Millard Avenue, Chicago.
New Y o rk : Eastern Cooperative League, 135 Kent Avenue, Brooklyn.

Cooperative Wholesales

In the following table are listed the various cooperative whole­
sales, together with the commodities handled by each and the other
services rendered by them.
L in e s



h a n d le d

Nam© and address of


w h o le s a le co o p e r a tiv e
p r o v id e d

a s s o c i a ti o n s


Goods handled

oth er

s e r v ic e s

Other services

Indiana: United Coopera­
tives, Inc., 733 West Henry
St., Indianapolis.

Petroleum products; auto tires and accessories; service
station and bulk plant equipment; hardware; poul­
try equipment; roofing.

Idaho: Grange Cooperative
Association, Shoshone.

Petroleum products; auto tires, farm machinery........




L in es o f good s handled b y w h o lesa le c o o p era tiv e a ssocia tion s and o th er s e r v ic e *
p rovid ed — Continued
Name and address of
R e u i o n a l—

Goods handled

Other services

C on tinued

Illinois Farm Supply Co.,
608 S. Dearborn St.,
Central States Coopera­
tives, 2301 S. Millard
A ve., Chicago.
Indiana: Indiana Farm Bu­
reau Cooperative Associa­
tion, Inc., Maryland and
Pennsylvania Sts., Indian­
Iowa: Cooperative Service
Co., Box 563, Waterloo.
Massachusetts: United Co­
operative Farmers, Inc.,
Kimball Place, Fitchburg.
Michigan: Farm Bureau
Services, Inc., 221 N .
Cedar St., Lansing.
Farmers’ Union Central
Exchange, Inc., 1200 N .
Concord St., South St.
M id la n d
C ooperativ e
Wholesale, 739 Johnson
St. N E ., Minneapolis.
Minnesota Farm Bureau
Service Co., 101 E . Fairfield St., St. Paul.
Missouri: Consumers’ Co­
operative Association, 1500
Iron St., North Kansas
Farmers’ Union Cooper­
ative Oil Association of
Nebraska, Hemingford.
Exchange, Omaha.

New York: Eastern Cooper­
ative Wholesale, Inc., 135
Ohio: Farm Bureau Coop­
erative Association, Inc.,
246 N . High St., Columbus.
O r e g o n : Oregon Grange
Wholesale, Inc., 1135 SE.
Salmon St., Portland.
Pennsylvania: Pennsylvania
Farm Bureau Cooperative
Association, 3607 Derry
St., Harrisburg.
Texas: Consumers’ Co-oper­
atives Associated, 109 Fill­
more St., Amarillo.
Utah: Utah Cooperative A s­
sociation, 155 Pi e r p o n t
A ve., Salt Lake City.

Petroleum products; paints, solvents; auto tires and
tubes; farm supplies.
Groceries, other household goods; motor oil, auto tires
and accessories; electrical appliances.


Household supplies; fuel; petroleum products, auto
tires and accessories; electrical appliances; lumber
and building material; plumbing supplies; farm sup­
plies and machinery. M a n u f a c t u r e s : Lubricating
Petroleum products; paints; bottled gas; stoves.


Dairy products; petroleum products; auto tires and
accessories; hardware; lumber and building material:
farm supplies and machinery. M a n u f a c t u r e s : Feeds.
Fuel; dairy products; petroleum products; auto tires
and accessories; farm supplies and machinery.

Petroleum products; auto tires and accessories; elec­
trical appliances; flour; hardware; farm supplies and
machinery; oil-station equipment. M a n u f a c t u r e s :
Lubricating oil.
Groceries; fuel, petroleum products; auto tires and
accessories; electrical appliances; paint; steel and
wire; bulk-station equipment; rope; farm supplies.
M a n u f a c t u r e s : Lubricating oil.
Petroleum products; auto tires and accessories; paint;
farm supplies. M a n u f a c t u r e s : Fertilizer.
petroleum products; auto tires and
accessories; electrical appliances; paint; lumber
and building material; roofing; farm supplies and
machinery; service-station equipment. P r o d u c e s
and refines gasoline. M a n u f a c t u r e s : Lubricating
oil, axle grease, paint, insect spray.

E d ucation al de­
partment; mer­
vice; auditing.^

partment; speak­
ers' bureau; au­
diting and busi­
service; trucking.

Fuel oils; petroleum products; auto tires and acces­
Groceries, meats; clothing, shoes, dry goods; fuel; dairy
products; household supplies; stationery, students’
supplies; petroleum products; butane gas and equip­
ment; auto tires and accessories; hardware; electri­
cal appliances; paint; farm supplies and machinery.
M a n u f a c t u r e s : Feed and seeds.
Groceries; dairy products; smoked meats; citrus fruits;
motor oil, auto tires; refrigerators; household appli­
Fuel; petroleum products; auto tires and accesso­
ries; paint; electrical appliances, household goods:
lumber and building material; farm supplies and
machinery; raw materials; twine. M a n u f a c t u r e s :
Fertilizer; feed.
Petroleum products; auto tires and accessories; farm
supplies and machinery.
Petroleum products; auto tires and accessories; hard­
ware; electrical appliances; lumber and building ma­
terial; farm supplies. M a n u f a c t u r e s : Feed.
Fuel oil; petroleum products; auto tires and accessories;
electrical appliances; washing machines: refrigera­
tors; household furniture; farm supplies; windmills.
Canned goods; petroleum products; auto tires and

1 Provided through separate organization.

S u p e r v i s i o n of
management o f
l o c a l , if r e ­

partment; audit­
ing; t r u c k i n g ;
poultry plant.
Technical advice in
store operation,
lay-out, etc.; test­
ing kitchen for
food products.
partment; audit­
i n g ; mail-order



L in es o f good s handled b y w h o lesa le c o o p era tiv e a ssocia tion s and o th er serv ices
p rovid ed — Continued
Name and address of

Goods handled

Other services

Grange Cooperative
Wholesale, 3104 Western
Ave., Seattle.
Pacific Supply Coopera­
tive, Box 58, W a l l a
Wisconsin: Central Coopera­
tive Wholesale, 1901 Win­
ter St., Superior.


Groceries and meats; limited lines of clothing and
shoes; fuel; household goods; petroleum products;
auto tires and accessories; students’ supplies; farm
supplies and machinery; hardware; electrical ap­
pliances; building material. Manufactures: Feed.
Petroleum products; auto tires and accessories;
electrical appliances; farm supplies.


Groceries (including fresh fruits) and meats; clothing,
shoes; bakery goods; household goods; students*
supplies; coal (fobbing only); petroleum products;
auto tires and accessories; hardware; electrical appli­
ances; lumber and building material; farm supplies.
Manufactures: Bakery goods and feed; roasts cofiee.

Eduoational de­
partment; audit­
ing;! merchandis­
ing service.

Associated Cooperat i v e s Groceries; electrical appliances; auto tires and
of Northern California,
372 Fortieth St., Oak­
Associated Cooperatives
of Southern California,
7218 South Hoover St.,
Los Angeles.
Illinois: The Cooperative Fresh produce; clothing; dairy products; bakery goods.
Union, Inc., 679 N. Michi­
Manufactures: Suits and coats.
gan Ave., Chicago.
H-O-B Co-operative Oil Petroleum products (including fuel oil); auto tires and
Association, Bruce Cros­
Federation, Inc., Rock.
C-A-P Cooperative Oil As­ Petroleum products, auto tires and accessories; elec­
sociation, Kettle River.
trical appliances; farm machinery; fly spray.
Range Cooperative Fed­ Automobiles; petroleum products, auto tires and ac­
eration, 307 N. 1st St.,
cessories; dairy and meat products; farm machinery.
Manufactures: Butter; meat products.
Trico Co-operative Oil
Association, 7 15th St.,
A & B Cooperative Oil As­
sociation, 414 11th Ave.
West, Ashland.
Cooperative Services, Inc.,
Fox River Valley Cooper­
ative Wholesale, 407 N.
Superior St., Appleton.
Iron Cooperative Oil Asso­
ciation, Iron.
Price County Cooperative
Oil Association, Prentice.

Fueloil; petroleum products; auto tires and accessories;
tractors; farm machinery.



Automobile - repair
service; in su r­
ance; trucking;
education depart­
ment; mortuary.

Fuel oil; petroleum products; auto tires and accessories.
Petroleum products; electrical appliances; explosives;
farm supplies and machinery; lumber and build­
ing material; (including cement) seed-cleaning
Petroleum products, auto tires and accessories; elec­
trical appliances: radios; household goods; hardware;
paint; bulk-station equipment; plumbing supplies
and fixtures; farm supplies and machinery.
Coal; petroleum products; flour and feed; building
material; farm supplies.
Petroleum products; farm machinery.

1 Provided through separate organization.



Appendix B .— O utline for Survey o f a Com m unity 1
I. Community characteristics.
1. Is this a stable community or a rapidly changing one?
2. W hat employing industries are there in the community? Are they
varied or does employment depend on one or two industries (i. e., so
that a depression in them would seriously affect the financial status
of the membership of the cooperative) ?
3. Is business fairly good?
4. Is employment fairly stable?
5. Are the residents accustomed to participation in community (joint)
activities (picnics, literary associations, labor unions, etc.)?
6. Are there capable leaders available for work in organizing and directing
a cooperative?
II. Local competition— existing agencies.
1. Number, type, and approximate volume of business of commercial enterprices in the locality (grocery stores, general stores, fuel yards,
gasoline stations, etc.).
2. Causes of dissatisfaction with existing agencies.
3. Possible ways in which cooperative could improve upon existing agencies.
4. Competition from existing agencies would be (keen) (weak) ; (fair)
III. Trading and membership prospects.
1. How large a trading territory could a cooperative be expected to have?
Miles N-------S------- E------- W -------, square m ile s ------- .
2. Number of families living in territory shown in Q. 1.
3. Estimated number that would be interested in joining a cooperative.
4. Probable volume of business of the cooperative.
5. Is trading territory large enough so that a branch would be feasible in
a nearby town at some future time?
IY. Trading facilities.
1. Can desirable shop facilities be leased? A t what rental?
2. Are conveniences (water, electricity, gas, fuel) easily available?
V. Financing.
1. Can sufficient capital be supplied by the prospective members to finance
the organization without borrowing?
2. W ill prospective members see the necessity of and agree to building up
adequate surplus and reserves each year?
VI. Other cooperatives.
1. W hat cooperatives now operate in the proposed areas? How long has
each been organized?
2. W hat percent of the available volume of business does each handle?
How many members in each?
3. W hat proportion of the families in the locality now utilize the services
of each?
1 Adapted from an outline drawn up by Kansas State College, Manhattan, Kans.




VI. Other cooperatives—Continued.
4. Do the members feel that these cooperatives have been successful? If
not, why?
5. What associations have failed in the past in this community? Reasons
for failure in each case.
VII. Questions relating to operation of the association.
1. Can competent management be obtained at a cost per unit within finan­
cial reach of the association?
2. Estimate a detailed budget of operating and fixed expenses for a year
(see p. 31).
3. Estimate volume necessary to pay these expenses and establish adequate
reserves (see pp. 29-31, 41).
4. Probable sources of supplies for the cooperative. Is there a cooperative
wholesale association sufficiently near to make patronage of it possible?
What lines of goods does it handle (see p. 51) ?
VIII. Summary and recommendations.
1. List conservatively the probable advantages of a cooperative.
2. List conservatively the probable disadvantages of a cooperative.
3. List the types of cooperative that, in the committee’s opinion, are feasible
for a cooperative group here.
4. Draw conservative conclusions as a result of the survey.
5. A cooperative should not be organized unless the following can be an­
swered in the affirmative:
(a) Is there a definite need of more than a temporary nature for a
cooperative in this community?
(b) Are local conditions favorable to a cooperative business?
(c) Can a volume of business sufficient for economical operation be
( d ) Can the funds necessary for capital be obtained from the prospective
(e) Can competent management be obtained at a unit cost within finan­
cial reach of the association?
( f ) Can enough capable persons be found in the area to oversee the
affairs of the association?

Appendix C .— Suggested B ylaw s For A Cooperative B uying Club
Bylaws o f the — Cooperative Club 1
A rticle
S ection

I.— N a m e

1. The name of this organization shall be — Cooperative Club.
A rticle

II.— O b je c t

S ection 1. The immediate object shall be to obtain for members services and
the ordinary articles of consumption at the lowest possible cost consistent with
quality. The ultimate object is to develop as soon as possible into a full-fledged
cooperative business enterprise.
A rticle

III.— M e m b e r s h ip

S ection 1. Any person who agrees to comply with the bylaws of this organiza­
tion may become a member by paying the initiation fee and paying the initial
installment on his member deposit, subject to acceptance by a majority vote of
the members at any regular meeting.
S ec. 2. A two-thirds vote at any regular meeting may expel a member, provided
that written notice of the proposed motion be signed by at least five members and
mailed to all voting members not less than 2 weeks prior to the meeting.

A member may withdraw from the association by handing in his or her

The return of the member deposit in such cases shall be at the discretion of
the management committee, but in no case shall the repayment be in excess of
the book value of the deposit2 or the par value, whichever is less.
A rticle

IV.— F e e s

and M e m b e r D e p o s i t s

S ection 1. Each member shall pay an initiation fee of $1 and a member deposit
of $5 ($10). The deposit may be paid in installments of 25 cents per week.
A rticle V .— M e e tin g s
S ection 1. Meetings shall consist of (1 ) a regular monthly meeting of the
members; and (2) four quarterly meetings at one of which savings are distributed
and problems and policies in connection with them discussed. The quarterly meet­
ings shall coincide with four of the monthly meetings. The quarterly meeting
which coincides with the end of the fiscal period shall constitute the annual meet­
ing. At that meeting the reports shall be considered and officers elected.
A quorum shall consist of 10 percent or more of the members.
S ec . 2. Each member shall be entitled to but one vote. No proxy voting shall be
1 Buying clubs are, generally, not incorporated.
It should be emphasized, however,
that in an unincorporated club the members are individually liable (as partners) for any
debts it may incur.
If the operations become extensive, therefore, incorporation is
2 For method of calculating the value of such deposits or shares see sec. 3, p. 63.




Members who are paying their deposits in installments may allow their savings
returns to be applied thereto, and they may vote when the deposit has been paid
in full.
S ec . 3. Special meetings may be called by the officers and shall be called by the
secretary at the request of any 5 percent of the members, provided notices thereof
are mailed 5 days prior to the meeting.
A rticle


Officers and C o m m it t e e s

S ection 1. The officers of this club shall be a president, a treasurer, and a
secretary-manager, elected annually by the membership. They shall constitute
the management committee which shall be in charge of the business of the club.
Sec. 2. The president shall perform the usual duties of that office, and shall also
serve as chairman of the educational committee.
S ec . 3. The treasurer shall hold all funds, make all disbursements as voted by
the management committee, and keep an accurate record of all money spent and
S ec . 4. The secretary-manager shall be in charge of all business details of the
club, and shall, subject to later audit by the management committee, sign all
vouchers for payment. He shall further carry on all correspondence and keep the
minutes of all membership meetings and of the proceedings of the management
S ec . 5. The committee on education shall be composed of the president, as chair­
man, and as many elected or appointed members as may be deemed advisable.
It shall be the duty of this committee to encourage membership and to arouse
interest in cooperation among the members and the community.
S ec . 6. An auditing committee of 3 shall be elected from members not on the
management committee. It shall be the duty of this committee to inspect the
financial records each month, to study and report upon the quarterly balance sheet,
and make to the membership any recommendations it deems advisable in connec­
tion therewith.
A rticle VII .— D isp o s a l o f S a v in g s
S ection 1. The surplus savings effected after paying all expenses shall be
divided periodically8 on the following basis: Five percent shall be placed in an
educational fund. At least 10 percent shall be placed in a reserve fund to be used
for expansion. The remainder shall be (a) distributed to the individual patrons in
exact proportion to purchases made during the period, the amount so distributed
to be paid in cash, applied on the member deposit, or left with the club as loan
capital, as the meeting may decide, or (b) used collectively in such a way as a
majority vote of the meeting shall determine. The acceptance of loan capital
shall be conditional upon the capital requirements of the club and at the discre­
tion of the management committee. The rate of interest thereon shall be deter­
mined by that committee.4
It is desirable to pay refunds on an annual or semiannual basis, as the volume of
business fluctuates rather widely. It may therefore happen that at the end of a very
successful quarter savings might be distributed which will be badly needed to tide over a
quarter in which business slumps. Annual or semiannual distribution tends to equalize
business risks and earnings.
4 One cooperative wholesale recommends to its member associations that the rate paid
on loan capital should not exceed the local rate paid on demand deposits.

256781°— 41



A rticle

VIII .— A m e n d m e n ts

S ection 1. Amendments to the bylaws may be made at any regular meeting,
provided a written notice of the proposed amendment to be voted on has been
placed in the hands of or mailed to each member at least 2 weeks before such
meeting. The provisions of one vote per member and of the return of surplus
savings in proportion to patronage shall not be changed except by unanimous
vote of those present, who shall constitute (with those voting by mail) at least
90 percent of the membership. For other amendments a two-thirds vote shall
be required.
A rticle

IX .— D is s o lu t io n

S ection 1. This club may be dissolved by two-thirds vote of the entire
membership, present or voting by mail.

Sec. 2. Upon such vote to dissolve the club, the management committee shall
pay all of the debts of the club. All surpluses, reserves, and other assets and
liabilities remaining thereafter shall be disposed of in either of the following
w ays:

Each member shall receive the amount of his member deposit or such
proportion thereof as the above resources will cover, plus his pro rata share
of any sum remaining after this obligation has been discharged; or
The surplus, reserves, and all other assets shall be transferred to a new
cooperative association established for the purpose of carrying on a cooperative
commercial business providing such goods and services as the members shall
decide. In such event the members of this club shall have the option of (1)
joining the new association, upon agreeing to its bylaws and subscribing for
the required share capital, in which case their member deposit shall be applied
thereto; or (2) withdrawing from the association, under the provisions of
article III, section 2.

