Summit focuses on common
challenges, opportunities facing
all co-op sectors



here is Teddy Roosevelt when America needs him? Glenn English, CEO of the National Rural Electric Cooperative Association (NRECA), raised this question during an address that was one of the highlights of the first National Cooperative Summit, held May 3 in Washington, D.C.

Roosevelt — the nation’s monopolybusting president — would doubtless be sorely aggrieved if he returned now to see how business power has been concentrated into fewer and fewer corporate hands. This makes the role of cooperatives more important than ever, English noted. Three decades of corporate mergers and deregulation have resulted in the rise of a new class of robber barons in some industries, he said.

In the 1970s, there were more than 60 railroads competing with each other. Then deregulation began, and today there are but four national railroads, English said. This has impacted rural utilities by contributing to soaring prices for coal.

“What would Teddy Roosevelt have to say? This nation needs a good dose of Teddy Roosevelt!” said English, adding that NRECA has engaged in a nine-year struggle on energy legislation needed to help address some marketplace imbalances. NRECA’s 900-plus member co-ops provide electricity to 39 million people and are growing at twice the rate of investor-owned utilities, English said.

“Some say co-ops should evolve into hybrid businesses, combining elements of co-ops and investorowned businesses. Others urge members to cash-in [selling or converting their coops], sacrificing the good of the membership for personal gain,” he continued, sounding highly skeptical of such moves. Instead, co-ops need to recruit managers who are “true believers in co-op principles,” English said.

“Co-ops represent the ultimate in self-reliance; they let people do for themselves,” he said. But new tools must be developed to carry co-op ideas and principles to millions more people in America and around the world. Coops are different from other businesses because they have “heart and soul,” English continued, and they are committed to the concept of providing service to their communities (the seventh co-op principle).

English saluted the National Cooperative Business Association (NCBA) for hosting the Co-op Summit, calling NCBA “the keeper of the flame for the co-op movement.”

Summit’s cross-sector focus
The Co-op Summit brought together 300 national cooperative leaders for a day-long series of seminars on topics ranging from strategies for fighting coop conversions to ways of improving cooperative identification with consumers.

Some saw the summit as a first step toward developing a cross-sector co-op agenda to address common needs and to begin flexing more co-op political muscle, which has never been commensurate with the impact co-ops have on the national economy.

The Summit also had an international flavor. More than 20 representatives of the International Cooperative Association attended the Summit, and Dame Pauline Green, CEO of Cooperatives UK, the United Kingdom’s largest consumer cooperative, was a featured plenary session speaker. She discussed efforts to develop a common co-op “master brand” for the cooperative, which includes various types of businesses, including food and drug stores.

Green explained that the pilot program in the U.K. was aimed at creating a consistent co-op identity around a common logo and slogan. Overall, she said, the pilot projects have been successful, boosting sales and customers and increasing the profile of the co-op stores. It is now up to U.K. co-ops to decide whether to adopt the brand permanently.

Subsequent events have proven that food, pharmacy and travel stores all outperformed control groups and brand standards improved across the board. As a result, The Co-operative Group has decided to roll out the new identity campaign across more than 3,400 outlets across the United Kingdom. Many other U.K. cooperatives are also adopting the common brand.

Other featured speakers included Wisconsin Sen. Herb Kohl and Deputy Agriculture Secretary Charles F."Chuck” Conner. Kohl hailed cooperatives as “the good news in American business” while Conner said without co-ops “rural America would not be what it is today.”

Conner: co-op identity
runs deep in rural America
Pinch hitting for Agriculture Secretary Mike Johanns, who was called away to crucial trade talks in Geneva, Switzerland, at the last minute, Conner noted that the Summit coincided with an important anniversary. “USDA and rural cooperatives are celebrating the 80th anniversary of a great partnership: the Co-op Marketing Act, which became law in 1926 and mandates that USDA operate a co-op program.” Conner noted that some have suggested the Act be updated to expand the mission to include all types of co-ops — an idea that was popular with many of the non-ag co-ops at the summit.

“Those of us who grew up in farm country learned early on the value of co-ops,” Conner said. “We got our electricity from the REC, our phone service from a rural telco, and did our farm business down at the co-op. The identification of co-ops with rural America runs deep,” even extending to the White House, he said.

“President Bush himself gets his electricity down at the ranch from a rural electric co-op,” Conner said. “He also gets his water from a USDA Rural Development-financed rural utility. You can talk co-op in the Oval Office to this President and be understood. That hasn’t always been the case in the past.”

