How Returns Demonstrate Respect to Owners


As cooperatives, we have a responsibility to provide patronage dividends to our owners. But when does a company decide to provide returns to owners?

While it may seem logical that discussions about returns begin around fiscal year-end, in actuality, a well-run company begins discussions during the fiscal year-end of the preceding year.

Plan ahead for best results

In order to guarantee returns to owners, a responsible cooperative company will include dividend distributions in next year’s budget. By including distributions in the budget, management is now responsible for results inclusive of dividends. Dividends are a budget line item for the current year but were discussed and approved at the conclusion of the last fiscal year.

Discussions of the returns to owners are typically organized into three main categories. First is the amount that is re-invested into the company. Is the re-investment amount sufficient to develop and deploy the products and services that our owners need? In addition to providing the products, another consideration is whether these products and services are priced appropriately.

Second is the amount put into retained earnings. Are retained earnings sufficient to increase the value per share at an acceptable pace while also respecting the newest investors who have an interest in recouping the premium paid for their shares?

Finally, the actual cash distributions are discussed to ensure long-term owners looking for current-year returns are rewarded. These discussions are critical to our success and the Board of Directors takes the decisions around the returns to owners very seriously.

An example of success

How has this played out in practice? A corporate goal of the cooperative CUSO CU*Answers is to increase value per share by roughly 10% annually and we have been very close to that goal each year. CU*Answers budgets patronage dividends every year and I am happy to report that we have not only achieved the budgeted amount but have also added bonus patronage dividends every year. We have also increased the amount re-invested in the business annually as well.

The success of any company in providing returns to owners begins with its board. A board should state a clear intent in each category of returns. Once the board’s intent is made clear, executive management can take that direction and build it into the annual business plans of the company.

Don’t hope for it, work for it

When financial returns to owners are desired, these funds should both be budgeted for and progress reported on as part of the monthly financial review. When re-investment is a goal, this item should be called out in the annual budget and business plan. Finally, when value per share growth is a goal, this objective should be included in the budget presentation as well.

The bottom line is that returns to ownership should not be something any company merely hopes for at the conclusion of the fiscal year. Instead, returns need to be planned for before the fiscal year even begins.

Progress towards these goals should be tracked during the year and adjustments made as necessary. There should be regular reporting on the progress to the Board of Directors and owners. This is the best way to guarantee results to the owners. CU*Answers can attest to the success of this process for our CUSO.


  • Bob Frizzle

    CFO, CU*Answers. Formerly Chief Financial Officer of a credit union in Virginia, Mr. Frizzle has been involved in the credit union industry since 1988. Mr. Frizzle has served as CU*Answers CFO since joining the 100% credit union-owned cooperative Credit Union Service Organization (CUSO) in 1997. Mr. Frizzle also provides accounting and CFO services to numerous national organizations and CUSOs. These include Xtend, Inc., eDOC Innovations, NACUSO, CU Student Choice, CU*NorthWest, and Chatter Yak. He is an active board member for eDOC Innovations.

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