Appendix D .—Suggested Bylaws for a Consumers’ Cooperative
The following bylaws are intended as suggestive only. Before
attempting to adopt a set of bylaws the group should study carefully
the State cooperative law in order to make sure that its requirements
are met. I f there is no such law, it is suggested that the group incor­
porate under the Consumers’ Cooperative Act of the District of
Columbia (see p. 86).
In each State the articles of incorporation are required to con­
tain a good many of the points included in the suggested bylaws
given below. Such points could be omitted from the bylaws, in
which case the articles of incorporation should be printed or mimeo­
graphed and issued to members along with copies of the bylaws.
Separation of matters required in the articles from the bylaws has
the advantage that such points can be amended without thereby
requiring also an amendment in the bylaws.
Bylaws o f the — Cooperative, In c.1
A rticle

I .— B u s in e s s

S ection 1. B u s in e s s . — This association shall have the authority to buy, store,
distribute, sell or handle, process, and produce for its members or for its mem­
bers and other patrons, foodstuffs, clothing, merchandise of all kinds, fuel,
petroleum products, building materials, and any and all other commodities
which the association may see fit to handle; to perform such other services as
the members may desire; to acquire, either by purchase or lease, real estate
and other properties or facilities necessary or desirable in the conduct of its
business; to mortgage, sell, and convey such properties;2 and to purchase, hold,
sell, assign, or transfer the shares of capital stock of other cooperative assoeia1 After a suitable name has been selected by the incorporators, permission to use the
same must be obtained from the authorities of the State in which the organization is to
do business.
The word “ cooperative” should appear in the title of a cooperative, if the State law
permits. Either “ Inc.” or “ Incorporated” should appear in the title as an indication that
the liability of the members Is limited. Many groups use merely “ * * * Cooperative, Inc.,”
but inclusion of the name of the two or region where the association will operate (as “Cedar
Ridge Cooperative, Inc.” ) is recommended. It is desirable not to use “ Company” or “ Cor­
poration,” as they are peculiar to profit business. If a corresponding term is desired, the
word “association” should be used if legally possible.
2 In general it is well to include all these purposes (or as many as the law under which
incorporation takes place will permit), even though immediate plans call for only one or
two of them. If they are all included in the bylaws (they should also be enumerated in
the articles of incorporation), amendments will not be required every time the association
undertakes some new line of business. The word “ service” is desirable because an asso­
ciation may wish to supply something more than commodities.
If the association is also to market agricultural products for its farmer members,
another clause to that effect should be inserted, preferably at the end of the first sentence.
The following wording may be used: “ Or marketing for the same of any or all products
of the farm, together with the byproducts produced in the manufacture, processing, or
handling of these products.”




tions.8 It shall also enjoy all other rights and privileges consistent with its
certificate of incorporation and the laws of the State of * * *.
A r t ic l e

II.—M e m b e r s h ip

S ection 1. M e m b e r s h ip qu a lifica tion s. —Membership in the organization shall
be open, without restriction as to race, sex, religion, or political or other affiliation,
to any consumer who can make use of its services,4 is in agreement with its aims
and purposes, agrees to abide by its bylaws, and has complied with the sharecapital requirements5 of section 2 of this article.
S ec . 2. A p p lic a tio n f o r m e m b e r s h ip . —Application for membership shall be made
in writing on a form provided for the purpose.6
The applicant shall subscribe f o r ----- shares of the capital stock7 of the
association and shall make an initial payment on such subscription of at least
$___________ _ and shall pay an initiation fee of 25 cents (or 50 cents). The
applicant becomes a full member with voting privileges only after he has paid
f o r ___ shares.
Nonmembers, patrons of the association’s business, who have accumulated
surplus savings in the form of credits toward the purchase of capital stock to
8 If the law permits, the last clause of this sentence should by all means be written in.
Otherwise, it may prove difficult at some future date to join the nearest cooperative whole­
sale association or, for that matter, any central cooperative organization.
4 For discussion of membership principle on which cooperatives operate, see p. 19.
5 (a) These bylaws are for a cooperative corporation financed by means of capital stock,
since this is the prevailing form of consumers’ cooperative. Alabama, California, Nevada,
New York, Oregon, Washington, and Wisconsin permit the incorporation of a consumers’
cooperative as a membership association without capital stock, and this may be desirable
under some circumstances. Where such a law is available, there are certain arguments in
favor of this form of incorporation, such as the following:
1. The distinction between the cooperative and the profit form of business is much
more sharply defined if the former is a nonstock organization. In a community where
“ capital stock” is for most people associated with dividends on stock, voting of stock, and1
other common business practices, it is very easy for many people, even members of the
cooperative, to look upon their association as only one more example of profit business;
and in annual meetings or elsewhere even to demand excessive stock dividends, more than
1 vote for the holder of several shares, a splitting up among the members of the reserve
fund or of the profits on sales to nonmembers.
2. Many people are afraid to buy stock in any organization, especially if they have once
lost money by investing in some worthless stocks.
3. The return on the capital stock of cooperative associations is regarded, for Federal
income-tax purposes, as a part of the profits of the business and therefore taxable. One
association having capital stock outstanding of nearly $1,000,000, and paying 6 percent
return to the shareholder members— $60,000 disbursement— would pay taxes to the
Government of over. $7,000 on this item alone. If the society had been financed by mean&
of money borrowed from its members instead, all this return could legally have been
charged as an overhead expense and it would not have been taxable.
(5) A nonstock membership organization is financed by means of loans secured from its
members and elsewhere. There are several sound financing schemes for such an associa­
tion. Commonly, nonstock associations issue certificates of membership instead of stock.
The price of these certificates is often similar to the price of shares of stock. Additional
funds are sometimes secured by the issuance of bonds or notes.
6,A certain amount of formality is desirable. Also, every association should have avail­
able a few elementary facts about all its members, such as name, address, age, occupa­
tion, etc. Some application forms require the applicant to state that he is familiar with
the bylaws of the association.
7 The amount required from each member depends upon local conditions. Most store
associations should require each member to subscribe at least $25. Many such associations
set a lower figure, but they handicap themselves by so doing. Some demand that each
member subscribe $100, but give him a long period in which to pay it. If organizations
which are members are required to subscribe larger amounts and to make larger initial
payments than individuals this fact should be specified in the bylaws, or the board of
directors should be given explicit permission to make exceptions in such cases.
For discussion of the forms and purposes of share capital, see p. 20.






the amount necessary for membership may, upon making application, be accepted
as members and receive the stock certificates to which they are entitled.
Sec. 3. A c t io n o n a p p lic a tio n . — Every application for membership shall be
acted upon by the board of directors, which may, in its discretion, refuse to
sell to or refuse to accept a subscription from any person, but such right shall not be
exercised unreasonably.8
An applicant rejected by the board shall have the right of appeal to a meet­
ing of the members, whose decision shall be final.
Sec. 4. R ig h t s o f in h e r ito r s . — A legal heir of a deceased member, who has
inherited stock in the association, may apply for membership by making formal
application as authorized in section 2 of this article and paying the initiation
fee, but the board of directors shall have the same rights to approve or reject
as are indicated in section 3. I f the application is rejected, the association
shall repurchase his shares, provided this can be done without jeopardizing the
solvency of the association.9 In case the association does not or cannot repur­
chase such shares the inheritor shall have the right to dispose of them under
the provisions of article IV, section 3.
Sec. 5. M e m b e r s h ip r o ll. — A list of the members with their addresses, and
the other information called for on the membership application shall be kept
by the secretary. Each member shall agree to notify the secretary within 10
days of any change of address.
Seo. 6. P r e s e n t a t io n o f b y la w s . — A copy of these bylaws shall be given to
each applicant for membership before or as he is accepted into membership.
Seo. 7. O r g a n iz a tio n m e m b e r s .10— Cooperative societies or other organizations
not operated for profit, whose aim and purposes are not in opposition to those
of this association, may make application for membership and on approval by
the board of directors shall subscribe for the minimum amount of stock set
forth in section 2 of this article, or such larger amount as the board shall
determine.11 Such an organization member shall, however, be entitled to only
one voting delegate in meetings of the association.
Sec. 8. R ig h ts and d u tie s o f m e m b e r s . — Every member must agree to obey
the rules of the association as set down in these bylaws, or elsewhere, and the
decisions of the general membership meeting or of the board of directors. He
must also help to promote the aims and purposes of the association, the success
of its business, and the welfare of its members.12
8 The only really valid reasons for rejection are (1) inability of the applicant to patronize
the association’s business, (2) positive knowledge of the applicant’s hostility to the cooper­
ative, its aims and purposes, the nature of its business, or its membership (hostility on the
part of the applicant to particular individuals on the board of directors or among the
employees is not sufficient grounds for rejection), or (3) knowledge that his acceptance
would be harmful to the association because of his character.
9 It is advised that the provision giving the association the right to repurchase inherited
stock be printed on the stock certificate itself.
10 Unless it is clearly established that the laws of the State in which the society is
incorporated permit such organization membership in a cooperative corporation, this sec­
tion must be stricken out. The laws of the State must also be consulted to determine what
voting rights are permitted in such an instance.
11 The directors may decide that another association, which has ample funds and is
going to demand more in the way of service than is accorded an ordinary householder,
should contribute a larger amount to the capital stock of the society.
Some associations have a pledge embracing these obligations. This is printed on the
form used for application for membership. Others ask for a verbal pledge when the appli­
cant is admitted by the board of directors. Although objection has been raised that a
pledge of this kind has no real value, since it cannot be strictly enforced, this is not a final
argument against it. There is a genuine moral value in any promise which impresses upon
the prospective member the fact that he has duties and responsibilities, as well as rights
and privileges, as long as he is a part of the society.



The books of account, stock book, and transfer ledger of the association shall
be available for inspection daily at reasonable hours by any member of the
association who has been a member for at least 6 months prior to his demand.
S ec. 9. W ith d r a w a l o r e x p u ls io n f r o m m e m b e r s h ip . — A member wishing to
terminate his membership shall make written application to the board of direc­
tors, which shall have the right to establish the terms according to which the
repurchase of his stock may take place, subject to the provisions of article IY,
section 3.
In the interest of the association, the shares of any member may be repur­
chased and his membership canceled, under the terms of article IY, section 3.
The initiation fee shall not be returned to a member who withdraws or
is dismissed.
A rticle III.— F is c a l Y e a r
S ection 1. F is c a l y e a r . — The business period of this association shall begin
w ith _________ of each year and end o n -----------------13
A rticle

IV.— C ap ita l

1. S to c k c er tific a tes . — A numbered certificate of shares in the asso­
ciation shall be issued to each member on the full payment of his subscription
to the capital stock, and for subsequent shares as paid for.14
S ec . 2. L im ita tio n o n sh a reh o ld in g . — No shareholder shall hold, either directly
or indirectly, more than 5 percent of the total shares outstanding.15 The
S ection

13 The period may be the calendar year or some other fiscal 12-month period.
34 Such certificate should be numbered and registered as issued, and should contain the
shareholder’s full name, the number of shares owned by him, and their value at par, and
be signed by the president and treasurer and impressed with the seal of the association.
Some associations also issue to members on their admission a membership card or
book. A card is merely a formal indication of membership with its rights and privileges.
A membership book usually contains blank pages on which may be recorded the various
installments paid on subscribed capital, other payments or loans made to the association,
quarterly, semiannual, or annual purchases made from the association, interest payments
on capital, and savings returns received by the member. This system is not used so
extensively in the United States as in European countries for the average member here
objects to carrying a membership book to the cooperative at regular intervals ; this system
also entails additional clerical work.
Before issuing share certificates, the association should consult the office of the Gen­
eral Counsel of the Securities and Exchange Commission, Washington, D. C., to see
whether the Association is subject to the Federal Securities Exchange Law.
Too many shares in the hands of any one member is not desirable. A member might
hold only 5 percent himself, yet have additional shares owned by minor members of his
family— children not legally entitled to exercise all the privileges of membership. A
member with a large number of shares might not have the power of more than 1 vote, but
he would perhaps be in a position to injure the association by removing all of his money
at once. No one individual should be in a position to cripple the association or to exercise
undue influence over the board of directors by virtue of the fact that he is a “big
In some States without a cooperative law and in which, if the association incorporates,
it must do so under the general corporation law, a stockholder must, under the law, have
as many votes as he owns shares of stock. Where this condition exists, a cooperative
association can meet the situation by organizing under the District of Columbia act (see
p. 86). A much less desirable alternative is to incorporate under the general corporation
law of the State and provide in the bylaws that each member shall have only one share
of voting stock, and any additional shares may be issued as preferred (nonvoting)
stock; if the law does not permit this, the additional capital may be in the form of a
long-term loan (but this is much less desirable). Flexibility in amount of investment
may be obtained by assigning different par values to differently numbered shares. In a
State in which the law permits the uncontrolled sale of stock by a person to any other
person at any price, it may be advisable that the cooperative association should organize
as a member association with certificates of membership or loan capital in place of stock,
or it should issue only as many shares of stock as it has members.



record of stockholders and the outstanding stock shall be kept by the secretary
in a book for that purpose.
Sec. 3. T r a n s fe r o r r e p u r c h a s e o f s h a r e s .— The association shall have the
first option on any shares of stock offered for sale.16 Shareholders desiring
to withdraw from membership or to dispose of surplus shares must first
offer their shares to the association, through its board of directors.
The amount to be paid for such stock shall be determined by the board
of directors, by the following computation: The par value of his paid-up
stock, minus the proportionate share of the deficit (if any) based on total
stock outstanding, or plus the proportionate share in the surplus (if any)
based on stock outstanding, exclusive of the general surplus reserve, the
educational reserve, or any other special reserves. These computations shall
be made as of the end of the fiscal year, the date of which is nearest to
the date of acceptance of the member’s withdrawal. The surplus (or deficit)
figure used in this computation shall be that figure found in the annual report
of the fiscal year used, after the board of directors has taken action in
accordance with section 7 of this article and section 1 ( a ) and (6) of
article V.17
If the association, through its board of directors, is unable or refuses to
redeem such shares, the shareholder shall then have the right to dispose of
them to any person eligible to membership in the association.
Transfers of the shares of this association shall not be binding until made
upon the books of the association with the approval of the board of directors,
and no transfers shall be completed until the old certificate or certificates
have been endorsed and surrendered and a new certificate issued in the name
of the purchaser.
The board of directors, also, shall at all times have the authority to re­
purchase the shares of stock and to cancel the membership of any shareholder
(1) who has died; (2) who has ceased to patronize the business of the
association to the minimum amount of $------ per y ear;18 (3) who has failed
16 Some associations have suffered considerably from having outsiders, perhaps even
business men who are their competitors, get into their hands a large amount of stock.
If stock is to be transferred, the association should see that the new purchaser is to be a
patron of the association and in agreement with cooperative principles. This provision
and section 2 of this article should amply protect the organization against the buying up
of large quantities of stock by a few individuals, who ultimately get complete control and
reorganize the association into an ordinary joint-stock company, sometimes with the con­
nivance of the manager. It is well to have this particular provision written on the stock
certificate itself.
17 The redemption price of shares is often regulated by the laws of the State. Some
States compel redemption at par value, regardless of the fact of a deficit or surplus on the
hooks of the association, others at book value.
“ This minimum amount will vary according to the nature of the business and other
local considerations. An association handling milk or bread only would set a much lower
figure than one handling a full line of general merchandise.
This rule is to insure the consumer nature of the membership. There are associations
whose membership is largely that of nonpurchasing stockholders, while the business is
done mainly with nonmembers. In such a case the interest of the member becomes increas­
ingly a stockholder’s interest rather than a consumer’s interest, until ultimately these
members may decide to reorganize as an ordinary stock corporation and the consumers’
cooperative becomes a profit business. It is therefore essential that the actual patrons
of the association constitute the membership. In case the financial condition of the
association does not permit the repurchase of all shares held by nontrading members, the
directors may postpone such action to a more favorable tim e; but they should have this
right and it is their responsibility to determine the real value of the shares before taking
any action.



to meet his payments on stock subscriptions within the specified period or
time; (4) or who has for any other reason, been judged unfit for membership.19
P r o v id e d , h o w e v e r , That such member shall have the opportunity to appear
in his own defense before the next regular or special meeting of the associa­
tion20 and that the board of directors is sustained in its action by a majority
vote of the members present.
After a shareholder’s whereabouts have been unknown for a period of 10 years
and, in accordance with the laws of the State o f -------------- , due notice and warn­
ing have been given in the public press, the board of directors shall have the right
to cancel such membership and transfer his share capital to the reserve fund.
Sec. 4. R e d u c in g c a p ita l b y r e p u r c h a s e o f s h a re s . —Whenever the share capital
of the association shall, in the judgment ctf the board of directors be in excess of
current needs, the board shall have the right to repurchase from any or all
shareholders, who have shares in excess of the minimum requirements o f ----shares, as many such shares as it shall consider necessary to the best interests
of the association.
The board of directors shall not repurchase the shares of any withdrawing
member nor of any other member when in its judgment such a reduction of the
association’s capital would in any way endanger the financial condition of the
Sec. 5. L ie n o n c a p ita l. —The association shall have an absolute lien on the
share or loan capital, and on the interest due thereon, of any member or any
subscriber to share capital, for his debts owned to the association.28
Sec. 6. L o a n c a p ita l. —The association may accept loans from its members
or from nonmembers when in the judgment of the board this is to the best interest
of the association, P r o v id e d , h o w e v e r , that the total amount of such loan capital
shall at no time exceed___ percent of the total paid-in share capital,28 and p r o ­
v id e d fu r t h e r , that any loans designed to finance new types of business must first
be authorized by vote of the membership. Notes or other evidences of indebtedness
Though the board of directors should have this right, it should be exercised only in
extreme cases, such as, for example, when the offending member has opened a private
business of his own in direct competition with that of the cooperative business.
20 When a member is before the association for dismissal, it is often desirable that the
case be heard by a special committee appointed for that purpose.
21 It would seem that this provision is so obviously sensible that it is not needed in the
bylaws. However, many a board of directors has acted directly contrary to its own best
judgment in the face of persistent demands on the part of some strong-willed shareholders.
A clause such as this in the bylaws will help to stiffen the backbone of a board of directors,
and a resolution by the board expressing its judgment and the reasons therefore would
probably meet the situation.
22 Many an association having no rule such as this, has felt itself obliged to redeem the
capital stock of a withdrawing member, even though that member was in debt for goods
purchased. Not only should there be such a provision in the by-laws, but it should be
scrupulously followed.
23 Some associations have at all times large amounts of loan capital; in some instances
twice as much as of share capital. Such an amount is dangerously high ; it should not
exceed 50 percent of the share capital. There are many members who will take the mini­
mum requirement of shares of stock, but will advance additional money only in the form
of deposits or loans which are a much safer investment in the event of losses sustained
by the business, and which at the same time are more easily recovered on reasonably
short notice. Thus loan capital offers a new source of capital. On the other hand, since
a serious wave of unemployment or other crisis in the community might provoke a “run”
on the loan-capital fund, no association should load up heavily with such a dangerous
form of capital except on long-term callable notes or bonds. It should again be emphasized
that the practice of depending upon loan capital for the financing of cooperatives is



shall be given by the association for such loans, but no such note shall be for a
period of less than 90 days.24
S ec . 7. R e t u r n s o n s h a r e a n d lo a n c a p ita l. —Any return on share capital shall
not exceed___ percent per annum25 and shall be paid only from earnings. Such
return shall not be cumulative.28 No return shall be paid on shares until the
subscription has been paid in full.27
Loan capital shall receive interest at a rate fixed by the board of directors, but
shall not exceed----- percent per annum such interest may be cumulative.29
A bticle V . — D is p o s a l o f N e t S a v in g s

1. D is t r ib u tio n o f n e t s a v in g s . —The board of directors shall at the end of
each fiscal period provide for the distribution of the net savings remaining after
expenses have been met, according to the following method:
G e n e r a l s u r p lu s r e s e r v e . —From the net savings shall be allocated to the
general reserve account a sum not less than 10 percent of such savings until the
reserve is equal to the amount of paid-in capital; and thereafter not less than 5
percent.80 The general surplus reserve shall consist of money especially allotted to
it from net savings or earnings of the business, initiation fees, fines, contributions
from individuals, confiscated capital of removed or deceased members, and any
other funds appropriated to it by action of the board of directors or the general
membership meetings. This reserve shall be used to absorb operating deficits
of unsuccessful years, losses caused by fire, theft, or other reasons; for the exten­
sion of the association as a consumers’ cooperative; or for other developments
directly associated with the cooperative movement, upon vote by a general meet­
ing of the membership.81
S eo.

