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New generation of executives tackles challenges facing Alaska Native corporations

Tim Bradner
Wayde Carroll / FIrst Alaskans Magazine

A second generation is starting to run Alaska’s Native corporations.

“There’s been a passing of the torch,” said Jason Metrokin, president of Bristol Bay Native Corp. and himself one of a group of younger Native CEOs who are bringing advanced degrees and business experience to the running of the corporations.

Metrokin said the second generation owes everything to the first generation of leaders, who founded the corporations after passage of the Alaska Native Claims Settlement Act in 1971. But after 40 years of corporate experience, the time has come for the passing of the torch to the next generation.

The challenges for the second generation include:

  • As the corporations grow and diversify, what relevance will they have to Native people?
  • What role will they have in protecting rural Alaska, its villages and its cultures?
  • How stable will they be, as businesses?

The answers are important not just to ANCSA shareholders, but to all Alaskans, because Native corporations are a big part of the state’s economy today.

'Cultural touchstone'

We talked with several of the second-generation CEOs about the challenges they face, among them Metrokin, Will Anderson at Koniag Inc., Aaron Schutt at Doyon Ltd. and Michelle Anderson at Ahtna Inc. We also talked with Margie Brown, president CEO at Cook Inlet Region Inc., whose term at CIRI’s helm has been longer, which gives her perspective.

There are other regional corporation CEOs who bring training and experience, including Rex Rock at Arctic Slope Regional Corp. Gail Schubert at Bering Straits Native Corp. and Andrew Guy at Calista Corp.

Things currently are going well for the regional corporations. They are diversified and profitable. They are large employers of non-shareholders and shareholders alike. Profits from out-of-state investments come back to Alaska, boosting the state’s economy.

All of the corporations provide financial support for initiatives to sustain Native cultures and are working to develop the human-resource potential of rural Alaska. Many are working to help develop more sustainable rural economies, where possible.

An interesting development is that, as Alaska Native people become scattered – for many regional corporations, half of the shareholders now live out of state – owning shares in the Native corporations may be a “cultural touchstone.” CIRI is experiencing this with its shareholders, said CEO Brown.

“Owning shares in CIRI is a way to keep in touch with your Alaska Native culture, it is a measure of pride and self-sufficiency, especially for those shareholders who live outside of Alaska,” Brown said.

Where are the members?

There are special challenges facing the second generation of ANCSA corporation leaders. The most fundamental is that Alaska Native populations have become more dispersed and less connected to the land and their corporations. In 1971 most of the regional corporations had the bulk of their shareholders living within their regions, many in small villages. Now it’s the reverse for many regions, with most shareholders living outside the home region, many in the state’s larger communities and many now living Outside.

Doyon’s case illustrates this.

“In 1971, when ANCSA passed, about three-quarters of our shareholders lived in villages, about 25 percent in Fairbanks and a small percentage elsewhere. Now only 25 percent of shareholders live in the villages, another 25 percent in Fairbanks and elsewhere in the state, and about half live out-of-state,” Schutt said.

The outward movement is undermining the villages themselves.

“In the 1970s we had villages of 250 to 300 (people),” Schutt said. “Now many just have 50 people and some are just fish camps in the summer. With that shift in demographics there’s a lot less of connection to the region.”

CIRI’s Brown adds, “There’s a whole class of shareholders not that familiar with the corporations and their history. In 10 to 20 years, many shareholders will have to decide what it really means to be Alaska Native shareholder, and in 40 years all of us probably will be at that point.”

A practical dimension of this is that it is becoming more challenging for ANCSA corporations to get enough shareholders, or proxies signed, to hold annual meetings. Schutt said Doyon’s average quorum was above 70 percent in the 1990s but has been trending down in recent years and was 52 percent in 2011.

Koniag has concerns about annual meetings too, CEO Will Anderson said. The challenge is that like a lot of the regional corporations, three-quarters of Koniag’s shareholders live outside the region and half live out of state.

“We do a lot of things, including door prizes. It works,” Anderson said.

At Bristol Bay, Metrokin said the corporation is relying increasingly on new media like Facebook and Twitter as tools to interest young people in the corporation and the annual meetings. So far no regional corporation has failed to get the 51 percent margin needed to hold an annual meeting but some village corporations have experienced the problem.

The core problem for many corporations is how to keep shareholders interested, absent their ability to have a big financial stake. Koniag tries to widen its benefits to the greatest extent possible, registering descendants, sending newsletters and extending certain benefits if people can demonstrate an affiliation with an original shareholder. “We try to be inclusive, to make the corporation relevant,” Anderson said.

What of the land?

A huge concern is how the movement of Native people out of rural Alaska, and out of Alaska, will affect shareholders’ commitments to protecting Native-owned land. ANCSA’s main purpose in 1971 was to give Alaska Natives ownership of land, and the mechanisms – corporations – to protect the land. If most shareholders live far away, do they continue to support those goals?

Michelle Anderson, president of Athna, is dealing with this right now. Unlike all other regional corporations, all of Ahtna’s villages are located along the state’s highway system and is affected by trespass and damage to land caused by people from outside the region, mostly from the cities.

