MADISON — Assembly Bill 353 and its companion, Senate Bill 281, seek to make several changes to current cooperative law, including the following controversial changes:
- Allow boards to have two (or 20 percent) non-member “outside advisors” to be appointed with full voting rights
- Permit cooperative holding companies like Cooperative Resources International (CRI) to base members’ voting power on patronage rather than the longstanding one-member, one-vote principle
- End the 8 percent cap on dividends that cooperatives can pay their stockholders
The bill may even (depending on the intent behind some of the language) prevent members from seeing any records of the cooperative – which they own – since the bill struck out “books and records” in a few areas and added “financial” to indicate that the new provision would limit members’ requests to seeing only financial records for the previous few years. During a hearing held last week at the Capitol, some proponents of the bill argued that it’s not reasonable to expect cooperatives to maintain such records as they become larger and larger entities. Aside from the fact that we live in an age where such information is more easily maintained in electronic formats, it was curious to see that some in the room felt like having more labor, money, and resources might make it more difficult to maintain records when it seems intuitive that it would be easier.
It’s important to note that there are changes in this bill that had unanimous or near unanimous support of everyone present, chiefly those dealing with electric cooperatives. Supporters of the bill continually invoked language like “modernizing” and “updating” when speaking to the need for the whole bill. The provisions on electric cooperatives are arguably the only changes that could easily fit those adjectives. Using those kinds of terms elsewhere to describe the bill as a whole is only intended to try and make current law seem antiquated and changes to state statute seem like a logical, needed set of changes simply because time has passed and cooperatives have increased in size. No one mentioned that current law has facilitated cooperative growth to the point that some are Fortune 100 businesses.
Indeed, packaging the deal the way they did was a clever ploy that counted on people not reading the details. Electric cooperatives should be upset that they were used as a spoonful of sugar to help the other provisions in the bill go down. Rather than let electric cooperatives be used this way, the legislature should pass these bills with the provisions for electric cooperatives in place and strike the rest of the provisions until there are better arguments for making the changes they propose. The ideas presented by Cooperative Network deserve a deeper conversation in their own right, and they should pass or fail on the merits and not because they’ve been joined at the hip with a reasonable title and a bunch of buzz words.
What was apparent during the testimonies in support of the bill was that none of the bill’s advocates came to the hearing with tales of a membership clamoring for any of the controversial proposed changes. In fact, there were members of supporting organizations cited in opposing testimony because they had no idea their organization favored the changes or that these bills even existed. There are, presumably, others who don’t know what’s happening who should inquire with their boards as to why more members aren’t aware of this bill. It’s one thing to lose a vote of the membership on an issue and be upset with the direction of your cooperative, but for members to have no idea whatsoever about a bill like this one begs a lot more questions.
It’s clear that some in the room that day felt as if they have the power to play in this case and the rest of us were mere interlopers; inconvenient citizens who they’d rather disinvite from the process if they could. Bob Topel of Foremost Farms USA began the show of annoyance by joking about how long it had taken to get through the testimonies of the unpaid citizen-lobbyists who volunteered to testify. Wisconsin voters should be thankful and proud that the Chairman of the Committee on Financial Institutions — Rep. Terry Katsma (R-Oostburg) — gave everyone present their time to speak. He could’ve limited our testimonies and not allowed the first of three bills that day to take four hours to get through. Our state needs more citizens and representatives who take participating in the democratic process as seriously as Chairman Katsma did that day.
For his part, Mr. Topel gave a compelling testimony as he explained how outside advisors help boards be more thoughtful about complex issues. He and several others brought up that boards are able to bring in experts to speak, and doing so is a very standard operating procedure. What was astonishing was that he described how Foremost’s board had already created two positions for outside advisors, and that change had revolutionized its operation. It was good to hear that Foremost’s board got the help it so desperately needed, but I think it was lost on Mr. Topel that his arguments were not in favor of the bill he came to support with the will of Foremost’s board. Indeed, all of the arguments he forwarded made it clear that Foremost had already gained what they wanted from outside advisors and that had been done under the current law.
So why would Foremost want to support the changes in the bill? Based on the comments from Mr. Topel and Cooperative Network, the hang-up was that outside advisors do not have to stand behind their advice the same way they would if they were voting members of the board, which is a strange thing to say. Aside from Foremost’s extremely positive experience with its outside advisors, there must be a plague of non-member, non-voting outside advisors who are offering poor advice, not standing by their expertise, and frivolously putting cooperatives and their boards at risk. At least, one would think so with the way that the advocates of this bill explained why modifying state statute to include non-member, voting board directors was necessary. Cooperative members would be wise, given these arguments, to investigate what decisions their boards have been making with bad information taken in good faith. Lastly, I made this point in my testimony, but under current cooperative law, cooperatives have the ability to determine who their members are and who they want their members to be. It’s all right there in 185.11 and 185.12 of the current state statutes. I’m sorry, but even if you argue that the proposed changes are voluntary and not mandatory — as supporters of the bill did all day — that doesn’t explain why the changes are needed.
John Manske, senior government affairs director for Cooperative Network and the primary force behind the proposed bill, opted to start his testimony by attempting to assassinate the character of those in the room in opposition to his bill rather than sticking to their arguments. In doing so, he exposed his hubris and revealed to the room and the assembled state representatives that he and his team were upset with the fact that the bill Cooperative Network’s working group had put together was too convoluted to escape the hearing without any of us concerned citizens and cooperative members daring to question the way they kluged together a set of distinctly different changes to Wisconsin’s cooperative law. His tone was shockingly disrespectful, mean, and condescending throughout his testimony and what that told me was that the opposing arguments had clearly gotten underneath his skin.
Ultimately, the argument that because an entity grows in size, geographical reach, and/or income that there is some sort of justification for changing state statute to suit the shape of the particular business vessel they currently live in is a troubling one. The statutory umbrella provided in Wisconsin law is big enough as it is for the exceptionally large variety of cooperatives — big and small — that call it home. It makes more sense that as an entity begins to distance itself from being a cooperative, that it leave that business model behind entirely, or in part, and reorganize into whatever type of entity makes the most sense for the kind of business they want to do, perhaps a Limited Cooperative Association (LCA) or a corporation. Then that individual business can hopefully flourish with whatever plans they have and not be burdened by worrying about whether or not they fit under the cooperative umbrella. Their only worry will be whether or not their member owners think this is a good idea.
— Chris Holman, Wisconsin Farmers Union
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