Wherever agreeable to the depositor, these notes should be made for longer periods of
time— 6 months or 1 year, or 2 years or more; they could be redeemable “90 days after
demand.” Notes or bonds running 20 years or more are advisable where the money is
used for building. Bonds are safer than short-term notes, because they insure a longer
loan, and they have a definite maturity date. Most cooperative associations will not
undertake to issue bonds, but they should try to give these notes something of the same
stability. Of course, as long as this form of capital is needed, members should be urged
to renew their notes well in advance of the date of expiration.
In no case should the maximum rate here specified exceed the current rate. If
savings are small, it may be well for the directors to recommend to the general meeting
that a return be paid at only 2 or 3 percent or even passed entirely for that particular
■year, so that the reserve fund may be made to grow faster or the consumer members
encouraged with a slightly higher rate of savings returns.
26 It is conceivable that during the first year or two the association may not be able to
pay even a low rate of return. Therefore provision may be made that in later and more
prosperous years the past payments may be m et; this is a question for the membership to
decide, but cumulative returns are not recommended.
27 If the interest return is to begin as soon as 50 or 75 percent of the amount subscribed
has been paid in, it should be clearly stated that such payments shall not be made in cash
but shall be applied only toward the unpaid balance of subscription.
28 One cooperative wholesale recommends to its member associations that the rate paid
on loan capital should not exceed the local bank rate on demand deposits.
29 Loan capital is entitled to its interest before share capital. In fact, the interest on it
should be charged to operating expenses, whereas the return on share capital must come out
of net surplus savings ; it cannot lawfully be paid from the general reserves.
80 Before the amount to be placed in the reserve is determined, the State law should be
consulted, as some of the laws have a definite provision on this point.
81 Under this section it is possible for the association to make an appropriation to the
central, national, or district cooperative educational body.
Generally, however, such
appropriations should be made out of current surplus savings or earnings. Funds should
not be appropriated from the reserve as donations to organizations or causes outside the
consumers’ cooperative movement; such action establishes a precedent from which it
is difficult to disentangle the association in the future; furthermore, it may cause dis­
agreement and division in the membership. Donations to pure philanthropies by unani­
mous vote of the membership should be the only exceptions to this rule.



The general surplus reserve shall be the indivisible property of the association
as a whole.88
( b ) E d u c a tio n a l fu n d . — From the net savings a sum not less than 5 percent
thereof shall be allocated to an educational fund. In addition, this fund shall
receive the amounts of patronage refunds standing to the credit of nonmembers
who have failed to become members within the period specified in paragraph
(c) of this section.
This fund shall be placed at the disposal of the educational committee of
the association, to be used for purposes of education among the members and
the public.83
(c) P a t r o n a g e r e f u n d s .u— Subject to determination by the membership meet­
ing, the sum remaining after paying the return on share capital and after
providing for the reserve and educational fund, as provided in section 1 ( a )
and (b) above, shall be used collectively for social purposes or be divided among
the members who have paid in full for their shares of stock or who are not
in arrears, in proportion to the amount of their patronage during the fiscal
P r o v id e d that these savings returns or patronage refunds may be paid im­
mediately in cash, or in certificates of indebtedness, or may be placed in a
revolving fund upon the books of the association to the credit of the patron
members, to be paid at some future date at the discretion of the board of
directors; and
P r o v id e d , fu r t h e r , that in case of a patron who is not the owner of shares
sufficient to qualify for membership in the association, patronage refunds shall
be credited to the payment of such stock.
I f a nonmember fails to become a member w ith in ----------------- , the amount to
his credit shall be transferred to the educational fund.
No patronage refunds shall be paid for any period in which there was an
operating deficit, nor as long as the association has a general deficit.

r t ic l e

V I.— P r i c e s

S e c t i o n 1. D is t r ib u ti o n p r i c e s .— As nearly as feasible, goods and services
shall be supplied to the members at the prices prevailing in the profit business
of the neighborhood or with which the association competes."
82 T h e indivisibility o f th e reserve fun d is im portan t.
I t s m ean in g should be made
clear to th e m em bership, fo r th is is one p a rticu la r in w hich th e cooperative bu siness
differs rad ic ally from profit busin ess.
M a n y association s have m ade the m istake o f credit­
in g each shareholder w ith “ h is sh a re” o f th e gen eral surp lus reserve an d a c tu a lly tu rn in g
th is over to him in th e fo rm o f cash w hen he w ith d raw s.
In other association s, the
m em bership m eeting h a s voted to divide the reserve. E ith e r practice is objection able, for
it a llo w s such persons to profit from the fu n ds b u ilt up from pa tro n age o f previous m em ­
bers an d is in vio la tio n o f th a t R ochd ale principle w hich requires th a t cooperative shares
sh a ll never exceed th e par valu e.
M o n e ta ry benefits to m em bers o f cooperatives should
be the resu lt o f patronage, n o t o f th e in vestm en t.
83 Som e association s regard ed ucational w ork as p a rt o f the regu lar op eratin g expenses
and do not, therefore, m ake a definite appropriation a t the end o f the fiscal period.
84 F o r discu ssion on suggested periods o f pa tro n age refun ds an d p referred m eth od s o f
handling refunds on nonm em bers’ patronage, see p. 41 and footnote 3, p. 57.
F o r a discussion o f the reasons for this practice, see p. 36.
In th e case o f association s
such as those providing medical services on a prepaym ent basis, exception m ig h t be
m ade.
In such cases th e charges w ould be based upon the estim ated a ctu a l cost o f serv­
ices ; an y surp lus w ould be used to low er th e fees or be retained by the association fo r
expansion o f services.

A r t ic l e


V II.— G overn m en t

S e c t i o n 1 . M em bership C on trol.— The control of the association shall be
vested in the membership meetings.86 The board of directors and such special
committees as may be elected by the membership meetings87 shall administer
its affairs. Final and supreme authority resides in the membership meeting.88
S e c . 2. Q uorum .— A t any regular or special meeting a quorum shall consist
o f ------- 89 I f a quorum shall be lacking at any such meeting, the board may
call a second meeting, to be held w ith in ____ weeks and after due notice, and
those members present at such a meeting shall constitute a quorum.
S e c . 3 . R egu la r m em bership m e e t i n g s — The regular meetings of the member­
ship shall be held annually (semiannually)41 on t h e ____ day o f ____________ and
t h e ------ day o f ____________ , at a time and place to be determined by the board
of directors and specified in the call to the meeting.42
80 Included under the head are both regu lar and special m eetings.
87 F o r the num ber and natu re o f such com m ittees see section on com m ittees, page 44.
These com m ittees m ust not be confused w ith those elected or appointed by the board of
directors. T h e la tter are under the control o f and responsible to the board o f directors
88 U nless the S ta te law reserves certain powers to the board o f directors. G eneral con­
tro l and centralized ad m in istration are the basis o f cooperative bu siness.
89 Th e num ber necessary fo r a quorum should be given carefu l con sid eration. I t should
depend upon the size o f the association and the p o ssib ility o f m em bers’ attend ance. *In
large association s the quorum m ay be a s low as 1 0 percent. I n a sm aller society it should
be a larger proportion.
40 T h e order o f business a t regu lar m em bership m eetings m ay w ell include the fo llo w in g :
R eading o f m inutes o f la s t regu lar or special m eeting.
U nfinished bu siness le ft from previous m eetings.
Report o f president.
R eport o f secretary.
R eport o f treasurer.
R eport o f m anager.
R eport o f au dit com m ittee.
R eport o f education com m ittee.
R eport o f m em bership com m ittee.
( I t is very easy fo r a m eetin g to confine it s e lf exclu­
sively to business m a tters. T h erefore, it is essen tial th a t a place be definitely a llo tte d on
th e agenda for discussion o f education and m em bership. I t is im p ortan t to h ave a sound
ed ucational policy as w ell as a sound financial policy. E x p an sion and developm ent o f the
m em bership are as essen tial as exp ansion and developm en t o f the business.
O th erw ise
the m em bers lose con tact w ith th eir business in stitu tio n , becom e indifferent to it, and
soon begin to look im person ally upon it, m erely as one o f several com peting stores in the
neigh borh ood.)
R eport o f other com m ittees.
E lection to fill vacancies on board o f directors or com m ittees, for the unfinished term ,
and o f new directors and com m ittee m em bers.
A c tio n on distribu tion o f net savings.
(T h e board o f directors should a lw ays present
its recom m endations on the d istribution o f the net savin g s, givin g the reason therefor.
T h e m eeting is then ready fo r a w orth -w h ile discussion o f the w hole m atter an d m ay
accept the recom m endation s, m od ify them , or reject th em .)
A c tio n on other recom m endations o f board.
(O th er m a tters to be presented m ay cover
a w ide ran ge o f sub jects, such as proposed am en dm ents to the bylaw s, con struction o f a
new store building, opening a new departm ent or branch store, p lacin g a m ortgage on the
a ssociation ’ s real estate, expulsion o f a m em ber, au th orizin g the sending o f a delegate
to a n a tio n a l or d istrict convention, etc.)
O ther new business.
41 For a discussion o f the frequency o f m eetings, see p. 25.
42 “ T h ird T h u rsd a y o f F eb ru a ry an d th ird T h u rsd ay o f A u g u s t” is the w ay one associa­
tion design ates the date o f m eetings.
Som e S tates (N ew Y o rk is on e) dem and th a t the
exa ct day be design ated in th is w ay. O th ers perm it th e directors to use their discretion
in each instance.
I f the S ta te law does n o t require th is, it m ay be le ft ou t and in its
place m ay appear the w ords “ on such date as m ay be determ ined by the board of
directo rs.”
T h e date should, how ever, be a t least 1 m on th , preferably 6 weeks, a fte r the
(F o o tn o te continued on p. 6 8 ,)



Notice of regular meetings shall be posted prominently in the association’s
places of business and shall also be sent by mail to the address of every mem­
ber as registered on the books of the association at the time the notices are
sent. Notices shall be sent at least 6 days before the date set for the meeting.
S e c . 4. S pecial m eetin gs.— Special meetings of the membership may be called
at any time by action of at least one-third of the board of directors, and must
be called upon petition therefor, signed by at least 10 percent of the members
and presented to the board.48
Notice of special meetings shall be given in the same manner as is provided
for regular meetings (sec. 3 ), but such notices shall be sent at least 10 days
before the date set for the meeting.44
Notice of special meeting shall state the time, place, and purpose of such
meeting and the business to come before it and no business other than that
specified in the call shall be transacted.46
S e o . 5 . R ig h ts and lim itation s o f th e m em bership m eeting.— The membership
meeting has both the right and the responsibility to elect directors or members
of committees and to remove them from office if and when they are derelict
in their duties; to hear and pass upon the reports of officers and the manager
of the association and of any committees which are responsible to i t ; to de­
termine the method of dividing the net surplus or earnings; to make the final
decision regarding any drastic changes in the financial policy; to act as final
arbiter in any disputes or disagreements which may arise between the board
of directors and any committees or individual members; to determine what
amendments shall be made in the bylaws; and to exercise its final authority
in all other matters vitally affecting the association as a cooperative fraternal
body and as a business organization.46
S e c . 6 . P a rticip a n ts in m em bersh ip m eetings.— Every member who has met
his full obligations as regards share capital, as specified in article II, section 2,
and who has not in other respects been judged, by a membership meeting, to
end o f the fiscal period, in order to allow tim e fo r the p reparation o f th e reports.
article I I I .
A few S tates dem and th a t the place fo r the m eetin g sh a ll also be fixed in th e b ylaw s
but th is is un u su al.
T h e call to the m eetin g is sen t out by the secretary, either on a
postcard or by letter.
W h en ev er possible it should also be published in the lo ca l press
or in the pu blication o f the association if it has one.
T h e righ t to in itia te a call for a special m eeting should be recognized in every coopera­
tive association .
A very s m a ll association should probably require th e sign atu re o f 2 0
percent o f the m em bers, w hereas a very large association m igh t require on ly 5 percent or
even less.
4410 days’ instead o f 6 days’ notice is suggested here because o f the extraordinary
natu re o f the occasion.
T h e m em bers u su ally are n ot exp ecting a call to such a special
m eeting, as th ey are a t th e tim e o f a regu lar m eeting, an d th ey should, therefore, have
m ore tim e to prepare for it.
45 T h is la s t paragrap h is a legal requirem ent in m an y S tates, and it should be required
in every cooperative association .
A special m eetin g gen erally has som e special purpose,
an d th is purpose m u st be clearly stated in advance.
A n d then, once the m eeting is in
session, no person present should be perm itted to surprise the m eetin g w ith som e other
business, th e n atu re o f w hich the m em bers m ay not be prepared to discuss. In fa c t there
m igh t be m an y m em bers absent from the special m eeting w hose in terests w ould be v ita lly
affected by the “ surp rise” bu siness and w ho w ould n o t be absent if th ey knew it w a s to be
Special m eetings m ust be sharply restricted to the specific purpose for which
th ey are called.
4« A t first glance this section m ay seem u n im p o r ta n t; it is not. M a n y association s have
been seriou sly crippled because th e m em bership m eeting did not have its du ties clearly
d e fin e d ; therefore, it neglected som e o f its m ost im p ortan t duties ( such as selecting the
proper people fo r the board o f directors or not holdin g them stric tly to accou n t a fte r
they w ere elected ), or, on the other hand, handicapped the board’ s effectiveness by in ter­
ferin g w ith its w ork.



be delinquent or acting contrary to the interests of the association, shall be
qualified to vote and to participate in the meetings of the association.47
S ec. 7. V o tm g rig h ts.— Election of directors and members of committees shall
be by ballot unless unanimous consent is given to a vote by show of hands.
Action on all other matters shall be by ballot, by an “aye” or “no” vote or
by a rising vote, as the majority of members present may decide. Each mem­
ber shall have one vote on all voting occasions, and never more than one vote,48
and there shall be no voting by proxy.4®
At the discretion of the* board of directors, or upon the presentation of a
petition signed by 10 percent of the membership, the secretary shall, along with
the notice of meetings, include a copy of any specific proposal to be acted upon
by the meeting. A member unable to be present at any meeting shall have the
right to cast his vote on such specific measures by mail, P rovid ed , that his vote
shall be signed by him and shall be received by the secretary in time to be counted
at the meeting.
Sec. 8. R eferen d u m .— Whenever in the opinion of at least one-third of the
members of the board of directors or of __________________ percent of the
members of the association, the vote taken at any meeting is not representa­
tive of the views of a majority of the members, and at their written request made
within 5 days after such meeting the board of directors shall provide for a
referendum vote to be taken by mail, by which members not present at the
meeting may vote on specific questions. P rovided that in case of a vote on
the removal of a director or officer, the referendum must be authorized by vote
of a shareholders’ meeting.
Sec. 9. D irecto rs and officers.— The management of the association shall be
vested in a board of directors consisting of 7 (or 9) members. The directors
47 I f the board o f directors has alread y decided th a t any m em ber should be dism issed
fo r in fra ctio n o f the rules or fo r fa ilin g to patronize th e a sso c ia tio n ’s busin ess, th e offend­
in g m em ber should not be disqualified from participating in the m eeting unless the m eeting
h a s approved th e action o f th e board. T h e board should n ot be placed in such power as to
m ake it possible fo r it to determ ine w ho m a y or m ay not vo te a t a m eeting. T h is power
should rest w ith the m em bership only.
48 T h e 1-v o te rule should be enforced under all circu m stan ces, unless the S tate la w con­
tain s specific provision to the con trary.
I t is one o f the fu n d am en ta l principles o f con­
su m ers’ cooperation.
F o r in stances o f an organization ho ld in g m em bership in the society and represented in
the m eeting by delegate or delegates, see a rt. I I , sec. 7.
48 P roxy vo tin g should n ot be perm itted in cooperative association s because it m ay be
used to d e fe at dem ocratic con trol.
W h en association s reach so great a size or h ave a
m em bership so w idely scattered th a t the m em bers can n ot com e togeth er in a sin gle m eet­
ing place, such association s should ( i f the law p erm its) be divided in to d istrict groups,
each h a v in g a m eeting place, loca l au tonom y, and delegate rep resentation in th e central
m eetings o f the cen tral organization. I f th e problem can n ot be solved in th is w ay because
o f scattered m em bership, v o tin g should be carried on by referendum . T h a t is, each ques­
tion to be voted on should be form u lated to be answ ered “ yes” or “ n o ,” and sen t to each
m em ber for his vote.
B u t p ro xy v o tin g should n o t be adopted as a com prom ise under
an y circu m stan ces, un less the requirem ents o f the S ta te la w m ake th is unavoidable (a s in
Illin o is and N o rth C arolin a, providing fo r w ritten proxies, bu t in the la tte r State proxy
votin g is allow ed on ly in case o f sickness or unavoidable absence, and no m em ber m a y be
perm itted to vote m ore th an 1 p r o x y ).
I f the State law requires vote by m ail under certain circum stances, a provision to
th at effect should be inserted a t this point.
(I n California, M ichigan, Illinois, M innesota,
M issouri, M on tan a, N ew Y o rk (s t o c k ), N ew Y ork (n o n s to c k ), N orth C arolin a, N orth D a ­
kota, South D akota, W a sh in g to n , and W iscon sin , an absent m em ber m ay be perm itted to
vote by m ail if notified in w ritin g o f the question to be voted on and i f a copy o f the
m otion is attach ed to the v o t e ; a ll the S tates except N ew Y o rk (n o n sto ck ) require th at
the vote be signed, and M in n eso ta requires th a t it be certified by th e v o tin g m em ber.)
F o r a discussion o f th e difference betw een votin g by proxy and v o tin g by m ail, see
footnote 6, p. 16.



shall serve for terms of 2 years, half of the board being elected at each annual
meeting. They shall be eligible to serve until the election of their successors.60
The board shall elect its officers, a president and vice president and a secre­
tary and treasurer, from its membership, and shall be authorized to appoint
an executive committee. The office of the secretary and treasurer may be
combined in one person in which event an extra member shall be elected to
the board in order to provide for an odd number.81
The board is authorized to fill the position of a member who resigns before
his term expires, such appointee to serve until the next regular election only.
S eo. 10. D isq u a lific a tio n o f officers and d ir e c to r s . — Any director or officer
shall vacate his office if he holds any other office or place of profit under the
association; if he becomes bankrupt or insolvent; or if he participates in the
profits of any outside business with the association. No employee of the
association or person supplying the association with goods shall hold office as
a director on any account whatever. No director shall engage in business
which competes with the business of the association. No credit shall be
extended on the books of the association to any director.
S ec . 11. D u t i e s o f d ir e c to r s .—The directors shall administer all business
carried on by or on account of the association. The directors shall in all their
actions be under control and direction of any regular or special meeting of
the members.
At meetings of the board a majority shall constitute a quorum.
The directors shall convene the meetings of the association. One-third of the
directors may call a special meeting by giving at least 1 week’s notice in writing
to the secretary, specifying the object thereof.
The directors shall act for the association and be responsible to it for the
performance of the following duties:
1. To watch closely the financial condition of the association and the operat­
ing results of its business, and to take action required to keep these in a healthy
2. To appoint the following officials and to assign their duties and determine
their salaries:
( a ) A manager or general manager to assume administrative control of the
(b) An auditor or auditing agency, as soon as the affairs of the association
require and the finances permit the employment of a paid auditor. The board
80 Some societies do not allow more than 2 consecutive terms, requiring that candidates
retire for 1 term before they become eligible for further service. The board of directors
and all other committees should always be an odd number.
51 It is highly objectionable to combine the offices of president and manager in the
same person. Some societies do this with apparent success, but the success is often more
apparent than real. Such societies tend to become “ 1-man organizations.” Sometimes the
one man has such control of the business that it is to all purposes his private affair.
Such societies have often been destroyed by being taken over by the manager upon his
terms. If the manager is both competent and sincere, the society seems to prosper, but
the membership and directors’ control becomes relaxed. A precedent is established. And
the next president-manager, if he fails in either competence or sincerity, is pretty sure to
wreck the society. Too much power in the hands of one person sooner or later destroys a
cooperative organization. A society, even with a good manager, that has not enough mate­
rial in its membership to produce a good president is in bad condition.
On the other hand, the combination of treasurer-manager has been found advantageous
and is customary in some sections. Some boards in larger associations find it desirable to
appoint a corresponding secretary from their own membership and a recording secretary
from the paid staff. It is therefore not wise to require these two offices to be filled by
board members.



