Native corporations doing well, but problems still loom

Alaska Native corporations have become financial powerhouses in Alaska. In 2010, eight of the 10 top corporations in Alaska, in terms of gross revenues, were owned by Alaska Natives and four of these grossed more than $1 billion, according to Alaska Business Monthly magazine's Top 49er list of companies.Alaska Native corporations have become financial powerhouses in Alaska. In 2010, eight of the 10 top corporations in Alaska, in terms of gross revenues, were owned by Alaska Natives and four of these grossed more than $1 billion, according to Alaska Business Monthly magazine's Top 49er list of companies.

 

That's good news for Alaska, but there are still problems for the corporation to resolve, and structural issues that could raise other problems down the road.

On the table now is the fact that not all of the 45 million acres due the Native corporations under the Alaska Native Claims Settlement Act have been transferred 40 years after passage of ANCSA. The biggest land deficiency is in Southeast, where Sealaska Corp. is still working to get a major part of its land entitlement.

There are a lot of reasons for the delays, including budget issues for the U.S. Department of Interior, which must do surveys and other work related to the transfers.

There are other land issues, including village land selection overlaps with state land selections, which are also holding up final title to Native allotments, the 160-acre tracts that individual Natives can own privately once title is cleared.

Another major concern is the dilution and fragmentation of shares as the original 1971 shareholders give or will their shares to children and grandchildren, and as some corporations issue special classes of shares to children born after 1971, the year Congress passed the Alaska Native Claims Settlement Act that required the corporations to form.

In 1971 Alaska Natives who were one-fourth Native were eligible to receive 100 shares each in regional as well as village corporations, although some chose to only hold shares in regional corporations. Subsequently, Alaska Natives living outside Alaska were given the option of forming and enrolling in a 13th regional corporation, which many did.

Four decades have now passed since ANCSA was enacted and the initial shares were distributed. Descendents are now receiving shares, given or willed, many of them in small blocks as shares are distributed among descendents. There are  also special classes of shares that were distributed by several corporations to children born after 1971, but many of those come with strings.

There are voting restrictions for some, and in other cases the special shares can't be inherited.

All of this creates two kinds of problems, both significant. First, with many young shareholders holding just a handful of shares, it will become more difficult to muster the necessary quorums of shareholders for annual meetings necessary to form boards of directors and address business issues.

This is already a problem for some smaller village corporations.

A related issue is that shareholders with just one or two shares have less of stake, and are often less interested and engaged, in the corporation's affairs or its founding goals, mainly the protection of land.

What both of these mean is that, over time, the corporations will be dominated by their managements.

The corporations have tried to kindle more interest among shareholders with larger dividend payouts. As much as 50 percent of net income for some corporations is devoted to dividends. While money is always an effective tool in keeping people interested, it is less effective in securing a commitment to the long-term goals of preserving lands.

A high percentage of net income devoted to dividends also reduces the amount of cash available to corporations for new investment. This doesn't seem to be a problem now for most Native corporations but it could over time.

A deeper problem is that there will be more Alaska Natives who do not own shares in regional or village corporations. They can still become members of tribal associations but the tribes do not actually own the land, the corporations do.

A worst-case outcome of this is a situation where the 45 million acres of Alaska transferred under the ANCSA settlement are owned by some, but not all, Alaska Natives.

A more subtle manifestation of this is political: Who will advocate for Alaska Natives? Currently the leaders of the corporations who are Natives fill this role. But if the shareholders of corporations move into the minority of Natives, will the corporation leaders feel they still have this mandate?

In the minds of many younger Natives today the corporations are looked at more as financial entities. This is in spite of the fact that Native corporations view their mandates as, first, to protect their land and, second, to improve the social and economic status of their shareholders.

The corporations are also careful to point out they are not social service agencies. Most, however, have corporate divisions or nonprofit affiliates that are dedicated to cultural preservation and education.

Still, the current Native corporation leaders are feeling a challenge from a younger generation, and this is something that must be dealt with.

It's an issue of major importance to the entire state because of the economic importance of the Native corporations and the stake all Alaskans have in their future stability and prosperity.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.

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