“It’s becomes an acute problem during fishing and hunting seasons,” Anderson said. “We expend a lot of resources on land protection but there are limits to what our land protection officers can do, and the state troopers are spread thin. I need to remember how diverse our shareholder base is becoming. Today our decision-making and future planning needs to factor in shifting shareholder priorities and equitable distribution of resources.”

The dispersal of shareholders creates difficult decisions for corporation managers in other ways.

“Corporate actions must benefit all shareholders, not just those still in the village,” Anderson said. “We have to maintain balance.”

Ahtna’s lands, for example, were selected mainly for cultural and subsistence values, as was the case for many ANCSA corporations. But new generations of shareholders don’t remember that. To respect the rights of all shareholders, “Though we may want to we can’t manage our lands only for subsistence,” Anderson said. “A shareholder in California doesn’t have the same passion for protecting subsistence. Dividends are expected, along with other benefits given to our shareholders. They expect us to make a profit with the resource we manage.”

What of the next generation?

Original ANCSA shareholders received 100 shares of the corporations to which they were enrolled. As original shareholders owning 100 shares pass on, shares are generally willed or gifted to children or surviving spouses. Over time, the shareholdings are diluted so that most children and grandchildren of original shareholders own fewer than 100 shares, sometimes just a handful of shares.

Combined with the fact that often children and grandchildren live outside the region, the dividend and the connection to the corporation may become even less important.

“I send a letter to every new CIRI shareholder as shares are inherited or gifted, and I watch how many shares are being received. There are some 100-share blocks being transferred to a single individual, but a large percentage of the time I see 20 shares or less,” Brown said. “At some point we will reach a point where the shares, simply for their dividend, are no longer relevant to peoples’ lives.”

Only five of the 12 land-based regional corporations, directed by shareholder vote, have issued additional shares to those born after the 1971 Native claims settlement enrollment deadline. Many of these are issued as Life Estate Stock, special shares that come with restrictions, such as not allowing them to be willed and passed on. Instead, those shares ultimately revert back to the corporations.

Regions that have done this have decided that is important for the post-1971 generation to have shares and a stake in the corporation, but the financial dilution effect is the same. More shares outstanding means the overall financial benefit of dividends is diminished.

“It becomes hard to grow the corporations fast enough to keep up with the birthrate,” to keep dividend amounts for each shareholder level over time, Brown said.

Selling a birthright

ANCSA shares are restricted because they cannot be bought or sold unless the shareholders agree to lift the restrictions.

The prohibition on sales of shares in corporations established by the Alaska Native Claims Settlement Act is a touchy issue.  It affects shareholders’ financial stake in the corporations and limits their ability to monetize assets.

“Shareholders of ordinary corporations receive dividends but they also benefit from capital appreciation, the increases in the value of their shares. The capital appreciation benefit, however, is not available to ANCSA shareholders,” Brown said.

So far no ANCSA corporation has opted to allow shares to be sold, although Congress has amended the claims act to allow corporations to do it if shareholders decide. Brown thinks this may someday happen. It’s a big step, though. “It might take a couple of more generations for people to be comfortable with this,” she said.

However, there may be creative ways for ANCSA shareholders to benefit from capital appreciation in other ways, Brown said. One idea might be to create a separate company engaged in a business that has transferable shares. ANCSA shareholders could be issued transferable shares in the affiliated company if this were to happen.

The inability to enjoy capital appreciation has another effect: “Because there is no way to access appreciations of capital value there is always pressure on the dividend payout,” Brown said.  CIRI was pushed by shareholders in the past to pay out large special dividends.

“Creating a balance between earnings paid out in dividends and earnings kept in the company for investment is always top of mind for me and for the CIRI board,” Brown said.

Many Native corporations today pay out more in dividends -- some surpassing 50 percent of net income -- than non-Native corporations, which retain more of the earnings to invest and grow the business.

Some business analysts believe that in the long run this may hurt the growth of the Native corporations. Doyon’s Schutt cites at least one Lower 48 tribe forced by members to make big cash distributions, which subsequently bankrupted the tribal businesses.

Political implications

There is one other new challenge for the ANCSA second generation leaders: Helping counter the erosion of rural Alaska’s influence as rural populations decline and lose political clout in the state Legislature while urban populations increase. Some of the ANCSA corporations are involved in ongoing court actions against the 2012 legislative redistricting, particularly Calista.

Others take a more indirect approach. Bristol Bay Native Corporation’s in-state advertising campaign, in print and television, talks about Bristol Bay and the values of people in the region, particularly the protection of fisheries.

“Our region’s foundation is its culture and its natural resources, and it’s a good story to tell,” to the rest of Alaska, Metrokin said. This is part of a strategy to widen Bristol Bay’s credibility, including with business customers for its subsidiaries, but is mainly to widen the region’s influence in the state.

With all the questions facing the new generation, leaders like Metrokin are not forgetting where they came from nor what their original ANCSA leaders built.

“That generation came from a different world, growing up in villages with subsistence and fishing. It’s to their credit that they got the ANCSA corporations up and running,” he said. “They put the corporations on the map.”

Those corporations are now large and complex, and this poses new challenges.

“Today’s generation of corporation leaders must walk in the corporate as well as village worlds,” Metrokin said.

Tim Bradner writes on natural resources and politics for the Alaska Journal of Commerce. Story first appeared in the September-October issue of First Alaskans magazine. Used with permission.