will consult the auditing committee in making this appointment, but the paid
auditor shall be appointed by and be directly responsible to the board.
Nothing in this provision shall be interpreted to prevent the board from
making other appointments if and when the welfare of the society makes this
necessary, but the filling of these two positions shall at all times be the direct
responsibility of the board.
3. To require the manager and all officers and employees charged with
responsibility for custody of any of its funds or property to give adequate
4. To provide adequate insurance of the property of the association and
adequate insurance against liabilities.
5. To determine and supervise the more important policies of the organiza­
tion, insuring the conduct of its affairs in accordance with the bylaws, with
fairness to members and employees; to provide the best possible conditions of
labor consistent with other requirements of these bylaws while demanding
equivalent results in efficiency and faithfulness.
6. To decide upon the major steps in business activity and expansion, includ­
ing the investment of reserve funds; borrowing money, subject to article IV,
section 6 making important financial commitments and entering into new
fields of business enterprise.
7. To maintain at all times an active program of cooperative publicity and
education; and to maintain relations with other cooperative societies, federa­
tions, leagues, and wholesales aimed to promote the best interests of the
association and of the cooperative movement.
S e c . 1 2 . D u t i e s o f p r e s id e n t cmd v i c e p r e s id e n t. —The president shall act as
chairman at all meetings of the association and of the board of directors, but
should he be absent the vice president shall take the chair; should he also
be absent the officers and directors present shall elect one from among them­
selves to act as chairman on that occasion. The president, or chairman acting
in his absence, shall sign all contracts.
Seo. 1 3 . D u ti e s o f s e c r e t a r y “ —The secretary shall attend all meetings of
the association and of the board of directors, and shall record the names of
all the directors present and the minutes of their proceedings; he shall also
countersign all contracts sanctioned and entered into by the directors; he
shall likewise receive all proposals for admission into the association. He shall
attend to all correspondence, keep the accounts, documents, and papers of this
association in such a manner and for such purposes as the directors may
appoint. He shall prepare the regular statement of the association’s affairs.
The secretary shall on all occasions in the execution of his duties act under
the superintendence, control, and direction of the board of directors.
S e c . 1 4 . D u tie s o f t r e a s u r e r . —The treasurer shall be required to attend all
the regular meetings of the association and of the directors. He shall be
responsible for such sums of money as may from time to time be paid into
his hands by the secretary or by any other person on account of the association
and for the investment of the same under the authority of the directors.68 He
shall be responsible for having adequate financial reports presented to the board
at regular periods or as the board may direct.
S e c . 1 5 . E le c ti o n a n d d u tie s o f a u d itin g c o m m it t e e . —An auditing committee of
3 members shall be elected by the members of the association. They shall each
62 Some associations provide for 2 secretaries— a recording and a corresponding secre­
tary— thus dividing and making less onerous the duties here specified.
63 It is customary for the manager or the treasurer to be given the responsibility of
depositing, daily, in the bank the money received.




appe n d ixe s

serve f o r _____ and shall at all times have access to the books, vouchers, and
accounts of the association; shall examine and audit the same and every balance
sheet of the receipts and expenditures and effects of the association at least
every 3 months; and shall report to the membership meeting, with recommenda­
tions. The auditors shall be responsible for the daily and perpetual accounting
system kept by the manager and shall check same periodically.64

VIII.—R e t ir e m e n t

r t ic l e

o f E m p lo y e e s

S e c t i o n 1. R e t ir e m e n t . —All paid employees of the association shall be retired
from duty upon attaining the age of 65 years.

r t ic l e

IX.—M e r g e r

w it h A n o t h e r A s s o c ia tio n

S e c t i o n 1. M e r g e r . —Upon affirmative vote by the membership, the board of
directors may arrange for the consolidation of this association with another
recognized cooperative in the same or nearby territory, if it appears that this
action would prevent duplication of activities, promote efficiency, or otherwise
be in the interest of the cooperative movement.

A rticle

X.—A m e n d m e n ts

S e c t i o n 1. A m e n d m e n ts . —These bylaws may be amended, repealed, or other­
wise changed by a two-thirds vote of the members at any regular or special
membership meeting, due notice of which has been given in advance. P r o v id e d ,
That no change shall be made in article V, section 1 (c) and article VII, section 7,
except by unanimous vote of the members present at the meeting who shall
constitute not less than 90 percent of the entire membership.


r t ic l e

XI.—D is s o lu tio n

o f A s s o c ia ti o n

1. D is s o lu tio n . —At any regular or special meeting, due notice of which
has been given in advance, this association may be dissolved by a two-thirds
vote of the entire membership, present or voting by mail.
S e c . 2. D is p o s a l o f r e s e r v e s . —Upon such dissolution duly authorized, any
reserves of the association in excess of the outstanding financial obligations
shall be turned over to such recognized cooperative organization as the mem­
bership may determine; or to some Government or other public agency, to be
used for some social purpose; or be distributed among those patrons who have
been members or subscribers at any time during the past 6 years, on the
basis of their patronage during that period.55
S e c t io n

M Other committees may be elected or appointed from time to time to meet special
needs. Usually the board will appoint an educational committee, an election committee,
and a store or business committee. The board or auditing committee may appoint an
inventory committee.
55 The purpose of this provision is to prevent the dissolution of the association solely
for the purpose of dividing the reserves among those who happen to be members at the
time, and thus bar them from profiting from the results of the patronage of the previous

Appendix E .— Typical B ylaw s o f a Cooperative Burial Association

In the following pages are reproduced the articles of incorporation
and bylaws of one of the cooperative burial associations reporting to
the Bureau. These are given, not as a “model,” but simply as illustra­
tive of the typical articles under which such associations operate.
Articles of Incorporation of the----- Cooperative Burial Association
We, the undersigned, residents of Minnesota, acting for ourselves as indi­
viduals, do hereby associate for the purpose of organizing and incorporating a
cooperative association under the provisions of chapter 326, Laws of Minnesota
for 1923, and acts amendatory thereof, and to that end we hereby adopt the
following articles of incorporation.
A rticle I. The name of this association shall b e ___________________ Coopera­
tive Burial Association.
The purpose of this association shall be to furnish complete funeral service
upon the cooperative plan.
The general nature of its business shall be to purchase and supply to its
members, caskets, burial vaults, and other burial supplies; to own and operate
a hearse; to hire and engage an undertaker to embalm bodies and conduct
funerals; and to do any and all other things necessary or desirable in connection
with funerals for its members and their families.
For the purposes above set forth, it shall have the power and authority to
own, operate, manage, and control a funeral home or mortuary, a hearse or
hearses, and any and all such other facilities and general supplies as may be
required in the usual conduct of such business or service; to purchase and hold,
lease, mortgage, and encumber, sue, exchange, and convey such real estate,
buildings, and personal property as the business of the association may require;
to issue bonds and other evidences of indebtedness, and to borrow money to
finance the business of said association, and it also shall have power and
authority, either for itself or its individual members and patrons, to do and
perform every act and thing necessary and proper to the conduct of its busi­
ness or the accomplishment of the purposes set forth herein or permitted by the
act under which it is incorporated. The principal place of business of said asso­
ciation shall be in ___________ , Minnesota.
A rt . II. The period of duration of this association shall be 30 years from the
date of approval of these articles.
A rt . III. Every cooperator shall pay a membership fee of $5 and shall receive
a certificate of membership. The membership shall be a family membership,
and shall include the person to whom the certificate is issued, his or her spouse,
all single children under 30 years of age, and all other relatives living with
that family and depending wholly or partly on the certificate holder for support.
This certificate shall be nontransferable, but the death of the certificate holder
shall not operate to deprive the other persons herein mentioned from the bene­
fits thereof, and said certificate shall be void when and if all single children
under 30 years of age, and the husband and wife, and all other dependent rela256781°— 41------ 6




tives have died. The $5 membership fee shall then be transferred to a free
burial fund. Any certificate holder moving out of t h e ----------------- territory
may have the membership fee refunded upon application to the board of directors.
The net income of the association, except such sums as are required to be set
aside as a reserve for permanent surplus, or may be set aside by vote of the
certificate holders of the association available for distribution among the mem­
bers and as may be prescribed by the bylaws, shall be distributed among the
certificate holders or their successors in interest as above outlined, only on the
basis of patronage.
A r t . IV. The highest amount of indebtedness to which the association shall
at any time be subject, shall not exceed five thousand dollars ($5,000).
A r t . V . The names and places of residence of the incorporators of this asso­
ciation, who shall also be the first board of directors thereof, holding office until
the first annual meeting of the certificate holders, and until their successors are
elected and have qualified, are, together with the offices which they shall hold
as follows: [names listed].
A r t . VI. The government of this association and the management of its
affairs shall be vested in a board of seven directors, which board, after the
one hereinbefore named, shall be elected by ballot by the certificate holders of
record, for such term as the bylaws may prescribe, at the annual meeting of
the certificate holders, which shall be held on the first Tuesday in February of
each year a t ___________ , Minnesota, at such hour and place as may be des­
ignated in the bylaws. Vacancies in the board of directors may be filled by
the remaining members of the board, the person or persons so appointed to
hold office until the next annual meeting of the certificate holders. The officers
of the association shall be a president, a vice president, a secretary and a
treasurer, who shall be elected annually by and from the directors. All direc­
tors and officers shall be members of this association, and no undertaker shall
be a member of the board of directors. Certificate holders shall be restricted
to one vote in the affairs of the association, and voting by proxy shall not be
A r t . VII.
These articles of incorporation may be amended as provided by
A r t . VIII. The fiscal year of this association shall begin on the first day
of January of each year, and close on the last day of December of each year.
In testimony whereof, we, the said incorporators, have hereunto set our hands
and seals th is___ day o f ____________ [names of incorporators].
S e c t i o n 1. The board of directors shall consist of seven members of said as­
sociation. At the first annual meeting four directors shall be elected for 2
years, and three for 1 year. Thereafter all directors shall be elected for 2 years.
Said directors shall elect their own officers annually at the meeting on the
first Tuesday in February. Four members of said board shall constitute a
quorum for the transaction of business. Vacancies shall be filled by a majority
vote of remaining members of board. The person so chosen shall hold office
until the next annual meeting or until his successor is elected and qualified.
Sec. 2. The officers shall be a president, a vice president, a secretary, and a
treasurer. The president shall be business manager of the association. The
board may appoint other officers and committees to assist in transaction of

Sec. 3. The officers, respectively, shall have the usual powers and duties of
corporate officers.




S ec . 4. Sales of caskets and other supplies handled by the association and
other services rendered by said association shall be made at as near cost as
practicable, keeping in mind the current operating cost and fixed charges on
borrowed capital.
Sec. 5. The net income of said association as defined by statute, shall be dis­
tributed as follows:
(а) For the first and second fiscal years the whole thereof, except 1 percent
shall be set aside in a separate fund for the purpose of creating a permanent
surplus fund, and thereafter at least 10 percent annually until such perma­
nent surplus fund equals the highest amount of indebtedness to which the
association shall at any time be subject as set forth in the articles of incorpora­
tion of this association.
(б) One percent annually shall be set aside for an educational fund to pro­
mote and encourage cooperative organizations and the success of this association.
After the first and second fiscal years the balance of income available
for distribution except as above provided, and as certificate holders by vote may
determine, may be distributed to certificate holders on the basis of patronage.
Sec . 6. All membership fees and all money received from any source except
donations to other specific funds, or contributions to the free burial fund, shall
go into the general fund. All members should pay 25 cents a year or more as
requested by the board of directors, to be placed in the free burial fund, which
shall be used to assist indigent members. This fund shall be under the sole
jurisdiction and control of the board of directors, who shall use it only for the
benefit of those who select the cheaper caskets and supplies.
Sec. 7. Regular and special meetings of the certificate holders may be called
as provided by statute, and these bylaws may be amended, added to, or altered
by a two-thirds vote of all the directors at any meeting, or by a majority vote
of the certificate holders at any annual meeting called for the purpose.
Sec. 8. It shall be a part of the duty of the board of directors to appoint a

funeral director who may be dismissed by them at their discretion.
Sec. 9. It shall be the duty of said funeral director to do the following work

for an agreed compensation to be embodied in a written contract with said
association: Embalm the body, if wanted or necessary; direct the funeral and
transport the body, if necessary. Said funeral director shall furnish transporta­
tion for himself while the body lies in state. He shall take the casket to the
place where it is necessary, and the rough box to the cemetery, also the vault,
if that is used, on the vehicle furnished by the association.
Sec. 10. Said funeral director shall be paid by the treasurer of the association
the stipulated and agreed compensation.
Sec. 11. All members should call the manager or secretary in case of a death.
Sec. 12. The cost of the funeral shall be as follows: The price of the casket

and other supplies furnished, plus the amount paid the funeral director in
accordance with the contract of the association with him for his services, plus the
price for the use of the hearse, plus a surcharge sufficient to meet current operat­
ing expenses and fixed charges on borrowed capital; such surcharge to be deter­
mined by the board of directors and changed whenever necessary.
Sec. 13. All funeral expenses and costs shall be paid to the treasurer or the
manager of this association.
S ec . 14. Payment for casket and services of this association shall be made
within 2 weeks after funeral.
Sec. 15. Any member not able to pay for the funeral expenses, and desiring aid
from the free burial fund, must notify the secretary before selecting the casket.



The secretary shall then call a meeting of the board of directors to decide upon
the merits of the application for such aid.
Sec. 16. Until the association secures a hearse of its own, the charge for the
use of a hearse in connection with a funeral conducted by the association shall
be the cost thereof to the association plus the surcharge above mentioned.
Sec. 17. Contributions to the different funds may be received by the association.
Sec. 18. Upon payment of the membership fee, a membership certificate shall be
issued by the president and secretary.
Sec. 19. Extra charge for transportation of a body before the day of the funeral

will be made at cost to the association, plus the surcharge above mentioned.

Appendix F .— T ypical B ylaw s o f a Cooperative H ealth Association

Bylaws of Cooperative Health Association of— , Inc.

r t ic l e

I.— P u r p o s e s

S ection 1. The purposes and objects of this association shall he to further the
principles of consumer cooperation as applied to medical services; to study and
spread the knowledge of health and preventive medicine; in behalf of the mem­
bers, to arrange for the services of physicians and dentists duly licensed to
practice their professions, as independent contractors, and for services incidental
thereto and necessary in connection therewith, to the end that the health of
the members may be preserved, protected, and improved.

r t ic l e

II.— M e m b e r s h ip

S e c t i o n 1. E lig ib ility . —Any person or nonprofit organization subscribing to
the purposes of the association and complying with the rules and regulations of
the association shall be eligible for membership, P r o v id e d , h o w e v e r , that such
rules and regulations shall not deny membership to any person because of race,
religion, or political convictions.
S ec . 2. A d m is s io n . —The board of directors shall establish such rules and
regulations governing admission to membership as it may from time to time
deem advisable.
S ec . 3. T e r m in a tio n . —Membership shall automatically terminate if the dues
provided for in article III are not paid within 60 days after their due date.
Such members can be reinstated only upon action by the board of directors.
S ec . 4. E x p u ls io n . —The board of directors for just and reasonable cause, may
expel from membership, after not less than fifteen (15) days’ notice and oppor­
tunity for hearing before the board of directors any person who, in the opinion
of said board of directors, shall have abused the privilege of his membership or
is otherwise guilty of wrongful conduct detrimental to the association or its
membership. The board of directors, after hearing as hereinbefore provided,
shall be the sole judge of whether the conduct in question warrants expulsion
from membership. Membership dues shall end upon expulsion.

r t ic l e

III.— F e e s

and D u es

Section 1. M e m b e r s h ip f e e . —Every member shall be required to pay a mem­
bership fee of $10 which shall be paid at the rate of not less than $1 per month.
The first installment shall be paid not later than the due date of the member’s
first monthly dues following the adoption of this amendment.
Upon full payment of the membership fee a suitable certificate shall be issued
to the member.
Such certificate may be transferred to another person only upon approval by
the board of directors and on the books of the association.
The proceeds of membership fees shall, insofar as possible, be used only for
purchase and maintenance of equipment and other property.
S ec . 2. A p p lic a tio n f e e . —Any person desiring to become a member shall make
payment of an application fee of $5, plus $1 for each dependent with respect to



whom he desires to have services secured and shall fill out an application on the
prescribed blank or blanks. If, after review of application and medical examina­
tion of all the persons on whose behalf services are requested, the application is not
accepted, this fee shall be returned, unless the person applying is otherwise eligible
for membership and desires to become a member under conditions stated in the
next subsection.
Sec. 3. D u e s . —In addition to the above fees each member shall pay monthly
dues for himself and his dependents in such amount as the board of directors, with
the approval of the membership, shall determine.
A rticle IV.—M e m b e r s h ip M e e t in g s
Section 1. A n n u a l m e e tin g s . —The annual membership meeting shall be held in
_______________ of each year.
Sec. 2. S p e c ia l m e e tin g s . —Special membership meetings shall be called by the
secretary upon resolution of the board or upon petition of 5 percent of the voting
members. The petition shall state the purpose of the special meeting and may fix
a period of 2 weeks during which the meeting may be held, P r o v id e d , h o w e v e r ,
That the petition be delivered to the secretary not less than 1 week before the
designated period.
Sec. 3. Q u o ru m . —At any regular or special meeting a quorum shall consist of
10 percent of the voting members, except that any membership meeting at which a
quorum is not present may be adjourned for from 7 to 14 days, and the secretary
of the board within 3 days shall give notice to all voting members of the adjourned
meeting. At the reconvened meeting a quorum shall consist of 5 percent of the
voting members.
Sec. 4. P o w e r s o f m e e tin g s . —At a membership meeting declarative resolutions
may be adopted, and instructions may be issued to the board, provided they do not
abridge powers specifically granted to the board by these bylaws.
At a special membership meeting no business may be transacted other than that
stated as the purpose of the meeting, without the unanimous consent of the mem­
bers present.
Sec. 5. V o tin g r ig h ts . —Each member shall be entitled to one vote only, cast in
person or by mail, and there shall be no voting by proxy.
If one-fourth of the members voting on a motion to that effect so desire, a vote
shall be by secret ballot.
A rticle V.—D i r e c t o r s a n d O fficers
Section 1. D ir e c t o r s . —The management of the association shall be vested in a

board of directors of not less than 9 nor more than 18, who shall be elected by
the membership except as provided by section 3 of this article. Any change in the
number of directors shall require a two-thirds vote of the entire board.
Approximately two-thirds of the total number of directors shall be elected each
year, except for the first annual election. At the first annual election, the third
receiving the highest plurality vote shall hold office for 2 years, and the others
for 1 year. In case of tie votes the terms of office shall be decided by lot.
Directors shall hold office until their successors have been elected and shall have
entered upon the discharge of their duties.
No director shall receive compensation for services to the association except
with the concurring vote of two-thirds of the remaining directors. Such compen­
sation may be given only where a director is called upon to perform a service
to the association in addition to his services as director.
Seo. 2. V a c a n c ie s . —Any director of this association who, having been duly
notified, fails to attend four regular consecutive board meetings, without excuse






satisfactory to the board, shall thereby forfeit his membership thereon, and the
position shall thereupon be deemed vacant.
Seo. 3. D u t i e s o f d ir e c to r s .—The directors shall administer all business car­
ried on by the association, under the direction and control of any special or
regular meeting of the members. They shall arrange an impartial audit by a
certified public accountant of the books of the association at least once a year,
and shall issue a financial statement to the membership. They shall also issue
annually to the membership a full report of its work during the year and of the
progress and condition of the association.
The board may create advisory committees composed of individuals interested
in one or more phases of the work of the association.
Sec. 4. O fficers .—The officers shall be president, vice president, secretary,
treasurer and such others as the board may deem necessary. The president, vice
president, and secretary shall be appointed by the board of directors from their
number at the first regular board meeting following the annual election. All
officers shall hold office at the discretion of the board.
If the treasurer is not a member of the board he may have a voice but no vote
at board meetings.
S ec . 5. D u t i e s o f officers .—The officers shall perform the duties usually apper­
taining to such offices and such other duties as may be delegated to them by these
bylaws or by the board.
S ec . 6. B o n d s .—All officers and employees handling funds of the association
shall be bonded.
A rticle VI.— M ed ic a l A r r a n g e m e n ts
S ection 1. The board of directors may contract for and in behalf of the mem­
bers of this association with physicians and dentists duly licensed to practice
their profession who shall render as independent contractors such service to the
members as may be provided in such contract.
Sec. 2. The board of directors may arrange for and in behalf of the members
of this association for hospital, laboratory, and other services incidental to the
services of physicians and dentists.
Seo. 3. The board of directors shall in no way supervise, regulate, or inter­
vene in the practice of medicine by any physician or dentist with whom it con­
tracts for the care of members nor shall it in any way supervise, regulate, or
intervene in the usual professional relationship between such physician or dentist
and his patient-member, and every such contract entered into by and between
a physician or dentist and the association shall contain a covenant to this effect.
A rticle

