opinion
One of the advantages of having farmer-owned and farmer-controlled grainhandling co-operatives is that the heads of those co-ops tend to be open and forthright with their members, even on sensitive issues. Thus Alberta Pool president Alex Graham didn’t mince words when a reporter asked about the idea of a co-op selling shares to the general public.
“Let’s be honest with the farmers,” Graham said. “The potential is there to lose control.” Under proposals being considered by Saskatchewan Wheat Pool, that organization might sell non-voting shares to institutional and other investors, while specifying that no single institution or person could own more than 10 percent of such shares.
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Graham, however, said non-voting shares could conceivably turn into voting shares if government legislation or stock-exchange regulations were changed to require publicly traded shares to have voting rights. There is also the chance that the shareholders themselves could apply pressure in an effort to get some voting power.
The issue raised by the Alberta president is one that pool members in all three provinces should think about carefully as the pools study various ways to raise more equity capital.
Farmers have gained major economic benefits from having their democratically-elected boards of directors acting in farmers’ interests instead of solely in the interest of corporate profitability. When farmers were caught in a financial squeeze, their representatives did everything possible to hold down grainhandling charges. When spending a few hundred thousand dollars on lawyers could induce an inquiry to cut railway charges by several million dollars, the pools did so.
It would be a tragic loss if any change in ownership structure threatened this orientation to farmers’ broad interests, or the pools’ role in policy. As the share proposals are debated this summer, farmers should make sure they get acceptable assurances that control of their co-operative will not be lost.
However, they should also give equal attention to dangers from the opposite direction – what might happen to their organizations if no new sources of capital are found? It would be pointless to flee from the idea of outside shareholders, only to end up in the clutches of bankers or bankruptcy trustees.
The problem is that the usual type of co-op equity – members’ patronage dividends reinvested in the co-op – is not permanent equity. It is debt that has to be repaid when members leave farming. To survive and compete against large multinationals, co-ops will need to strengthen their capital base in some fashion.
Pool members have some serious thinking to do this summer.
