Organization and Management of Consumers’ Cooperatives Bulletin No. 1024 UNITED STATES DEPARTMENT OF LABOR Maurice J. Tobin, Secretary BUREAU OF LABOR STATISTICS Ewan Clague, Commissioner Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Organization and Management of Consumers’ Cooperatives Bulletin No. 1024 UNITED STATES DEPARTMENT OF LABOR Maurice J. Tobin, Secretary BUREAU OF LABOR STATISTICS Ewan Clague, Commissioner For sale by the SuperintendentWashington of 25, Documents, D. CJ —Price U. S. 30 Government cents Printing Office, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Letter of Transmittal United States D epartment of Labor, Bureau of Labor Statistics, Washington, D. C., June 1, 1951. The Secretary of Labor: I have the honor to transmit herewith the revision of a report in­ tended for the use of groups wishing to organize cooperative buying clubs or consumers’ cooperative associations on the Rochdale plan. Both the original and the revision were prepared by Florence E. Parker of the Bureau’s Office of Labor Economics. Ewan Clague, Commissioner. Hon. Maurice J. Tobin, Secretary of Labor. ii Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis PREFACE The present bulletin is a revision of two previous bulletins (Nos. 598 and 665), the first of which was issued in 1934 at the request of the Con­ sumers' 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 cooperative 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 Consumers' Advisory Board as consumers and to the Bureau of Labor Statistics as wage earners led to discussions be­ tween 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 sub­ jects connected with labor, in the most general and comprehensive sense of that word/' had for many years been collecting data regarding the consumers' cooperative movement. This information covered, among other things, statistics of membership and business, methods of opera­ tion, and causes of success or failure. The Bureau's studies had shown that one of the most prolific causes of failure of cooperative associations resulting in the loss of wage earners' money, as well as in loss to the creditors of bankrupt coopera­ tives—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 authoritative basis were forth­ coming. To provide that information Bulletin No. 598 was issued. In the preparation of it, the Bureau drewr not only upon its own fund of in­ formation but also upon the practical experience of the Cooperative League of the U. S. A. and its member associations. TIT Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis IV PREFACE The continuous demand for the report has demonstrated both the need and the desire for information of this kind. The important changes in conditions and in cooperative techniques that have taken place in the past few years have rendered misleading and obsolete many of the sections in the two reports. It has therefore seemed desirable to issue a revision that will deal with present conditions in a realistic way. As was the case in the previous revision, the Bureau has had the benefit of suggestions and criticisms of many 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 suggestions received. Ewan Clague, Commissioner of Labor Statistics. June 1951. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Contents Page Preface.................................................. -.......................... ............................................ h i Introduction.------ ---------------------------------------------------------- 1 Preliminary survey---------------------------------------------- 2 Nature and needs of the group_______________________________ 2 Survey of local conditions_______ _____________________________ 2 Considerations in the selection of the cooperative enterprise______ 3 Part 1.—Consumers1 cooperative associations____________________________ 6 Preliminary organization work. _________________________ 6 First organization meeting___________________________________________ 7 Charter and bylaws---------------------------------------------- 8 Rochdale principles._____ ________ __________________ i ----------- 9 Rochdale practices____________________________ 9 Articles of incorporation_________________________________________ 10 Bylaws_____________________________________ 11 Membership ----------------------------------------------- 12 Capital____________________________________________________________ 13 Share capital---------------------------------------------------------------------------- 13 Loan capital___________________________________________________ 14 Amount of holdings in capital__________________i_______________ 14 Withdrawal of capital______________________________________ 14 Return on share capital_________________________________________ 15 Directors__________________________________________________________ 15 Officers___________________________________________________________ 17 Membership meetings--------------------------------------------------------------------- 18 Voting power and method of voting___________________________________ 19 Questions relating to initial financing and beginning of operations_________ 20 Capital requirements for a store association____________________ 20 Capital and initial equipment for a petroleum association____________ 23 Operating expenses of a store association__________________________ 25 Business location and premises___________________________________ 20 Employees of the cooperative________________________________________ 27 Store manager_________________________________________ 27 Other employees_________________________________ 28 Wages_____ ____________________________________ 29 Business methods and policies..................................................._...................... 29 Cash or credit?...... ............................................................ 29 Price policy............................................................... 30 Delivery service.................................................................. 31 Fidelity bonds or security guaranties............................................................. 32 Buying of merchandise and sources of supply............................................. 32 Meeting competition............................................................................. 32 Accounting practices--------- --------------------------------------- 33 Bookkeeping........................................................................ 33 Audit.................................................................................. 34 Inventory and depreciation.................................................................. 34 Record of patronage.............................................................. 35 v Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis VI CONTENTS Page Net savings and their disposal............................................................................ 35 General surplus reserve---- - r w -_ i _________________________ 35 Educational funds----- ------------------------------------------------------------ 36 Savings returns or refunds op purchases____________________ ____ 36 Other uses for net savings_____________________________________ 38 Committees___________________________________________________ __ 38 Committee on education_________ ____ ____________ ___________ 38 Committee on grades and quality of goods._ _ ____________________ 40 Committee on audit and inventory_____ ._________ _____________ 40 Business management committee_______________________________ 40 Educational work_________________________________________________ 40 Part 2.—Consumers’ cooperative buying clubs___________________________ 43 Object and scope______ _•_________________________________________ 43 Organization_____________________________________________________ 43 Officers and committees______________________ ____________ ______. _ 44 Goods handled___________________________________________________ 45 Sources of supply_________________________________________________