VII.— A m e n d m e n ts

1. I n itia tio n .—Amendments may be initiated by the board or by
members at a meeting, or by a petition signed by 5 percent of the voting
S ec . 2. B o a r d a c tio n .—The board shall consider the proposed amendment
and make recommendation to the membership.
Seo. 3. P a s s a g e .—The proposed amendment shall be acted upon at a mem­
bership meeting, P r o v id e d that a notice of the proposed amendment and of the
board’s recommendation shall have been given to the members. If approved
hy the board, the amendment may be passed by a majority vote of the mem­
bership meeting but if disapproved by the board, a two-thirds vote of the
membership meeting will be required.
Seo. 4. C h a n g e in o r g a n iz a tio n .—When the membership reaches 1,000, the
board shall prepare and submit to the membership a plan providing for dele­
gated representation through sectional meetings.
S ection

Appendix G .— Suggested Form for A n n u al Financial R eport

Because o f the general lack of knowledge regarding financial state­
ments, what they mean, how they should be interpreted, and what the
relation between the various items should be, the following forms,
reproduced from Consumers’ Cooperation, April 1939,1 are given.
(Ideal) Cooperative Condensed Balance Sheet

The “ ideal” balance sheet of a cooperative would show the follow­
ing relationships:



Cash _ _
___ . _ $16, 000 1. Earnings_
- .___ $6,000
. _ 10,000 2. Payables _ _ _. _ 10, 000
In ven tories-__
- - 10,000
7,000 3. Reserves Investments
2,000 4. Mortgages_
25,000 5. Capital _ _
- - 25, 000





60, 000

It is agreed that in the ‘ideal” balance sheet—
1. Cash should equal earnings plus payables;
2. Reserves should equal receivables, plus inventories, plus
3. Capital should equal facilities.
The reasons for this are explained below:
1. C a sh sh o u ld eq u a l ea rn in g s p lu s p a y a b le s .—Earnings and pay­
ables should be definitely related to cash because the manager and
directors may be called upon by the members at the end of any speci­
fied period to produce the earnings in the form of cash and by the
creditors to meet the payables. The members have the right to
demand that the earnings be in cash in order that they may determine
how they wish to allocate them—whether to use that part of the cash
which represents current earnings to distribute in the form of patron­
age returns, to reduce payables or mortgages, or to retain as reserves
or capital in order to increase some form of assets. The creditors
also have the right to demand that there be sufficient cash to meet
the payables.
2. R e s e r v e s sh o u ld eq u a l r e c e iv a b le s , p lu s in v e n to r ie s , p lu s in v e s t­
m e n ts .—The receivables item should include both accounts and notes.
1 These were drawn up by E. R. Bowen, secretary of the Cooperative League of the
U. S. A.






Receivables should be conservatively depreciated to their probable
net collectible value. Although the payables which a cooperative
owes should be worth 100 cents on the dollar on the books of its
creditors, it is generally quite true that the receivables which a co­
operative owns are seldom worth 100 percent of their face value,
particularly if they are a large amount and old.
Inventories should be marked down by the full amount necessary
to cover any partial obsolescence or unsalability at full current prices,
so that the normal percentage of margin may be maintained during
the following accounting period.
Investments of a local cooperative usually consist largely of shares
owned in other cooperative institutions such as the wholesale which
serves it. They should be carried on the books at their true net
Reserves should include both the amount which is the property of
all the members, which may be called “ general reserves” or “ social
capital,” together with any amount which may be the undistributed
property of certain members, in the form of “ individual reserves” or
“members’ equities” which are presumed to be distributed at some
future time.
In a cooperative, the amount of reserves should equal the receiva­
bles, inventories, and investments. In other words, the receivables,
inventories, and investments should be in a sense “ velvet.” They
should be represented by interest-free reserves.
C a p ita l sh o u ld eq u a l fa c ilitie s .—Facilities include land, build­
ings, and equipment. In some cases such facilities are mortgaged
and any such amounts should be listed separately from other pay­
ables. Capital should be the net amount of common stock issued to
members or partially paid for.
The members do not actually own the cooperative until the amount
of capital equals the amount invested in facilities and there are no
mortgages. So long as there are mortgages they may be added to
capital to equal facilities. (In the case of a few cooperatives, enough
earnings have been voted to reserves to cover part or all of the
capital requirements and the facilities are equaled in part or whole by
reserves rather than capital.)
It should always be remembered that “ you cannot control what
you do not own”—*that the capital and/or reserves must equal the
facilities in order for the members of a cooperative really to own and
control it.
By examining its financial report in the light of the above stand­
ards, the association will be able to see how far and in what respects
its condition falls short.



Condensed Comparisons

Five condensed comparative substatements are also of great value—
covering assets, liabilities, operations, expenses, and departments.
The comparisons of assets and liabilities are subsidiary to the balance
sheet. The comparison of operations is a condensation of the more
complete operating statement. The comparisons of expenses and
departments are subsidiary to the operating statement.
All of these substatements show the differences between the present
and the previous year.
C o n d en sed C o m p a riso n o f A s s e ts


Present year

Previous year


Cash __ ____________________________
Receivables.......................... .....................
Inventories...... ................... ............. .........
Investments.......................... ................. ..
Facilities.............................................. .......



$ . . . . ................... $........................

T otal......................................................

C o n d e n s e d C o m p a r i s o n o f L ia b il it ie s


Present year

Previous year




$ . . . ................


$ . . . . ...................

T otal__________________ _______ ____

A condensed operating statement is second only to a condensed
balance sheet in importance. Operations can be summarized into
the five items of volume, margin, expense, earnings, and other income.
Comparisons by amounts and percentages for the present and the
previous years to date are invaluable as indications of the direction
in which the cooperative is going and the rate of speed.
C o n d e n s e d C o m p a r i s o n o f O p e r a t io n s


Percentage distribution

1. V o lu m e
2. M a r g in
3. E x p e n s e
A E a rn in g s
R O th e r innnm e

________ __










Condensed Comparison of Expenses



1. A rim in istra tin o

A. Finance..______
Miscellaneous ...

Percentage distribution

Previous Difference


Previous Difference

$ ............... $ ............. $ ...............


T o ta l



Condensed Comparison of Departments

Percent of gross margin
G as a n d oil
G roceries _
G o al


..... _


Percent of expenses

Percent of earnings





Appendix H .— Citations o f Cooperative Laws
A labam a,. — Code, 1928, section 7046.
A la sk a . — Compiled Laws 1933, title 2, chapter 11, article 7, sections 991 to 998.
A r k a n sa s . — Statutes, 1937, sections 2262 to 2285.
C a lifo rn ia . — Acts

of 1939, chapter 808 (Civil Code, Part II, Division F irst;
Title X X V ) .
C o lo ra d o . — Statutes 1935 (M ichie), chapter 41, sections 210 to 214.
C o n n e c tic u t. — General Statutes, revision of 1930, title 35, chapter 193, sections
3508 to 3517.
D is t r ic t o f C o lu m b ia . — Public Act No. 642, 76th Congress, 3d Session, ch. 397.
F lo r id a . — Compiled General Laws 1927, title 3, subchapter 8, sections 6385
to 6390.
I d a h o . — Code 1932, title 29, chapter 10, sections 29-1001 to 29-1005.
Illin o is. — Revised Statutes (Smith-Hurd) 1935, chapter 32, sections 305 to 331.
In d ia n a . — (Cooperative act of Indiana, Statutes 1926, sections 5282 to 5288,
was repealed in 1935.)
I o w a . — Code 1939, chapter 390.1, sections 8512-01 to 8512.60.
K a n s a s . — Revised Statutes 1923, article 15, sections 17-1501 to 17-1515.
K e n t u c k y .—^ Carroll’s Statutes (Baldwin’s 1936 revision), sections 88 3d -l to
M a s s a c h u s e tts . — General Laws (Ter. Ed.) 1932, chapter 157, sections 1 to 9.
M ic h ig a n . — Compiled Laws (Baldwin’s 1934 supplement), sections 10040 to
M in n e s o ta . — Mason’s Statutes 1927, and 1936 supplement, sections 7822 to
7847-4, as amended by Acts of 1939, chapter 14.
M is s o u r i. — Revised Statutes 1929, sections 12748 to 12766.
M o n ta n a . — Revised Codes 1935, sections 6375 to 6396.
N e b r a sk a . — Compiled Statutes 1929, sections 24-1301 to 24-1306.
N e v a d a . — “Domestic and Foreign Corporation Laws” of Nevada (compiled in
1935 by secretary of state) sections 1 to 9.
N e w J e r s e y . — Compiled Statutes 1910, volume II, page 1580, sections 1 to 18.
N e w M e x ic o . — Acts of 1939, chapter 164.
N e w Y o r k . — Cahill’s Consolidated Laws, 1930 as amended by supplement,
1931-1935, chapter lO -a, articles 1 to 9, Acts of 1937, chapter 172 and Acts of
1938, chapter 458.
N o r t h C a rolin a . — Code 1935, sections 5242 to 5259.
N o r t h D a k o t a .— Compiled Laws (Supplement, 1913-25) as amended by acts of
1929, page 119, and acts of 1931, pages 191, 192, chapter 13— Cooperative
Associations, sections 4609al to 4609al9.
O hio. — Code 1940 (Baldwin’s Throckmorton), sections 10185 and 10186.
O k la h o m a . — Statutes 1931, sections 9894 to 9909.
O r eg o n . — Code 1930, volume II, as amended by acts of 1931, chapter 9 1 ; acts
of 1933, chapter 4, section 3 0 -A and sections 25-801 to 2 5 -8 27 ; and acts of
1937, chapter 119.
P e n n s y lv a n ia . — Purdon’s Pennsylvania Statutes, 1936, title 14, chapter 1, sec­
tions 1 to 28, and chapter 4, sections 191 to 193.
S o u th C a rolin a . — Code 1932, Chapter 158, article 1, sections 8137 to 8149.

S o u th D a k o t a .—Code


1939, chapter 11.11.
Laws 1933, chapter 239, section 5791.
V ir g in ia .—Code 1936, chapter 148, sections 3855 and 3855a.
W a s h in g to n . —Remington’s Revised Statutes 1932, sections 3904 to 3923.
W is c o n s in . —Statutes, 1935, chapter 185. Cooperative Associations, sections 185.01
to 185.23, as amended by Acts of 1939, chapter 398.
W y o m i n g .— (Former cooperative statute, sections 5119-5134, Wyoming Comp.
Stat., 1920, was repealed in 1931.)

V e r m o n t .—Public

Appendix H .— Consumers’ Cooperative A c t o f the
District o f Columbia

Following is the complete text of the Consumers’ Cooperative Act
of the District of Columbia (Pub., No. 642, 76th Cong., 3d session,
ch. 397):
A rticle

I.—D e fin itio n s

S e c t io n
1. D e fin itio n s . —In this act unless the subject matter requires
(1) “Association” means a group enterprise legally incorporated under this
act, and shall be deemed to be a nonprofit corporation.
(2) “Member” means not only a member in a nonshare association but also
a member in a share association.
(3) “Net savings” means the total income of an association minus the costs
of operation.
(4) “Savings returns” means the amount returned to the patrons in pro­
portion to their patronage or otherwise in accordance with the provisions of
section 31 herein.
(5) “Cooperative basis” as applied to any incorporated or unincorporated
group referred to in sections 4 ( 7), 13, 23, 37, 40, and 41 herein means—
(a) that each member has one vote and only one vote, except as may be
altered in the articles or bylaws by provisions for voting by member
(b) that the maximum rate at which any return is paid on share or member­
ship capital is limited to not more than 8 per centum per annum;
(c) that the net savings after payment, if any, of said limited return on
capital and after making provision for such separate funds as may be required
or specifically permitted by statute, articles, or bylaws, or allocated or dis­
tributed to member patrons, or to all patrons, in proportion to their patronage;
or retained by the enterprise, for the actual or potential expansion of its
services or the reduction of its charges to the patrons, or for other purposes
not inconsistent with its nonprofit character.

Article II.— W h o M a p I n c o r p o r a t e ; P u r p o s e s a n d P o w e r s

of A s s o c ia tio n s

Sec. 2. W h o m a y in c o r p o r a t e . —Any five or more natural persons or two or
more associations may incorporate in the District of Columbia under this act.
Sec. 3. P u r p o s e s . —An association may be incorporated under this act tc
engage in any one or more lawful mode or modes of acquiring, producing,
building, operating, manufacturing, furnishing, exchanging, or distributing
any type or types of property, commodities, goods, or services for the primary
and mutual benefit of the patrons of the association (or their patrons, if any)
as ultimate consumers.
Sec. 4. P o w e r s . —An association shall have the capacity to act possessed by
natural persons and the authority to do anything required or permitted by
this act and also—



(1) To continue as a corporation for the time specified in its articles;
(2) To have a corporate seal and to alter the same at pleasure;
(3) To sue and be sued in its corporate name;
(4) To make bylaws for the government and regulation of its affairs;
(5) To acquire, own, hold, sell, lease, pledge, mortgage, or otherwise dispose
of any property incident to its purposes and activities;
(6) To own and hold membership in and share capital of other associations
and any other corporations, and any types of bonds or other obligations; and
while the owner thereof to exercise all the rights of ownership;
(7) To borrow money, contract debts, and make contracts, including agree­
ments of mutual aid or federation with other associations, other groups organ­
ized on a cooperative basis, and other nonprofit groups;
(8) To conduct its affairs within or without the District of Columbia;
(9) To exercise in addition any power granted to ordinary business cor­
porations, save those powers inconsistent with this act;
(10) To exercise all powers not inconsistent with this act which may be
necessary, convenient, or expedient for the accomplishment of its purposes, and,
to that end, the foregoing enumeration of powers shall not be deemed
A rticle III—A r t ic le s o f I n c o r p o r a t io n
Sec. 5. A r t ic le s o f in c o r p o r a t io n ; c o n t e n t s . — Articles of incorporation shall
be signed by each of the incorporators and acknowledged by at least three of
them if natural persons, and by the presidents and secretaries, if associations,
before an officer authorized to take acknowledgments.
Within the limitations of this act the articles shall contain—
(1) A statement as to the purpose or purposes for which the association is
(2) The name of the association which shall include the word “coopera­
tive” ;
(3) The term of existence of the association which may be perpetual;
(4) The location and address of the principal office of the association;
(5) The names and addresses of the incorporators of the association;

(6) The names and addresses of the directors who shall manage the affairs
of the association for the first year, unless sooner changed by the members;
(7) A statement of whether the association is organized with or without
shares, and the number of shares or memberships subscribed for;
(8) If organized with shares, a statement of the amount of authorized
capital, the number and types of shares and the par value thereof which may
be placed at any figure, and the rights, preferences, and restrictions of each
type of share;
(9) The minimum number or value of shares which must be owned in order
to qualify for membership; if organized without shares, a statement of
whether the property rights of members shall be equal or unequal, and if
unequal, the rule by which their rights shall be determined;
(10) The maximum amount or percentage of capital which may be owned
or controlled by any member; including a statement of whether or not each
member shall be limited to a single share, and whether such single shares shall
be of various par values;
(11) The method by which any surplus, upon dissolution of the association,
shall be distributed; in conformity with the requirements of section 36 herein
for division of such surplus.



