Cooperative Network testifies on Chapter 185 revisions

Cooperative Network testifies on Chapter 185 revisions

September 27, 2017

To: Members, Assembly Financial Institutions Committee
From: John Manske, Senior Government Affairs Director and David Ward, Director of Government Relations and Dairy
RE: Support for AB 353

Thank you Chairman Katsma and members of the committee for scheduling this hearing on AB 353, which provides several changes to Chapter 185, the primary statute governing cooperatives that are organized in Wisconsin. Also, thank you to the authors, Rep. Tauchen and Sen. Testin, and all the Republicans and Democrats who have co-sponsored this series of modest changes to the statute. The legislation reflects the first significant proposed changes to Chapter 185 in over 30 years.

I am John Manske, Senior Government Affairs Director at Cooperative Network. I am joined today by David Ward, our Director of Government Relations and Dairy. Cooperative Network is committed to protecting and promoting Minnesota’s and Wisconsin’s cooperative businesses and their shared cooperative principles. We are the largest statewide co-op trade association in the United States, representing a diverse and active group of more than 400 members.

In 2015, a group of Cooperative Network’s member cooperatives, with the help of several attorneys who work with cooperatives, came together for a series of meetings to discuss potential changes to Chapter 185. Included were representatives of the Wisconsin Electric Cooperative Association (WECA). The recommendations of this working group of cooperators were included in the legislation that was drafted and which is before you today.

It must be stressed that all the provisions found in AB 353 and its companion SB 281 are subject to the individual decision of each cooperative as to whether they will be adopted. This is in keeping with the value of “member-owned and member-controlled” that defines the cooperative difference from other business models.

Those opposing several provisions found in AB 353 would deny cooperative members and their elected board members an opportunity to vote to add the perspectives of appointed directors at a time when the complexity of financial decision-making may most demand another set of background or knowledge in the boardroom. There is an obvious reason why the federally chartered and regulated farm credit system provides for appointed directors. Generally, the financial experts who are such a valuable part of farm credit association boards are appointed outside, not elected members. Under AB 353, the appointed director(s) would always remain in the minority of any board, if a cooperative’s member-owners voted to enact this provision.

The provision allowing patronage-based voting only applies to cooperative holding companies, of which there is only one in the state: Cooperative Resources International (CRI). Although their delegates have been informed about this potential change, it would still require a vote of CRI’s member-delegates to move forward with a patronage activity based or patronage equity based voting system.

The diversity of cooperatives in Wisconsin and the competitive environment that they find themselves in today would point in the direction that a rich cooperative history alone will not ensure success in today’s economy. Whether that means consideration of paying more than 8 percent dividends on stock or membership capital or encouraging electric cooperatives to make consumer loans to their members for important projects such as wiring safety or emergency backup generation, we trust members of cooperatives to make intelligent decisions that will help the cooperative fulfill their mission of service to their members and the communities in which they operate. We encourage you to trust your constituents who are members of cooperatives, and do so by supporting AB 353.

Thank you again for the hearing on AB 353. I welcome any questions you might have on this legislation.

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