CO-OPERATION PRINCIPLES

Waipa Post, Volume 32, Issue 1784, 20 July 1926, Page 6

CO-OPERATION PRINCIPLES

NO DIVIDEND ON SHARE CAPITAL. THE POSITION EXPLAINED. One of the chief objections, and one that recurs 'velry frequently among farmers in connection with the farm ers' co-operative syjstem of dealing with their fat stock, has been that the company will not pay any dividend on capital invested. The agricultural editor of the Otago, Witness, dealing with the subject recently, says the objection disappears in the face of a little logical reasoning. It must first be realised that there is a vast difference between a co-operative concern, on the one hand, organised for service and aiming at getting the best prices for its produce in the world markets, and) on the other hand, a private manufacturing concern organised with the object of returning the highest possible return or dividend, on its share capital. It is a fact that a strictly co-operative concern makes absolutely no profit at all. It simply makes an advance payment to suppliers from month to month, or at any interval agreed upon, and any surplus that may he in hand at the end of the year is disposed of by means of a final payment to suppliers. Killing, freezing, and marketing costs would be taken • off the surplus, and every other penny distributed among the suppliers. What would happen if a dividend were paid on share capital in a truly co-operative concern such ais this meat company will be? Take the paid-up capital of the company at £250,000, for, example. Perhaps it may be decided to pay a dividend of 6 per cent. That would mean that £15,000 per annum would 1 be absorbed. Where would that amount come from? Obviously it would have to be taken from the annual surpluls at the close of the year. It would simply mean that in getting a 6 per cent dividend the supplier was decreasing his final payment from the annual surplus. It can" therefore be seen that from the suppliers' point there is no loss occasioned by the company not payingdividends on share capital. The shareholder does not suffer to the extent of one penny piece.

Another point that is worth mentioning here is that dividends on share capital are liable to a heavy income tax, and if the company decided that £15,000 should be paid out in dividends it would! later have to earmark another considerable sum for income tax to the extent of about 7s 6d in the £.

The principled of co-operation are most clearly- established by refusing to pay dividends on share capital, but instead handing all surplus to the sup-plier-shareholders by way of final payment.

The only man who has a grievance on the score of no dividends is the dry shareh lder, because he gets nothing at all. Thils grievance, however, is discounted by the fact that his shares are generally easily sold. If the matter is looked at from this angle, and) if the shareholder realises the meaning and advantages of truly co-operative principles, this objection, which appears (to be a stumblingblock to many, should quickly disappear.