Of course, the cooperative movement as a whole is much broader than just rural America and agriculture, Conner said, acknowledging and welcoming the non-farm and non-rural cooperatives present.

The mission of USDA Rural Development, which administers USDA’s rural business and cooperative programs, is to increase economic opportunity and improve the quality of life in rural America. “You don’t need to be a farmer, an REC or a telecom to do business with us,” Conner said. “If you are doing any kind of business in rural America — whether it’s elder or farm worker housing, or health care, or schools or child care, or worker cooperatives in any field, or making use of our housing, community facilities and business programs — we can provide resources you can draw upon. We are eager to work with you.

“We know we can’t stand still, and neither can you. Rural America is incredibly diverse. The rural economy is highly diversified. The world is changing. Your businesses — and our mission — change with it.”

A better business model
NCBA President Paul Hazen kicked off the Summit by proclaiming that U.S. co-ops “aren’t simply an alternative business model; they are a better business model.” He offered reasons why: Cooperatives largely police themselves while government must provide extensive oversight and control over stock companies, Hazen said. “As long as the newspapers are full of scandals involving investor-owned companies, as long as a greedy few seek to convert coops for personal gain and as long as economic forces keep widening the gap between rich and poor, I’ll keep saying it. Co-ops are a better business model.”

Co-op program deserves support
Sen. Kohl, the ranking minority member on the U.S. Senate Agriculture Appropriations Subcommittee, said cooperatives deserve greater attention from the federal government for all they do to foster economic development. He noted that co-ops serve nearly 40 percent of Americans and pump at least $200 billion into our economy each year.

“Cooperatives are vital to our economy, and they do it with a conscience — a conscience that is centered on the notion that we get more done by working together,” Kohl said. “Yet, while investor-owned businesses can turn to the Commerce Department, and small business has the Small Business Administration, cooperatives have just one office at the Department of Agriculture, which makes it their sole business to advocate for co-ops.” He urged that a leader with strong coop credentials be appointed to reinvigorate USDA’s Cooperative Programs office.

Kohl helped secure $4.5 million in federal funding to establish a farmer health care cooperative pilot project in Wisconsin to increase access to affordable health benefit plans. The funding is being used to develop health care purchasing alliances for Wisconsin farmers and small businesses in the state’s rural communities.

“If this program works in Wisconsin, I see no reason why it can’t work in other parts of the country,” Kohl said. “It’s a textbook example of cooperatives offering an innovative solution to a vexing national problem.”

He also authored a bill that will result in the expenditure of $500,000 to collect data and research on the contributions cooperatives make across our economy. That program is being overseen by USDA’s Cooperative Programs office.

The Summit concluded with a roundtable of co-op CEOs moderated by Hazen. The CEOs discussed the top issues facing U.S. co-ops today, including capital and equity needs, as well as ideas for better co-op marketing.



Model co-op law examined

The continuing debate over the wisdom and need for states to enact legislation authorizing the creation of “cooperatives” with many characteristics of limited liability companies was the focus of one Summit breakout session. Donald Frederick, USDA Cooperative Programs specialist in law and policy matters, reported that four states (Wyoming, Minnesota, Iowa and Tennessee) now have such laws and a fifth (Wisconsin) was close to adopting one [it since has].

Thomas Geu, professor at the University of South Dakota School of Law, discussed the project of the National Conference of Commissioners on Uniform State Laws (NCCUSL) to draft a model statute in this area. He explained that NCCUSL is a nonprofit association of lawyers, appointed by the states, that researches, drafts and promotes enactment of uniform state laws in areas where it believes uniformity is desirable and practical.

In the summer of 2003, NCCUSL created a drafting committee to write a uniform cooperative associations law in response to the Wyoming and Minnesota laws that were already on the books at that time. Professor Geu, who serves as the reporter (chief draftsperson) for the committee, said that the committee has met each fall and spring since then. In 2005, the original scope of the project, agricultural cooperatives, was broadened to include most lines of business. NCCUSL plans to complete work on its uniform statute in the summer of 2007 and submit it to the legislatures of the states for possible enactment in their 2008 legislative sessions.

The panel concluded with a discussion of key provisions of the various pieces of legislation. Frederick explained provisions of the existing state “LLC/Cooperative” laws and questioned calling entities created under these laws “cooperatives” when a substantial portion of the ownership, control and financial rewards can be bestowed on non-patron investor-owners. Professor Geu responded by explaining how the NCCUSL draft attempts to protect patron-member interests while still creating flexibility and incentives for outsiders to provide equity capital to cooperatives.





July/August Table of Contents