The articles may also contain any other provisions not inconsistent with law
or with this act, for the conduct of the association’s affairs.
Sec. 6. S a m e ; fi lin g ; r e c o r d a t i o n ; f e e s ; e f f e c t o f c e r t ifi c a t e .—The articles shall
be delivered to the recorder of deeds. If he finds that the articles conform to
law, he shall file the same upon the payment of a fee of $5, and he shall record
the same, upon payment of a fee of $1. Said fees shall be in lieu of any other
fees or payments provided in section 552 of the act entitled “An act to estab­
lish a code of law for the District of Columbia,” approved March 3, 1901, or
in any other section of the code of laws of the District of Columbia, to be paid
for at the time of said filing; and the last paragraph of section 552 of such
act of March 3, 1901, shall have no application to associations organized under
this act. After such filing and recording, he shall issue a certificate of in­
corporation, whereupon the corporate existence shall begin. Such certificate
shall be conclusive evidence of the fact that the corporation has been duly
incorporated. This shall not preclude the institution of quo warranto proceed­
ings under sections 1538 through 1548, both inclusive, of the act entitled “An
act to establish a code of law for the District of Columbia,” approved March
3, 1901. The filing or recording of the articles or of amendments thereto, or
of any other papers pursuant to this act is required for the purpose of affording
all persons the opportunity of acquiring knowledge of the contents thereof, but
no person or incorporated or unincorporated group dealing with the association
shall be charged with constructive notice of the contents of any such articles
or papers by reason of such filing or recording.
Sec. 7. S a m e ; a m e n d m e n ts ; f e e . —Amendments to the articles may be pro­
posed by a two-thirds vote of the board of directors, or by petition of 10 per
centum of the association’s members. Notice of the meeting to consider such
amendment shall be sent by the secretary at least 30 days in advance thereof
to each member at his last-known address, accompanied by the full text of the
proposal and by that part of the articles to be amended. Two-thirds of the
members voting may adopt said amendment and when verified by the president
and secretary, it shall be filed and recorded with the recorder of deeds within
30 days of its adoption, and a fee of $1 shall be paid.
If the amendment is to alter the preferences of outstanding shares of any
type, or to authorize the issuance of shares having preferences superior to out­
standing shares of any type, the vote of two-thirds of the members owning
such outstanding shares affected by the change shall also be required for the
adoption of the amendment; if the amendment is to alter the rule by which
members’ property rights in a nonshare association are determined, a vote of
two-thirds of the entire membership shall be required.
The amount of capital and the number and par value of shares may be
diminished or increased by amendment of the articles, but the capital shall
not be diminished below the amount of paid-up capital existing at the time
of amendment.
A rticle

IV.—B y la w s

Sec. 8. A d o p tio n , a m e n d m e n t , o r r e p e a l o f "bylaws .—Bylaws shall be adopted,
amended, or repealed by at least a majority vote of the members voting.
Sec. 9. C o n te n ts o f b y la w s . —The bylaws may, within the limitations of this
act provide for—
(1) The method and terms of admission to membership and the disposal of
members’ interests on cessation of membership for any reason;
(2) The time, place, and manner of calling and conducting meetings;
(3) The number or percentage of the members constituting a quorum;



(4) The number, qualifications, powers, duties, term of office, and manner,
time, and vote for election, of directors and officers; and the division or
classification, if any, of directors to provide for rotating or overlapping terms;
(5) The compensation, if any, of the directors, and the number of directors
necessary to constitute a quorum;
(6) The method of distributing the net savings;
(7) The various discretionary provisions of this act as well as other pro­
visions incident to the purposes and activities of the association.
A rticle V .— M e e tin g s

Sec. 10. R e g u la r a n d s p e c ia l m e e tin g s . —Regular meetings of members shall
be held as prescribed in the bylaws, but shall be held at least once a year.
Special meetings may be demanded by a majority vote of the directors or by
written petition of at least one-tenth of the membership, in which case it
shall be the duty of the secretary to call such meeting to take place within
SO days after such demand. Regular or special meetings, including meetings
by units as hereinafter provided, may be held within or without the District of
Columbia as the articles may prescribe.
Sec. 11. N o t i c e o f m e e tin g s . —The secretary shall give notice of the time
and place of meetings by sending a notice thereof to each member at his lastknown address not less than the number of days in advance of the meeting
specified in the bylaws. In case of a special meeting the notice shall specify
the purpose for which such meeting is called.
Sec. 12. M e e t in g s "by u n its o f th e m e m b e r s h ip . —The articles or bylaw's may
provide for the holding of meetings by units of the membership and may pro­
vide for a method of transmitting the votes there cast to the central meeting,
or for a method of representation by the election of delegates to the central
meeting; or for a combination of both such methods.
A rticle V I.— V o tin g

Sec. 13. O n e m e m b e r — o n e v o t e . —Bach member of an association shall have
one and only one vote, except that where an association includes among its
members any number of other associations or groups organized on a coopera­
tive basis the voting rights of such member associations or groups may be as
prescribed in the articles or bylaws.
No voting agreement or other device to evade the one-member-one-vote rule
shall be enforceable at law or in equity.
Sec. 14. N o p r o x y . —No member shall be permitted to vote by proxy.
Sec. 15. V o tin g b y m a il. —The articles or bylaws may provide for either or
both of the following types of voting by mail:
(1) That the secretary shall send to the members a copy of any proposal
scheduled to be offered at a meeting, together with the notice of said meeting,
and that the mail votes cast by the members shall be counted together with
those cast at the meeting if such mail votes are returned to the association
within a specified number of days;
(2) That the secretary.shall send to any member absent from a meeting an
exact copy of the proposal acted upon at the meeting, and that the mail vote
of the member upon such proposal, if returned within a specified number of
days, shall be counted together with the votes cast at said meeting.
The articles or bylaws may also determine whether and to what extent mail
votes shall be counted in computing a quorum.
256781°— 41------- 7



S ec . 16. A p p lic a t io n o f v o t i n g p r o v is io n s in th is a c t t o v o t i n g "by m a il .—
If an association has provided for voting by mail, any provision of this act
referring to votes cast by the members shall be construed to include the votes
cast by mail.
S ec . 17. A p p lic a t io n o f v o t i n g p r o v is io n s in th is a c t t o v o t i n g b y d e le g a te s .—
If an association has provided for voting by delegates any provision of this
act referring to votes cast by the members shall apply to votes cast by delegates;
but this shall not permit delegates to vote by mail.
A rticle

VII.—D ir e c t o r s

a n d O fficers

S ec . 18. D ir e c t o r s . —An association shall be managed by a board of not less
than five directors, who shall be elected for a term fixed in the bylaws not to
exceed 3 years, by and from the members of the association and shall hold
office until their successors are elected, or until removed. Vacancies in the
board of directors, otherwise than by removal or expiration of term, shall be
filled in such manner as the bylaws may provide.
The bylaws may provide for a method of apportioning the number of direc­
tors among the units into which the association may be divided, and for the
election of directors by the respective units to which they are apportioned.
An executive committee of the board of directors may be elected in such
manner and with such powers and duties as the articles or bylaws may
Meetings of directors and of the executive committee may be held within
or without the District of Columbia.
S ec . 19. O fficers. —The officers of an association shall include a president, one
or more vice presidents, a secretary and a treasurer, or a secretary-treasurer.
The officers shall be elected annually by the directors unless the bylaws other­
wise provide. The president and at least one vice president must be directors,
but no other officer need be a director.
S ec . 20. R e m o v a l o f d i r e c t o r s a n d o ffic er s . —A director or officer may be
removed with or without cause, by a vote of two-thirds of the members voting
at a regular or special meeting. The director or officer involved shall have
an opportunity to be heard at said meeting. A vacancy caused by any such
removal shall be filled by the vote provided in the bylaws for election of
S ec . 21. R e fe r e n d u m . —The articles or bylaws may provide that within a
specified period of time any action taken by the directors must be referred to
the members for approval or disapproval if demanded by petition of at least
10 per centum of all the members or by vote of at least a majority of the
directors: P r o v id e d , h o w e v e r , That the rights of third parties which have
vested between the time of such action and such referendum shall not be
impaired thereby.

r t ic l e

VIII.—S h a r e s

a n d M e m b e r s h ip

S ec . 22. L im it a t io n s u p o n t h e r e t u r n o n c a p ita l. —The return upon capital
shall not exceed 6 per centum per annum upon the paid-up capital and shall be
Total return upon capital distributed for any single period shall not exceed
50 per centum of the net savings for that period.
S ec . 23. E lig i b ili t y an d a d m is sio n to m e m b e r s h ip . —Any natural person, asso­
ciation, incorporated or unincorporated group organized on a cooperative basis,
or any nonprofit group, shall be eligible for membership in an association



if it has met the qualifications for eligibility, if any, stated in the articles or
bylaws and shall be deemed a member upon payment in full for the par value
of the minimum amount of share or membership capital stated in the articles
as necessary to qualify for membership.
S ec . 24. S u b s c r ib e r s . —Any natural person or group eligible for membership
and legally obligated to purchase a share or shares of, or membership in, an
association shall be deemed a subscriber. The articles or bylaws may determine
whether, and the conditions under which, any voting rights or other rights of
membership shall be granted to subscribers.
S eo. 25. S h a r e a n d m e m b e r s h ip c e r t ifi c a t e s ; is s u a n c e a n d c o n t e n t s . —No cer­
tificate for share or membership capital shall be issued until the par value
thereof has been paid for in full. There shall be printed upon each certificate
issued by an association a full or condensed statement of the requirements of
sections 13, 14, and 26 herein.
S eo. 26. T r a n s fe r o f s h a r e s a n d m e m b e r s h ip ; w ith d r a w a l. —If a member
desires to withdraw from the association or dispose of any or all of his hold­
ings therein, the directors shall have the power to purchase such holdings by
paying him the par value of any or all of the holdings offered. The directors
shall then reissue or cancel the same. A vote of the majority of the members
voting at a regular or special meeting may order the directors to exercise this
power to purchase.
If the association fails, within 60 days of the original offer, to purchase all
or any part of the holdings offered, the member may dispose of the unpur­
chased interest elsewhere, subject to the approval of the transferee by a ma­
jority vote of the directors. Any would-be transferee not approved by the
directors may appeal to the members at their first regular or special meeting
thereafter, and the action of the meeting shall be final. If such transferee is
not approved, the directors shall exercise their power to purchase, if and when
such purchase can be made without jeopardizing the solvency of the
S ec . 27. S h a r e a n d m e m b e r s h ip c e r t i f i c a t e s ; r e c a ll. —The bylaws may give
the directors the power to use the reserve funds to recall, at par value, the
holdings of any member in excess of the amount requisite for membership;
and may also provide that if any member has failed to patronize the associa­
tion during a period of time specified in the bylaws, the directors may use the
reserve funds to recall all his holdings and thereupon he shall cease to be a
member of the association. When so recalled, such certificates of share or
membership capital shall be either reissued or canceled.
S ec . 28. S h a r e a n d m e m b e r s h ip c e r t i f i c a t e s ; a tta c h m e n t. —The holdings of
any member of an association, to the extent of the minimum amount necessary
for membership, but not to exceed $50, shall be exempt from attachment, exe­
cution, or garnishment for the debts of the owner. If any holdings in excess
of this amount are subjected to such liability, the directors of the association
may either admit the purchaser thereof to membership, or may purchase from
him such holdings at par value.
S eo. 29. L ia b il it y o f m e m b e r s . —Members shall not be jointly or severally
liable for any debts of the association, nor shall a subscriber be so liable except
to the extent of the unpaid amount on the shares or membership certificates
subscribed by him. No subscriber shall be released from such liability by reason
of any assignment of his interest in the shares or membership certificate, but
shall remain jointly and severally liable with the assignee until the shares or
certificates are fully paid up.



S eo. 30. E x p u ls io n .—A member may be expelled by the vote of a majority of
the members voting at a regular or special meeting. The member against
whom the charges are to be preferred shall be informed thereof in writing at
least ten days in advance of the meeting, and shall have an opportunity to
be heard in person or by counsel at said meeting. On decision of the associa­
tion to expel a member, the board of directors shall purchase the member’s
holdings at par value, if and when there are sufficient reserve funds.
A rticle

IX.—A p p o r tio n m e n t

o f N et

S a v in g s

S ec . 31. A llo c a t i o n a n d d is t r ib u t io n o f n e t s a v in g s . —At least once a year the
members and/or the directors, as the articles or bylaws may provide, shall
apportion the net savings of the association in the following order:
(1) Not less than 10 per centum shall be placed in a reserve fund until such
time as the fund shall equal at least 50 per centum of the paid-up capital; and
such fund may be used in the general conduct of the business. The amounts
apportioned to the reserve fund shall be allocated on the books of the associa­
tion on a patronage basis, or in lieu thereof, the books and records of the asso­
ciation shall afford a means for doing so, in order that upon dissolution or
earlier, if deemed advisable, such reserves may be returned to the patrons who
have contributed the same, subject to the limitations of section 36 herein;
(2) A return upon capital, within the limitations of section 22, may be paid
upon share capital, or, if the bylaws so provide, upon the membership capital
certificates of a nonshare association; but such return upon capital may be
paid only out of the surplus of the aggregate of the assets over the aggregate
of the liabilities (including in the latter the amount of the capital stock) after
deducting from such aggregate of the assets the amount by which such ag­
gregate was increased by unrealized appreciation in value or revaluation of
fixed assets;
(3) A portion of the remainder, as determined by the articles or bylaws,
shall be allocated to an educational fund to be used in teaching cooperation,
and a portion may also be allocated to funds for the general welfare of the
members of the association;
(4) The remainder shall be allocated at the same uniform rate to all
patrons of the association in proportion to their individual patronage: P r o v id e d
(a) in the case of a member patron, his proportionate amount of savings
returns shall be distributed to him unless he agrees that the association should
credit the amount to his account toward the purchase of an additional share or
shares, or additional membership capital;
(b) in the case of a subscriber patron, his proportionate amount of savings
returns may, as the articles or bylaws provide, be distributed to him, or
credited to his account until the amount of capital subscribed for has been
fully paid;
(c) in the case of a nonmember patron, his proportionate amount of savings
returns shall be set aside in a general fund for such patrons and shall be
allocated to individual nonmember patrons only upon request and presentation
of evidence of the amount of their patronage. Any savings return so allocated
shall be credited to such patron toward payment of the minimum amount of
share or membership capital necessary for membership. When a sum equal to
this amount has accumulated at any time within a period of time specified
in the bylaws, such patron shall be deemed and become a member of the asso­
ciation if he so agrees or requests, and complies with any provisions in the



bylaws for admission to membership. The certificates of shares or member­
ship to which he is entitled shall then be issued to him;
if within any periods of time specified in the articles or bylaws, (1) any
subscriber has not accumulated and paid in the amount of capital subscribed
for; or (2) any nonmember patron has not accumulated in his individual
account the sum necessary for membership; or (3) any nonmember patron has
accumulated the sum necessary for membership but neither requests nor agrees
to become a member, or fails to comply with the provisions of the bylaws, if
any, for admission to membership, then the amounts so accumulated or paid
in and any part of the general fund for nonmember patrons which has not been
allocated to individual nonmember patrons shall go to the educational fund
and thereafter no member or other patron shall have any rights in said paid-in
capital or accumulated savings returns as such: P r o v id e d fu r t h e r , That nothing
in this section shall prevent an association under this act which is engaged in
rendering services from disposing of the net savings from the rendering of
such services in such manner as to lower the fees charged for services or
otherwise to further the common benefit of the members: A n d p r o v id e d
f u r t h e r , That nothing in this section shall prevent an association from adopt­
ing a system whereby the payment of savings returns which would otherwise
be distributed, shall be deferred for a fixed period of months or years; nor
from adopting a system, whereby the savings returns distributed shall be partly
in cash, partly in shares, such shares to be retired at a fixed future date, in
the order of their serial number or date of issue.
A rticle X . — B o n d in g ; B o o k k e e p in g ;

R ep o rts

Sec. 32. B o n d in g . —Every individual acting as officer or employee of an asso­
ciation and handling funds or securities amounting to $1,000 or more, in any
one year, shall be covered by an adequate bond as determined by the board
of directors, and at the expense of the association; and the bylaws may also
provide for the bonding of other employees or officers.
S ec . 33. B o o k s ; a u d itin g . —To record its business operation, every association
shall keep a set of books which shall be audited at the end of each fiscal year
by an experienced bookkeeper or accountant, who shall not be an officer or
director. Where the annual business amounts to less than $10,000, the audit
may be performed by an auditing committee of three, who shall not be direc­
tors, officers, or employees. A written report of the audit, including a state­
ment of the amount of business transacted with members, and the amount
transacted with nonmembers, the balance sheet, and the income and expenses,
shall be submitted to the annual meeting of the association.
Sec. 34. A n n u a l r e p o r t .—Every association shall annually, within 60 days
of the close of its operations for that year, make a report of its condition, sworn
to by the president and secretary, which report shall be filed with the recorder
of deeds. The report shall state—

(a) The name and principal address of the association.
(b) The names, addresses, occupations, and date of expiration of the terms,
of the officers and directors, and their compensation, if any.
(c) The amount and nature of its authorized, subscribed, and paid-in capital,
the number of its shareholders, and the number admitted and withdrawn during
the year, the par value of its shares and the rate at which any return upon
capital has been paid. For nonshare associations the annual report shall
state the total number of members, the number admitted or withdrawn during
the year, and the amount of membership fees received.
(d) The receipts, expenditures, assets, and liabilities of the association.



A copy of this report shall be kept on file at the principal oflice of the
Any person who shall subscribe or make oath to such report containing
a materially false statement, known to such person to be false, shall upon
conviction of such offense be punished by a fiue of not less than $25 nor more
than $200, or by imprisonment of not less than 30 days nor more than one year,
or both such fine and imprisonment.
S ec . 35. N o tice o f d elinqu ent r e p o r ts ; m andam us.— I f an association fails to
make such report within the required period of 60 days, the recorder of deeds
shall within 60 days from the expiration of said period send such association
a registered letter directed to its principal office, stating the delinquency and
its consequences. If the association fails to file the report within 60 days from
the mailing of such notice, any member of the association or the United States
attorney for the District of Columbia may by petition for mandamus against
the association and its proper officers compel such filing to be made, and in
such case the court shall require the association or the officers at fault to pay
all the expenses of the proceeding including counsel fees.

A rticle

X I .— D issolu tion

S ec . 36. D issolu tion .— An association may, at any regular or special meeting
legally called, be directed to dissolve by a vote of two-thirds of the entire mem­
bership. By a vote of a majority of the members voting, three of their number
shall be designated as trustees, who shall, on behalf of the association and
within a time fixed in their designation or within any extension thereof, liqui­
date its assets, and shall distribute them in the manner set forth in this section.
A suit for involuntary dissolution of an association organized under this act
may be instituted for the causes and prosecuted in the manner set forth in
sections 786 through 791, both inclusive, and sections 794 through 797, both
inclusive, of the act entitled “An act to establish a code of law for the District
of Columbia,” approved March 3, 1901: P r o v id ed , That any distribution of
assets shall be in the manner set forth in this section. In case of any dissolu­
tion of an association, its assets shall be distributed in the following manner
and order: (1) By paying its debts and expenses; (2) by returning to the
members the par value of their shares or of their membership certificates,
returning to the subscribers the amounts paid on their subscriptions, and re­
turning to the patrons the amount of saving returns credited to their accounts
toward the purchase of shares or membership certificates; and (3) by dis­
tributing any surplus in either or both of the following ways as the articles
may provide—
(a) Among those patrons who have been members or subscribers at any
time during the past 6 years, on the basis of their patronage during that
(b) As a gift to any consumers’ cooperative association or other nonprofit
enterprise which may be designated in the articles.
A rticle

X I I .— P en a lties

S ec . 37. Use o f nam e “ co o p era tiv e” ; p en alty.— Only (1) associations organized
under this act, (2) groups organized on a cooperative basis under any other
law of the District of Columbia, and (3) foreign corporations operating on a
cooperative basis and authorized to do business in the District of Columbia
under this or any other law of the District of Columbia shall be entitled to
use the term “cooperative,” or any abbreviation or derivation thereof, as part



of their business name, or to represent themselves, in their advertising or
otherwise, as conducting business on a cooperative basis.
Any person, firm, or corporation violating the above provision shall upon
conviction of such offense be punished by a fine of not less than $25 nor more
than $200, with an additional fine of not more than $200 for each month during
which a violation occurs after the first month, or by imprisonment for not less
than 30 days nor more than 1 year, or by both such fine and imprisonment.
The district attorney of the United States for the District of Columbia, or any
individual, or association, or group organized on a cooperative basis, may sue
to enjoin an alleged violation of this section.
Should a court of competent jurisdiction decide that any person, firm, or
corporation using the name “cooperative” prior to this act, and not organized
on a cooperative basis, is entitled to continue in such use, any such business
shall always place immediately after its name the words “does not comply with
the cooperative association law of the District of Columbia” in the same kind
of type, and in letters not less than two-thirds as large, as those used in
the term “cooperative.”
S ec . 38. P r o m o t io n e x p e n s e s ; lim it a t i o n s ; p e n a lt y .— An association shall not,
directly or indirectly, use any of its funds, nor issue shares nor incur any
indebtedness, for the payment of any compensation for the organization of
the association except necessary legal fe e s; nor for the payment of any
promotion expenses in excess of 5 per centum of the amount paid in for the
shares or membership certificates involved in the promotion transaction. Any
association’s officer, director, or agent who gives, or any person, firm, corpora­
tion, or association which receives such promotion commission in violation of
this section shall, upon conviction of such offense, be punished by a fine of
not less than $25, nor more than $200, or by imprisonment for not less than
30 days nor more than 1 year, or by both such fine and imprisonment.
S ec . 39. S p rea d in g fa ls e r e p o r t s ; p e n a l t y .— Any person, firm, corporation, or
association which maliciously and knowingly spreads false reports about the
management or finances of any association shall, upon conviction of such
offense, be punished by a fine of not less than $25 and not more than $200,
or by imprisonment for not less than 30 days nor more than 1 year, or by
both such fine and imprisonment.

