During campaign season at Alaska Native corporations you hear the slogan of "more dividends" in many board candidates' speeches. Candidates promise "more dividends" and "larger dividends" when they talk to shareholders because many Alaska Native shareholders believe that the purpose of a Native corporation is to benefit its shareholders financially.
For these candidates and shareholders, large dividends are the definition of success. To them, a large dividend means the company is doing well and is fulfilling its purpose. Likewise, no dividend or a small dividend means the corporation is struggling and is failing.
Their definition doesn't tell the real story. Financial benefits are important, but providing them does not show a Native corporation has succeeded.
Actually, dividends are a poor measure of success. They can conflict with our values and, in some cases, can even hurt our future. Providing dividends is not the purpose of a Native corporation.
Defining the purpose of Alaska Native corporations
What is the purpose of a Native corporation? For many Alaska Natives, it includes "providing benefit to shareholders." With this definition, one can see how Native corporations' primary goal became giving out dividends.
Another possible definition involves land. The Alaska Native Claims Settlement Act (ANCSA) was a land claims act, after all.
So, perhaps the purpose of every Native corporation should be to "manage and protect the land for current and future shareholders."
However, that doesn't provide any benefit above and beyond owning the land. Also, some shareholders believe it would instruct corporations to distribute individual parcels of land to every shareholder.
A few Native corporations took that route and found it difficult and time-consuming to create a process to distribute the land fairly. One Southeast village corporation issued parcels only to see them sold away to non-Natives.
Even though every Southeast village corporation owns at least 23,000 acres, many acres are engulfed by the Tongass National forest, parks, and monuments. Shareholders in a small village surrounded by highly restricted public land are environmental refugees.
They can't use their land freely and are isolated. Lack of road access and high transportation costs limit their business opportunities. Beyond natural resource extraction such as timber, their land has fewer economic advantages than land connected to road systems.
In today's world, it takes more than "managing and protecting the land for current and future shareholders."
Instead, Native corporations should aim to "be relevant on your own land." Fulfilling this purpose doesn't require dividends. But, it does require village Native corporations to become more than what they are today.
"Land" in this definition means Indian country, not parcels defined by deeds and titles.
So, what does it mean to be relevant on your own land? It means no one can describe or define the land or village without including you. It means when they call the major stakeholders of the area to the table, you are always included. It means you have a say in the big decisions affecting your land and the surrounding area.
To become a major stakeholder, you need economic and political power. This power can be gained through successful business operations and influential relationships. Being relevant on your land is the best way to "provide benefit to shareholders," as a group.
Valuing the group over individuals
Native corporations need to redefine "benefit to shareholders." In most of America, shareholders are individuals. But, for Native corporations, it makes more sense to use Native values to define our relationship with shareholders and treat them as a group instead of as individuals.
Consider Southeast Alaska. Under Tlingit social structure, the group (clan) is the strongest and most important form of identification. The success of the clan is more important than the success of the individual. This is one of the major differences between Tlingit culture and Western culture.
Today, dividends separate us into individuals instead of groups. When Native corporations tell their shareholders about the next dividend, they usually describe the amount only as how much each individual will receive.
They may leave out the total amount paid to all shareholders and just say they're distributing "$2.50 per share, so the average shareholder will receive $250 dollars."
For example, Sealaska has more than 21,000 shareholders. So for them, a "small" $2.50/share dividend amounts to an enormous amount distributed to the shareholders as a whole.
It's time all Native corporations start reporting the total amount paid out only. Let's allow shareholders to figure out on their own the amount they each will receive. This change would show how Native institutions value the group over the individual.
The outside world has picked up on the idea of individual dividends as a measurement of success and uses it against Native corporations. When critics of the SBA 8(a) programs want to hurt Native corporations, they point out how Native holding companies bring in large revenues from their 8(a) subsidiaries but provide only small dividends to shareholders.
These critics treat Native corporations as merely a collection of individual shareholders, assuming dividends are the most significant way shareholders can receive benefit. They often ignore the group benefits of building business capacity and strong education, language and culture programs.
Dividends conflict with Tlingit value 'Haa Shagoon'
Valuing Haa Shagoon means you value your ancestors and descendants; the past and future as equals to the present. This value bonds us to our ancestors. It guides us in the present and carries us into the future.
Dividends only benefit the present.
The present should benefit; it's what our ancestors would have wanted. However, if providing dividends means liquidating a struggling company, then you are hurting future generations.
If giving dividends means you have less money to provide for burial expenses, elder benefits or education scholarships, then you are not following the value of Haa Shagoon. There needs to be a balance between the three.
Dividends hurt growing companies
When a Native corporation provides a dividend to shareholders, it is partially liquidating the company. As an example, let's say a village corporation brings in $1 million in revenue every year with a profit of $50,000. Its assets are $1 million, which includes $200,000 cash.