A rticle

X I I I .— R e la tio n to O th e r L a w s

S ec . 40. E x i s t i n g c o o p e r a tiv e g r o u p s .— Any group incorporated under another
law of the District of Columbia and operating on a cooperative basis or any
unincorporated group operating on such a basis in the District of Columbia may
elect by a vote of two-thirds of the members voting to secure the benefits of
and be bound by this act, and shall thereupon amend such of its articles and
bylaws as are not in conformity with this act. A certified copy of the amended
articles shall be filed and recorded with the recorder of deeds and a fee of
$5 shall be paid.
S ec . 41. F o r e ig n c o r p o ra tio n s and a sso c ia tio n s .— A foreign corporation or
association operating on a cooperative basis and complying with the applicable
laws of the State wherein it is organized shall be entitled to do business in the
District of Columbia as a foreign cooperative corporation or association.
S ec . 42. L e g a l it y d e c la r e d ; n o t in r e str a in t o f tra d e .— No association, or
method or act thereof which complies with this act, shall be deemed a con­
spiracy or combination in restraint of trade or an illegal monopoly, or an
attempt to lessen competition or fix prices arbitrarily.



S eo. 43. L a w s n ot applicable.— No law of the District of Columbia conflicting
or inconsistent with any part of this act shall, to the extent of the conflict or
inconsistency, be construed as applicable to associations formed hereunder;
nor shall any law of the District of Columbia inappropriate to the purposes of
such associations be so construed nor shall any of the provisions of sections
574 through 797, both inclusive, of the act entitled “An act to establish a code
of law for the District of Columbia,” approved March 3, 1901, be construed as
applicable to associations formed hereunder, except as expressly stated in this
S ec . 44. T a xa tion .— Associations formed hereunder, and foreign corporations
and associations admitted under section 41 to do business in the District of
Columbia and entitled to the benefits of section 37, shall pay an annual license
fee of $10.
S ec . 45. S ep a ra b ility ; con stitu tion a lity.— If any provision of this act or the
application thereof to any person or circumstance shall be held unconstitu­
tional or otherwise invalid for any reason, the validity of the remainder of this
act and the application of such provision to other persons or circumstances
shall not be affected thereby.
S ec . 46. The Congress reserves the right to alter, amend, or repeal this act,
or any charter or certificate of incorporation made thereunder.
S e c . 47. S h ort title.— This act may be cited as the “District of Columbia
Cooperative Association Act.”
Approved, June 19, 1940.

Appendix J.— Consumers’ Cooperation: A Selected
List o f References

A l a n n e , y. s.
Fundamentals of consumer cooperation. Minneapolis, Northern States Co­
operative League, 1936. 120 pp., chart. (2d ed., revised.)

Booklet intended for study groups, educational committees of cooperative associa­
tions, and similar organizations.

-------Manual for cooperative directors.
Association, 1938. 208 pp.

Superior, W is., Cooperative Publishing

Exposition of matters on which cooperative directors should be inform ed: General
adm inistration; qualifications of board m em bers; what directors should know about
cooperative principles, bookkeeping, financial statem ents, parliamentary procedure,
e tc .; how to analyze an income and expense statem ent and a statem ent of assets
and liabilities ; discussion of the various controls (margins, expenses, inventories,
A m eric an A cadem y of P olitical a n d S ocial S c ience .
The Annals, May 1937: Consumers’ cooperation.
Street, 1937. 292 pp.

Philadelphia, 3457 Walnut

How to organize a cooperative health association.
1938. 19 pp .; mimeographed.

New York, 1790 Broadway,

A symposium of articles on various phases of consumers’ cooperation, grouped
into five broad subjects: Principles and fundam entals; Social relationships; Co­
operation in the United States (history, farmers’ purchasing, oil, retailing, insur­
ance and finance, service associations, housing, credit, recreation) ; Cooperation
abroad; Criticisms (by a business man and an advertising man).
A sso c ia tio n of M edical C ooperatives .
B arou ,

Cooperative insurance.

London, P. S. King & Son, Ltd., 1936.

391 pp.

An analysis of the nature, elements, and shortcomings of popular insurance, and
a discussion of insurance on the cooperative basis. Contains chapters on cooperative
insurance by agricultural and consumers’ cooperative associations, labor organizations,
and employees’ organizations.
C arr -S a u n d e r s , A. M .; F lo rence , P. S ar g ant ; and P e e r s , R obert .
Consumers’ cooperation in Great Britain. An examination of the British
cooperative movement. London, George Allen & Unwin, Ltd., 1938. 556
pp., maps.

This detailed study covers many points of interest hitherto alm ost entirely neg­
lected— adm inistration of both retail and wholesale associations, general questions
of democratic control, the place of federal associations in the cooperative structure,
working conditions in cooperatives, points of efficiency and of inefficiency of the
cooperative movement, and its future possibilities.
C h il d s , M a r q u is W .
Sweden, the middle way.

New Haven, Yale University Press, 1936.

171 pp.

A description of the Swedish cooperative movement and its accomplishments, in
relation to the whole Swedish economy.
C o n su m e r D ist r ib u t io n C orporation .

Manager’s manual for consumers’ cooperative food stores. New York, 420
Lexington Avenue, 1940. Various paging.
C ooperative L ea g ue of t h e U. S. A.
Cooperative League Yearbook, 1939. New York, 167 W est Twelfth Street,

Compendium of statistical and descriptive material about various types of con­
sumers’ cooperatives.




C ooperative L ea g ue

of t h e U. S. A. Accounting Bureau.
Primer of bookkeeping for cooperatives, by Werner E. Regli.
167 W est Twelfth Street, 1937. 40 pp.

-------B u reau o f C oop era tive M edicine.
A primer of facts about cooperative medicine.
1937. 13 pp.

New York,

New York, 1790 Broadway,

C ooperative U n io n , L td .
British cooperation today.

Manchester (England), 1934.

207 pp., illus.

Summarizes the main events and achievements of the British cooperative move­
ment. Includes short sketches of the framework and activities of the various central
organizations, such as the Cooperative Union, the Cooperative Wholesale Society, Co­
operative Insurance Society, Cooperative Productive Federation, etc.
C o w lin g , E l l is .
Cooperatives in America, their past, present, and future.
ard-McCann, Inc., 1938. 206 pp.

New York, Cow-

Recounts briefly the development of Rochdale cooperatives in England and in
other European countries, and shows how the American movement was built on
the efforts of early farmers’ organizations and on those of immigrants from countries
where cooperatives had thrived. The account of present-day cooperatives in this
country includes a chapter on the struggle in the farmers’ organizations between
the consumer and producer points of view, and one analyzing the factors of strength
and weakness. The latter contains an enlightening account of the overlapping in
the cooperative wholesale movement.
D a n ie l s , J o h n .
Cooperation— An American way.

New York, Covici-Friede, 1938.

399 pp.

Traces the development of the cooperative movement, beginning w ith the mutual
insurance associations formed as early as 1820, continuing with the various Grange
cooperative ventures of the 70’s and 80’s, the developments of the later nineteenth
century, and those of the present time. The presentation of the various types of
associations, local and federated, commercial and educational, as part of a unified
movement, shows how each fits into the picture.
D ig by , M argaret .
Producers and consumers: A study in cooperative relations.
Plunkett Foundation, 1938. 254 pp. (2d revision.)

London, Horace

Critical analysis of the relationships between agricultural and consumers’ co­
operatives, from the time of the formation of the British Cooperative Union in
1869 to the present. Discusses, commodity by commodity, the sources of supply
and the avenues and development of cooperative trade in each.
E a ste r n C ooperative L ea g u e .
How to organize a cooperative.
11 pp., mimeographed.

Brooklyn, N. Y., 135 Kent Avenue, 1939.

Simple instructions and bylaws for the use of cooperative buying clubs, especially
those in the area served by the Eastern Cooperative Wholesale (New England and
Middle Atlantic States).

------- The A B C’s of consumers’ cooperation, with special regard to growth of
movement on eastern seaboard. Brooklyn, N. Y., 135 Kent Avenue. 1939.
5 pp.

F o w ler , B ertram B .

Consumer cooperation in America: Democracy’s way out.
guard Press, 1936. 305 pp.
------- The Lord helps those . . .

New York, Van­

New York, Vanguard Press, 1938.

180 pp.

A stirring description of the ways in which the poverty-stricken fishermen and
other people of Nova Scotia have improved their economic condition through the
organization of credit unions, marketing associations, processing plants, housing
associations, and other cooperative self-help measures.
F r e u n d l ic h , E m m y .
Housewives build a new world.
Guild, 1936. 142 pp.

London, International Cooperative Women’s

An account of the formation, development, and activities of the International
Cooperative Women’s Guild and its affiliates in various countries.



Gide, C harles .
Consumers’ cooperative societies.
Union, Ltd., 1921. 251 pp.




Contents .— The object of a consumers’ cooperative society; The cooperative pro­
gram ; Criticism of econom ists; The history of distributive cooperation; Statistics
and geographical distribution of the cooperative m ovem ent; Various system s of
sa le ; The division of profits; M embers; C apital; Various types of consumers* so­
cieties ; Cooperative federations; The conflict between cooperative societies and trad­
ers ; Causes of success or failure of consumers’ societies; The relations between
cooperative societies and the S ta te ; Production by consumers’ societies; The em­
ployees and workmen in cooperative societies; Cooperation and socialism.

H all , F.
Handbook for members of cooperative committees.
The Cooperative Union Ltd., 1928. 460 pp.

Manchester (England),

H all ,

F., and W a t k in s , W . P.
Cooperation: A survey of the history, principles, and organization of the
cooperative movement in Great Britain and Ireland. Manchester (Eng­
land), The Cooperative Union, Ltd., 1934. 408 pp.

Of special value are the sections dealing w ith comparatively little known phases
of the movement, such as the labor problems, and relations with and treatm ent of
employees, cooperation in relation to social questions, and cooperative education.
H owe , F rederic C.
Denmark, the cooperative way.

New York, Coward-McCann, 1936.

Joh n , Julia E., com p ., and others.
Consumers’ cooperatives. New York, H. W . Wilson Co., 1936.
(The Reference Shelf, vol. II, No. 2.)

277 pp.
297 pp.

Intended for debating purposes, this book contains arguments for and against the
proposition “that the extension of consumers’ cooperation would contribute to the
public welfare.”

K allen , H orace M.
The decline and rise of the consumer: A philosophy of consumer coopera­
tion. New York, D. Appleton-Century Co., Inc., 1936. 484 pp.

Traces the position of consumers under capitalism under “producer” doctrines,
such as those of Robert O w en; and as a pressure group in the producer world.
Shows the gradual emergence of the idea of the “primacy of the consumer” through
the development of consumers’ cooperation. Of particular interest to American
readers are the chapters on the history of the cooperative movement here— among the
farmers and among the industrial workers— and future possibilities.

L ehner , A n t h o n y .
W hat every cooperator ought to know.
Bureau Association, [n. d.]. 32 pp.

Harrisburg, Pennsylvania Farm

Brief, simple discussion of fundamentals of cooperative philosophy, interpreta­
tion of financial statem ent, qualifications of board members, manager, and

M ercer, T. W .
Towards the cooperative commonwealth. Manchester (England), The Co­
operative Press, Ltd., 1936. 221 pp., illus.

Treats of the development of consumers’ cooperation in Great Britain, by periods.
Features of this book are the discussion of the events leading up to the formation
of the Cooperative Party, the encounters between the movement and the organized
private dealers, and legislative measures directed against the movement.

M oore, W illiam H.
Campus co-ops; a guidebook to the formation of college cooperatives.
Louis, Mo., Hilton Printing Co., n. d.
R andall , H arlan , and D aggett, Cla y .
Consumers’ cooperative adventures.
1936. 646 pp., charts, illus.


Whitewater, W is., Whitewater Press,

Intended for classroom use. Gives case histories of selected cooperative asso­



ic h a r d s o n





A B C of cooperatives— a handbook for consumers and producers.
Longmans, Green & Co., 1940. 264 pp.

New York,

A simply written description of how a cooperative association works, and how
a consumers’ cooperative, a producers’ cooperative, and a credit union can be
formed. An appendix gives questions for the use of study groups, and model
bylaws for a Federal credit union, for a consumers’ cooperative buying club, and
a cooperative store.

tew ar t

, M

a x w e l l


Cooperatives in the U. S.— A balance sheet. New York, Public Affairs Com­
mittee, Inc., 1939. 33 pp., charts. (Public Affairs Pamphlet No. 32.)

, Y. J.
The problem of cooperative medicine. New York, Work Projects Adminis­
tration of New York City, 1940. 78 pp. ( Studies of the Cooperative Project,
Series B : Studies in the field of cooperative medicine, Part 1.)

er esh ten k o

First of a series of four publications on the subject of cooperative medicine.
This report presents the views for and against provision of medical care under
the cooperative plan.

, H. J.
The economic advance of British cooperation, 1913 to 1934.
(England), The Cooperative Union, Ltd., 1934. 110 pp.

w ig g


An analysis of the progress of the various branches of the British movement—
retail distribution, wholesale distribution, production, banking, and insurance.

n it e d




A g r ic u ltu r a l A d ju s t m e n t A d m in is tr a tio n .

C o n s u m e r s ’ C o u n s el

(in cooperation with Consumers’ Project, Department of Labor).
Cooperative bookshelf: A bibliography of Government publications on con­
sumers’ cooperation. Washington, 1937. 13 pp.

D iv is io n


D ep a rtm en t o f C om m erce.

B u rea u

o f F o reig n

a nd D o m e s t ic C o m m e r c e .

Consumers’ cooperative societies (basic information sources).
Ruth C. Leslie. Washington, 1939. 19 pp., mimeographed.

Compiled by

Bibliography of material relating to consumers’ cooperation.

------D e p a r t m e n t

o f th e I n t e r io r .

Office o f E d u c a tio n .

College projects for aiding students, by Fred J. Kelly and Ella B. Ratcliffe.
Washington, 1938. 69 pp. ( I t s Bulletin, 1938, No. 9.)
Contains information on student cooperatives.


D ep a rtm en t o f L a lo r .

B u r e a u o f Lal>or S ta tis tic s .

Consumers’ cooperation in the United States, 1936, by Florence E. Parker.
Washington, 1939. 207 pp., illus. ( I t s Bulletin No. 659.)
Results of the Bureau’s statistical survey covering the year 1936. Data cover
retail distributive associations, local service associations, telephone associations,
credit unions, insurance associations, federations (wholesales, service federations,
and noncommercial federations), education and recreation, cooperative associations
as employers, and legal status of cooperatives of certain types.

------------------------- Organization and management of cooperative gasoline and oil
associations (with model bylaws). Washington, 1934. 36 pp. ( I t s Bulletin
No. 606.)
------------------------ Organization and management of cooperative housing associa­
tions (with model bylaw s). Washington, 1934. 35 pp. ( I t s Bulletin No.


C o n s u m e r s ’ P r o je c t.

Consumers’ cooperative statutes and decisions to January 1, 1937.
ton, 1937. 219 pp.


Full text of the various State laws on consumers’ cooperatives, together with
summaries of decisions of courts on various provisions.



n it e d


ate s

F a r m C r e d it A d m in is tr a tio n .


Refrigerated food lockers— A new cooperative service, by L. B. Mann.
Washington, 1938. 30 pp., illus. ( I t s Circular No. C -107.)
Contains a short account of the development of the cooperative provision of coldstorage locker plants for storing meat and other perishable foods; also information
as to the formation of an association for this purpose— plant lay-out, financial re­
quirements, cost of service, and advantages and disadvantages to locker users.

---------------Managing farmers’ cooperatives, by Kelsey Gardner.
1939. 12 pp. ( I t s Circular E -21.)


Written for farmers’ organizations, but equally applicable to urban consumers’

--------------- Sizing up your cooperative, by J. E. Wells, Jr.
13 pp. ( I t s Circular E -18.)

Washington, 1939.

Gives 9 factors to be taken into consideration in “sizing up” a farmers’ cooper­
ative. These are equally applicable to consumers’ cooperatives.

----------------Suggestions for educational commodities of Federal credit unions.
Washington, 1989. 16 pp., charts. ( I t s Circular No. 23.)
Valuable for credit unions organized under State laws as well as for Federal
credit unions. Contains a bibliography on credit unions and consumer credit.


I n q u ir y on C o o p e r a tiv e E n t e r p r i s e in E u r o p e .

Report, 1937.

Washington, 1937.

321 pp.

The report of the commission appointed by the President (the so-called Baker com­
mission) to study and report on the various phases of the cooperative movement in
Europe. The report is divided into three parts, dealing, respectively, with methods
and relationships of cooperative enterprise, the meaning of cooperative enterprise to
America, and examples of cooperation at close range. Appendixes give statistical
data on the growth of the movement in the 9 countries visited, information on co­
operative housing and on rural electric cooperatives, cooperative testing of goods for
quality, collective bargaining between consumers’ cooperatives and their employees,
the agricultural and consumer cooperative agreement in effect in Czechoslovakia, and
a cooperative view of credit trading.

t a h






d m in is t r a t io n


Cooperative accounting manual, by Fay E. Hall.
pp., form s; mimeographed.

Salt Lake City, 1938.


Excellent presentation, in simple terms, of problems of bookkeeping adapted to
use of cooperative associations. Shows, step by step, how to set up the books and
make the necessary entries and reports, beginning with the first payments on shares,
the renting of the building, the purchase of supplies, etc. A supply of sample forms
is included, so that the reader may follow the exposition, performing all the opera­
tions himself.

------- Handbook: Consumer cooperation.

Salt Lake City, 1939.

Various paging;

Contains 6 “lessons” in consumers’ cooperation dealing, respectively, with the growing
importance of the consumer ; our economic system— three ways to improve i t ; Rochdale
principles; consumers’ cooperation today; general cooperative problems; and business
control of the cooperative association through scientific acounting. At the end of each
lesson, questions are posed on the subject matter of the lesson.

-------Handbook: Cooperative health association.
charts; mimeographed.

Salt Lake City, 1939.

53 pp.,

Intended as reference material for cooperative leaders, study-group organizers, and
WPA teachers, this reports contains general sections on health conditions in America,
medical economics (with special reference to Utah conditions), and preventive medicine,
as well as an exposition of cooperative principles, a description of various types of group
medical plans (doctor-owned clinics, hospital-sponsored plans, Government medical plan,
typical cooperative plans, etc., the last-mentioned including several Utah associations),
and a chapter on problems of cooperative health associations. An appendix gives typical
bylaws of a cooperative health association, sample contracts with a physician and with
a hospital, and a membership application.



W arbasse , Dr. J a m e s P.

Cooperative democracy through voluntary association of the people as con­
sumers. New York, Harper & Bros., 1936. 285 pp. (3d ed.)
“A discussion of the cooperative movement, its philosophy, methods, accomplish­
ments, and possibilities, and its relation to the State, to science, art, and commerce,
and to other systems of economic organization,” by the president of the Cooperative
League of the U. S. A.

------- Cooperative medicine: The cooperative organization of health protection.
New York, Cooperative League, 167 W est Twelfth Street, 1936. 24 pp., illus.
-------W hat is consumer cooperation? New York, The Cooperative League, 1936.
32 pp.
A concise statement of consumers’ cooperative principles and practices.

------- Problems of cooperation: A study of the deficiencies of the cooperative
method of economic organization, and the difficulties in the way of its expansion.
New York. The Cooperative League, 1940. 100 pp.
------- Cooperative education: A discussion of educational methods for cooperative
New York.
The Cooperative League, 1938.
20 pp.
(3d ed.)

, A. W .
Cooperative buying clubs— Their advantages and their weaknesses, with some
suggestions and advice. Chicago, Central States Cooperative League, 2301
S. Millard Avenue, 1985. 8 p p .; mimeographed.

a r in n e r

A & B C ooperative O il A sso ciation ___
Accoun tin g practice_____________________3 9 ,1 0 1
Accoun tin g B ureau
League________________________________ 40, 49, 51
Accoun ts,
m em bers_________________________________
Alanne, V . S ______________________________
A m endm ents to constitution and by­
law s___________________ 58, 72, 74, 75, 79, 88
Am erican Academ y o f P olitical and
Social Science__________________________
Appearance o f business prem ises______ 33, 40
A ssociated Cooperatives o f N orthern
C aliforn ia------------------------------------------------- 51, 53
A ssociated Cooperatives o f Southern
C aliforn ia_________________________________ 5 1 ,5 3
A ssociation of M edical C ooperatives—
Audits and au ditin g practice---------------40,
46, 50, 52, 53, 70, 71, 79, 93
Au dits.
{S e e
a lso
C om m ittee
a u d itin g .)

B akery, capital requirem ents fo r -------28
B arou, N ___________________________________
B elgian plan o f use o f net savings o f
B onding o f em ployees handling m o n e y .
17, 37, 38, 71, 79, 93
Bonds, issuance of, by cooperatives-----Bookkeeping, considerations regardin g ____ 10, 11, 39, 49, 50, 8 0 - 8 3 , 93, 98, 101
Bow en, E . R ----------------------------------------------80
B uild in g, purchase of, hy a sso c ia tio n .
B ureau o f Cooperative M ed icin e . 12, 49, 51, 98
B u rial service--------------------------- 4, 12, 53, 7 3 - 7 6
B usiness m anagem ent com m ittee---------57, 58, 72
B usiness prem ises, location o f, consid­
erations governing-------------------------------32
B usiness, probable volum e of___________
3, 54
Business to be undertaken, considera­
tions governing------------------------------------ 3 - 5 , 12
B usiness to be undertaken, kinds o f__
3 -5 ,
12, 59
B u yin g clubs___________ 6—12, 28, 5 6 - 5 8 , 9 8 ,1 0 0
B yla w s, am endm ents t o . 58, 72, 74, 75, 79, 88
B y la w s for association s-------- 50, 5 6 - 5 8 , 5 9 -7 2 ,
7 4 - 7 6 , 7 7 - 7 9 , 88 , 8 9 ,1 0 0 , 101
C - A - P C ooperative O il A sso ciation -----53
C apital, accum ulation o f association ’s .
18, 21, 27

Capital, liens on member’s share, by
association__________________________ 64, 91
Capital, loan__________________________
22, 36, 43, 57, 64, 65
Capital required from individual mem­
ber____ 7, 13, 19, 21, 22, 56, 60, 62, 73, 91
Capital requirements of cooperatives— 27, 28
Capital, returns on____________________
22, 57, 60, 65, 90, 92
Capital, share--------------------------- 16, 20, 60. 81
Capital, share or membership, repur­
chase of members’___________________
22, 43, 56, 61-64, 74, 91
Capital, share, withdrawal of------------ 22, 91
Capital-stock associations------------------60
Carr-Saunders, A. M_____________________
Cash basis for business, necessity
for_______________ __________ 7, 9, 16, 32, 35
Central Cooperative Wholesale (Wis­
consin)------------------------------------ 29,
40, 47,53
Central States Auditing Service (Illi­
Central States Cooperatives (Illinois). 51, 52
Certificates, share-capital_________ 61, 62, 91
Childs, Marquis W ____________________
Cold-storage (locker) associations____
College cooperatives_________________ 99,100
Committee, auditing___________________
44, 46, 57, 71, 72, 93
Committee, educational----------------------8,
14, 15, 44, 45, 57, 6 6 , 72, 101, 102
Committee, executive--------------------- 25, 46, 47
Committee for interesting women in
work of cooperative_________ -_______ 45, 46
Committee, library____________________
Committee, membership------------ 14, 15, 45, 67
Committee on business management—
57, 58, 72
Committee on complaints------------------44
Committee on election------------------------72
Committee on grades and quality of
goods______________________8,14, 15, 44, 46
Committee on inventory______________
Committees, cooperative, handbook for.
Constitution and bylaws, what they
should cover____________________ 7, 15-18,
56-58, 59-72, 74-76, 77-79, 87, 88
Consumer Distribution Corporation
(New York)________________________
Consumers’ Cooperative
(Missouri)______________________ 40, 47, 52
Consumers’ Co-operatives
(T exas)------------------------------------------52
Consumers’ Counsel Division, Agricul­
tural Adjustment Administration__50, 100




Consumers’ Guide_____________________
Eastern Cooperative League (New
Consumers’ Project of U. S. Depart­
York)------------------------------------------- 1 1,51,98
ment of Labor_____________________ 50,100
Contracts for discounts on purchases4 , 1 1 Eastern Cooperative Wholesale, Inc.
(New York)-------------------------- 28, 47, 52, 98
Contracts for medical care___________
Educational committees___________
Cooperative League of the U. S. A ____
14,15, 44, 45, 57,6 6 , 72,101,102
5, 8 , 13, 27, 47, 49, 51, 97, 98
Cooperative Service Co. (Iowa)______
52 Educational fund____ 42, 57, 65, 6 6 , 75, 92, 93
Educational work, preliminary---------- 1 , 2 ,13
Cooperative Services, Inc. (Maple,
W is.)________________________________
53 Education of members andpublic_ 47—50,
52, 53,102
Cooperative Union, Inc. (Chicago,
Election committee______________
1 1 1 .) ________________________________________________
Cooperative Union (Great Britain)—
98 Election methods_______________ 23, 67, 70, 78
Electricity cooperatives, sources of in­
Corporation law, how to incorporate
formation regarding___________
a cooperative under______________ 17,18, 62
Employees of cooperatives_________ 33, 34, 39
Cost-plus basis, disadvantages of--36, 37
Cowling, Ellis_________________________
98 Employees, retirement of________
Employees, training of____________ 13, 39, 47
Credit, extension of, to directors, pro­
hibited_____________________________ 24,
70 Employees, working conditions of co­
operative__________ 23, 34, 35, 46, 71, 97, 99
Credit, question of extension of, to
members---------------------------------- 9, 32, 35, 36 Equipment, considerations governing
purchase of------------------------------32
Credit Union National Association_3 ,12, 49
Established business, considerations in
Credit unions, capital requirements
purchasing an---------------------------------32
Expulsion, member’s rights in case of
Credit unions, functions in relation to
cooperative-store operation-.______ 9, 36
Credit unions, sources of information
regarding-------- .-------------------------------12, 49, 50, 98, 100, 101
Credit, use of, by cooperative associa­
tions_____________________________ 29, 31, 36

Farm Bureau Cooperative Association,
Inc. (Ohio)___________________________ 40,52
Farm Bureau Services, Inc. (Michi­
Farm Credit Administration---------------3,
32, 49, 50,101
Farmer groups, advisability of direct
relations with___________________10, 45, 98
Farmers’ Union Central Exchange,
Inc. (Minnesota)_____________________ 40,52
Farmers’ Union Cooperative Oil Asso­
ciation of Nebraska------------------------Farmers’ Union State Exchange (Ne­
braska)---------------------------------------------40, 52
Federal Securities Exchange Act, ap­
plication to cooperatives___________ 2 1 , 62
Fees___ 7, 15, 56, 60, 62, 65, 73, 74, 77, 78, 88
Films, cooperative____________________ 27, 49
Financial reports----------------------- 80-83, 93, 94
Financing, problems of_______________
Fixed charges, in relationto sales____
Fowler, Bertram______________________
Fox River Valley Cooperative Whole­
sale _________________________________
Freundlich, Emmy____________________
Funeral director, duties of___________
Funeral service. (See Burial.)

Daggett, Clay_________________________
Daniels, John_________________________
Debts of members, to association-------- 43, 64
Deferred-dividend plans---------- 20, 43, 66 , 93
Deficits, how to treat, in bookkeep­
ing__________________________ 42, 63, 65, 66
Delegate representation, in large co­
operatives________________ 61, 69, 79, 89, 90
Delivery cost, in relation to sales------ 32, 37
Delivery of goods to members_____ 10, 32, 37
Deposits, advance, by members to cover
Depreciation of goods, fixtures, and
plant__________________________ 1 6,4 0 ,4 1 ,8 1
Design Service of Cooperative League49
Digby, Margaret______________________
Directors, election of---------------------23, 74
Directors, extension of credit to, pro­
hibited___________________________ 24,70
Directors, number of_______ 23, 69, 74, 78, 90
Directors or officers, removal of___ 69, 70, 90
Directors, powers and duties of________
46, 61, 63-65, 67, 70, 75, 77, 79, 97
Directors, qualifications of________ 23, 24
Directors, remuneration of------------ 23, 78
Directors, terms of-------- 23, 69, 70, 74, 78, 90 Gasoline filling stations_______________
3, 50
Discounts, cash, advantages of___ 30, 31
General store, capital requirements___
Disfranchisement of members------ 68 , 69
29, 31
Dissolution, procedure in case of__ 58, 72, 94 Gide, Charles____________________________
District of Columbia Cooperative Law_
15, Goods handled, considerations govern­
17, 59, 62, 84, 86-96
Dues, members’, in medical-care asso­
Grange C o o p e r a t i v e Association
ciations--------------------------------------- 77, 78


Grange Cooperative Wholesale (Wash­
Grocery store, capital requirements
of________________________________ 29, 30, 31
Hall, F________________________________
Health associations. (See Medical
Hiring and firing in the cooperative- 24, 34, 46
H-O-B Cooperative Oil Association_
Housing associations, capital require­
ments _______________________________
Housing associations, information on
organization of__________________ 4, 50, 98
Howe, Frederic C-------------------------------99
Illinois Farm Supply Co--------------------52
Indiana Farm Bureau Cooperative As­
sociation, Inc_______________________
Incorporation___________ 15, 17, 18, 59, 73, 74
Inheritors of deceased members_______
Initiation or application f e e ., ________
56, 60, 62, 65, 77, 78
Inventory---------------------------------- 40, 46, 80, 81
Investments of cooperatives__________
Iron Cooperative Oil Association_____
John, Julia E ___
Kallen, Horace M




Laws, cooperative _
. _ 15-17, 84, 85
L a w s , cooperative, compilation of
Legal considerations___ 15,17, 18, 22, 23, 25,
26, 35, 42-44, 59-62, 65, 67-69, 100
Lehner, Anthony_____________________
Liability of members of cooperatives__
17, 56, 91
Loan capital-------------- 2 1 , 2 2 , 36, 43, 57, 64, 65
Location of business premises, consid­
erations governing_________________
Mail-order service____________________ 4, 52
Mail, voting by------------------------- 69, 78, 89, 90
Manager, qualifications, duties________
34, 55, 57, 70
Managers, manual for------------------------97
Margin, gross, desirable rate of_______ 30, 31
Medical care, contracts for___________
Medical-care cooperatives_____________
50, 77-79, 9 7,9 8 ,1 0 0 -1 0 2
Meetings, membership------------------------25,
26, 27, 56, 67, 74, 75, 78, 89
Meetings, notice of-------------- 26, 58, 68 , 78, 89
Meetings, special---------- 26, 57, 67, 68 , 75, 78
Members as patrons, necessity of in­
suring continuance of______________
Members, deceased, inheritors of_____
Members, expulsion of____ 56, 62-64, 77, 92
Members, facts to be required about__
256781°— 41------ 8

Members, liability of_____________7,17, 56, 91
Members, number necessary--------------Members, organizations as, of coopera­
tive associations____________________
Members, rejection of application,
valid reasons for___________________
Members’ rights in case of action for
expulsion____________________________ 64, 92
Membership certificates________ 62, 73, 76, 91
Membership committee________ 14, 15, 45, 67
Membership, duties of________________
Membership, eligibility for______________
16, 19, 56, 60, 77, 90, 91
Membership fees________________ 7, 73, 74, 77
Membership, powers of__ 26, 43, 61, 62, 67, 68
Membership, withdrawal from or ter­
mination of__________________ 56, 62, 77, 91
Mercer, T. W __________________________
Merchandise, assured quality of______ 38, 39
Merger with another association_____
Midland Cooperative Wholesale (Min­
nesota)---------------------------------------------48, 52
Minnesota Cooperative A u d i t i n g
Minnesota Department of Education__
Minnesota Farm Bureau Service Co___
Moore, William H-------------------------------99
Name of association_______________ 18,19, 59
Nepotism, avoidance of_________________
Neutrality of cooperatives, political__16, 26
Nonmembers, how to treat___________ 19, 61
Nonmembers, patronage refunds to__
43, 44, 6 6 , 92, 93
Nonprofit associations___________________
Nonprofit law, possibility of incorpo­
rating under_________________________ 1 7 , 18
Nonstock corporations_________________ 17, 60
North Dakota Division of Coopera­
tives -----------------------------------------------Northland Cooperative Federation,
Northwest Cooperative Auditing and
Service Association________________

Officers and directors, terms of______
23, 70, 74, 79, 90
Officers, duties---------------- 25, 5 7 , 71, 72, 7 9 , 90
Officers, how selected__________ 25, 57, 70, 79
Operating expenses------------------- 30, 31, 82, 83
Order of business at membership
meetings------------------------------------------- 26, 67
Oregon Grange Wholesale, Inc________
Organization expenses, how covered- 7,13, 9 5
Organizers, desirable qualifications of_
Other cooperatives, relations with____
11, 44, 71

Pacific Supply Cooperative (Washing­
t o n ) ------------------------------------------------------------


Patronage, records o f m em bers’ ________


Patronage returns____________________
16, 19, 41-43, 57, 6 6 , 75, 92



Pennsylvania Farm Bureau Coopera­
Students’ cooperatives_______________ 99,100
tive Association-----------------------------52 Study groups, advantages of_____ 1 , 2,12, 48
Political neutrality of cooperatives-----16, 26
Supplies, sources of, of cooperatives__
Powers of association_______ 60, 61, 73, 8 6 , 87
10, 38, 51-53
Preferred stock, use of. in cooperatives- 22, 62 Surpluses and surplus reserves____ 63, 65, 75
President, duties o f --------------------- 25, 57, 71 Surpluses, disposal of, in case of dis­
Price County Cooperative Oil Associa­
solution of association______________58, 72
tion-------------------------------------------------53 Surveys, preliminary, reasons for and
Price policy of cooperatives___________
advantages of______________________
17, 34, 36, 6 6 , 75 Surveys, what theyshould reveal- 2 , 3, 54, 55
Proxy voting________ 16, 17, 56, 69, 74, 78, 89
Publication of store bulletin, news let­
ter, or other periodical, value of- 46, 47, 68 Taxation, under District of Columbia
Publicity, use of, by cooperatives_____
law -------------------------------------------------96
48, 49, 71 Tereshtenko, V. J_____________________
Training courses for organizers, mem­
bers, and employees_____________13, 47, 48
Quality of goods-------- 8 , 14,15,17, 38, 39, 46
Treasurer, duties of_______________ 25, 57, 71
Quorum at meetings________ 26, 56, 67, 78, 89
Trico Co-operative Oil Association____
Twigg, II. J----------------------------------------100
Randall, Harlan---------------------------------99
Range Cooperative Federation________
Records of members’purchases_________ 1 1 , 41 United Cooperative Farmers, Inc.
(Massachusetts) ____________________
Referendum vote---------------------------------- 69, 90
United Cooperatives, Inc. (Indiana)__’
Regli, Werner E---------------------------------- 8 , 40
United States Bureau of Foreign and
Rent, in relation to sales_______________ 31, 32
Domestic Commerce________________
Reports, to membership, on status of
United States Bureau of Labor Sta­
association___________ 67, 71, 80-83, 93, 94
tistics----------------------------------3, 4, 12, 50, 100
Research and Information Service of
United States Office of Education____
Cooperative League------------------------51
Utah Cooperative Association_______
41, 42, 57, 58, 65, 6 6 , 75, 80, 81, 92 Utah Works Progress Administration- 50, 10 1
Richardson, Gerald-----------------------------10 0
Rochdale Institute-------------------------13, 49, 51
16, Vacancies, filling of, on board of di­
Rochdale principles and practices____
rectors---------------------------- 70, 74, 78, 79, 90
17, 42, 43, 66
Rotating-capital plan--------------- 20, 43, 6 6 , 93 Vice president, duties of______________25, 71
Rural Electrification Administration50 Voting practice___________________ 16-18, 27
56, 61, 68 , 69, 72, 74, 78, 89, 90


Sales per employee____________________
Savings, division of net________________
1 1 , Wages in cooperatives. {See Working
16, 41, 57, 65, 80, 92, 99
Secretary, duties of__ 25, 57, 61, 63, 71, 75, 76 Wages in relation to sales_____________
Warbasse, James Peter_______________ 1 , 10 2
Self-help cooperatives, sources of in­
formation regarding_______________
50 Warinner, A. W _____________________ 1 1 , 102
Watkins, W. P_______________________
Shares, purchase of, bynonmembers_
Shares, transfer of___________________ 63, 91 Wholesale cooperatives_______________
Shares. (See also under Capital.)
10, 38, 40, 51-53, 98
Social activities, value of_________ 27, 45, 48 Wholesale services, possibilities of ob­
taining, should be considered before
Social uses of cooperative earnings. 44, 6 6 , 72
starting store______________________
Southeastern Cooperative Education
Association------------------------------------------51Wisconsin Superintendent of Public
Stewart, Maxwell_____________________
Stock turn-over, how to compute____
28 Women’s guilds and other special ac­
tivities for women_______ 45, 46, 48, 49, 98
Stock turn-over, in relation to kind of
business--------------------------------------- 28, 29, 31 Working conditions of cooperative em­
ployees------------------- 24, 34, 35, 46, 71, 97, 99
Store lay-out----------------------------- 33, 34, 52, 5 3
Stores, lines to be carried by_______4, 27, 28
Stores, points to be considered before
starting--------------------------------------4, 5, 13, 14
Young people, measures to interest- 45, 48, 49