If that company has 500 shareholders and decides to provide a dividend of $2 per share, assuming all shareholders own 100 shares, the total payout would be $100,000. The company's dividend liquidates 10 percent of the company. More damaging is the depletion of 50 percent of the available cash.
Now, this company is left with less cash and opportunity to start new companies or grow its existing companies. Growing or starting a company is extremely difficult to begin with and, once you strip away the cash, you have removed the runway before the business can take off.
Plus, each shareholder only received $200. That isn't a fair deal.
At some point, isn't a Native corporation successful enough to provide dividends without hurting its future? Yes, definitely. Yet, out of the 180 village corporations, only a handful can claim this level of success.
Some directors feel so strongly about providing dividends that they will do so even when their companies are not profitable. In fact, many Native corporations pay out more in dividends in a year than they earn in operating revenue. Some will even attempt to pay out dividends while filing for bankruptcy.
How is this possible, and why would any director agree to give out money the company doesn't have?
First, this is possible because every Native corporation receives payment from the sharing provision of the Alaska Native Claims Settlement Act (ANCSA).
Also, the terms "dividends" and "distributions" are often used interchangeably and incorrectly by shareholders. Properly, dividends come from profits; payments from other sources are distributions.
7(i), the 'sharing provision'
Section 7(i) of ANCSA states that 70 percent of all revenues received by each region from natural resource development goes into a pool and is divided annually among all 12 regional corporations.
This section was written to prevent disparities between the "haves" and "have-nots" of Native corporations due to natural resource wealth. Today, this sharing provision is working as planned.
7(i) funds go directly to the village corporations. Some village corporations "pass" these funds through to their shareholders as "dividends" while others keep the funds for business operations.
Because the money comes from "outside" the village corporation, many directors feel it should be given to shareholders regardless of the company's financial health. They point out the unfairness of urban and at-large shareholders receiving the money directly when village corporation shareholders do not.
Why directors vote for distributions
All Native business leaders are faced with far more taxing demands than just creating profit. Most mission statements include language like "improving the lives of shareholders." That's a tall order for any corporate board.
At the village corporation level, these demands are even more challenging.
Directors can spend years learning and discussing complex problems with little to no progress. The challenges often include energy problems, out-migration and loss of economic opportunity in their village.
The problems can feel overwhelming for a board and outside their control.
On the other hand, passing through 7(i) revenue to shareholders is within their control. It feels like a win--a success.
Unfortunately, after the good feelings of sharing have subsided and the money has been spent, the problems remain and threaten the very existence of "being relevant on your own land." These problems can't be solved by a small corporation with no economic or political power.
This can lead to a defeatist sentiment among village directors. Often when they argue for a distribution rather than reinvesting in the company, they say, "we have lost that money in the past, what's preventing us from losing it again." The subtext is "we aren't good enough."
In addition, there are strong moral reasons why village corporation directors vote to pass through the 7(i) funds as distributions to their shareholders. After all, we all know an elder in a village who is living on the edge of acceptable living conditions or a relative who could use a little extra help. Providing distributions to those in need is honorable work and feels good.
Finally, it's a good political decision for a director who faces election every three years. Few shareholders complain about receiving money.As directors, we need to base our decisions on more than just feelings. We are not "representatives" for shareholders; we are elected leaders. We are sent to the boardroom for the difficult task of building a future, not the easy one of passing through 7(i) revenue. We are good enough.
We are good enough to fulfill our purpose
The purpose of every Native corporation should include "to be relevant on their own land". It is not accomplished by providing dividends or distributions.
That said, dividends are a byproduct of achieving relevance. They are the most equitable way to share in the financial success of one's corporation. They are also a great way to infuse money into local economies, including into the villages themselves. Enough shareholders still live in the village to make this cash infusion meaningful.
Going forward, let's measure success by asking these questions:
How many good, high-paying jobs did the Native corporation create? What about educating the next generation? How much money is spent on training and mentorships or educational and vocational scholarships? How is the health of the home village? Does the village or region have a viable economic engine? Are the shareholders optimistic and hopeful about the future? Native corporations should only consider dividends and distributions when they have grown to a point where the subtraction of cash will not significantly hurt them. They should only distribute money when they are profitable without 7(i). Native corporations should focus on their purpose of being relevant on their own land.
Previous leaders and outspoken shareholders created a story that "dividends" are the goal of every Native corporation. We have all willingly participated in that story. Now, it's time to change the story we tell ourselves and write a new one -- a story in which dividends are the byproduct of success, not the definition, and every Native corporation is relevant on its own land.
Morgan X'agatkeen Howard is director of Yak-tat Kwaan Inc., an Alaska Native village corp.; director of Tlingit Haida Tribal Business Corporation, for-profit tribal section-17 tribal business; and owner of Morgan Howard productions and NativeCo.com.
The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)alaskadispatch.com.