The annual meeting of Verendrye Electric Cooperative in Minot, N.D., can be a lively, even raucous affair. The event regularly draws 3,000 to 3,500 of the co-op’s 15,000 members. As with many co-ops, there’s everything from jumping castles to cash door prizes to draw a crowd.
But some of the liveliest moments come when members are invited to ask questions of the co-op’s leaders. Over the years, those have included everything from routine service queries to strident questioning by environmental advocates.
Bruce Carlson, Verendrye Electric’s general manager, wouldn’t have it any other way. “It makes for an interesting meeting,” he says. “Any question, any concern, let’s talk about it.”
That’s only part of the co-op’s effort to make sure it remains transparent and accountable to its members. Despite the size of its annual meeting, Verendrye Electric holds at least three informational meetings a year out in its service territory to give people another chance to learn what their co-op is doing and to get their questions answered.
The co-op also has a member advisory committee to make sure it’s hearing a broad range of viewpoints and has gone out of its way to make it easy for members who want to run for the board of directors to get on the ballot.
“Our board welcomes competition,” Carlson says. “There’s a contested race this year. We think that’s healthy for the membership. In fact, the nominee who’s running against our board president nominated himself to run.”
The second cooperative principle—“Cooperatives are democratic organizations controlled by their members, who actively participate in setting policies and making decisions”—has been at the heart of the electric co-op movement since the beginning. The participation focuses on electing a board of directors. But as people’s lives grow ever-more busy and co-ops grow in size and complexity, ensuring good governance can become more challenging. Making sure members are informed and involved and that the co-op board is responsive and representative can take extra attention, especially as many co-ops find the makeup of their membership changing.
“Things like requiring a reasonable number of member signatures to nominate a director and making board rules and activities available to the membership help demonstrate a co-op’s commitment to democratic governance,” he says. “An informed, engaged membership makes for much smoother sailing, particularly in times of change like we’re experiencing now.”
On the other hand, closed or unhealthy board cultures, he says, can lead to disasters. A handful of cooperatives have faced governance challenges in recent years, often as frustrated members pressed to get a clearer look at what was actually happening at their co-op.
Martin Lowery, NRECA’s executive vice president for external affairs and member relations, agrees. “The greatest risk is that the membership comes to conclude or at least perceive that it’s a closed organization, and they don’t have an understanding of how their money is being spent,” he says.
If members believe the board or management hasn’t been forthcoming or responsible in fulfilling its fiduciary duty, “that inevitably leads to the change-out of the board members and manager,” Lowery says. “And that isn’t always smooth or pretty.”
For the electric cooperative community as a whole, one risk of ineffective governance is that “it could lead to increased state or federal legislation or regulation,” says Ty Thompson, NRECA vice president and deputy general counsel for director and member legal services. “Right now, in general, electric co-ops have a lot of flexibility when it comes to governance and a lot of freedom. But if that freedom is abused, then it’s increasingly likely that you’ll have state or federal regulation.”
Across the country, cooperatives are working to make sure they remain open and vibrant democratic institutions. Some are re-orienting their annual meetings, making them more member- and family-friendly to promote attendance. Delaware Electric Cooperative, based in Greenwood, Del., attracts 6,000 members to its yearly gathering, which includes a dinner, a community fair, demonstrations by co-op linemen, a public question-and-answer session, and live entertainment.
The co-op also makes extensive use of social media, such as Twitter and Facebook, to reach millennials and other younger members, along with more traditional forms of communication, including a newsletter and bill inserts. CEO and President Bill Andrew has made it a priority to leave no stone unturned when it comes to reaching members. He appears on local radio as often as three times a month, where he gives out his cell phone number to the public. He encourages his employees to do the same.
“We have to be agile enough to utilize all forms of communications,” Andrew says of today’s co-op. “We have to be approachable. We have to be very good listeners. And most of all, we have to be honest and straightforward.”
“I think the idea that a co-op has to have at least some demographic representation of its membership is something we need to talk about,” he says. “If we have 26-year-olds who want to be on our board, we should be encouraging them.”
Thompson says for some co-ops, increasing board diversity can be a practical and legal challenge.
“Ultimately, it’s the members, not the cooperative or the board, that elect directors,” he says.
Schwartz says he has seen many cooperatives working in good faith to meet demographic challenges, creating member advisory committees to provide input from the broader community, establishing nominating committees to recruit new faces, even adopting term limits to make sure the board is regularly infused with fresh energy.
Some cooperatives are also taking advantage of technology to expand participation in director elections. Blue Ridge Electric Membership Corp., based in Lenoir, N.C., has seen voting in its elections go way up since it added mail-in ballots and, most notably, a secure online option. In the past, Blue Ridge EMC, like many co-ops, required members to attend the annual meeting to cast their ballots.
“It just made sense in today’s world to add electronic voting,” says Renee Whitener, Blue Ridge EMC’s director of public relations. “We hear from our members that they want the convenience and the ease that comes with that. We see this more and more from the younger generations, that they want to do business with us electronically.”
Before voting, the co-op e-mails each online voter a packet of information about the candidates. Other voters get the same materials through more traditional means.
“Candidate nominations and elections are a great opportunity for cooperatives to connect with their members,” says Tony Hoff, Survey & Ballot Systems’ cooperative account manager. “Ensuring the process is transparent and convenient helps increase member participation, which is a high priority for electric cooperatives.”
Blue Ridge has seen a noticeable increase in engaged members since it expanded its nomination and election process. With about 58,000 members, Whitener says the number of ballots cast used to average about 800 when attendance at the annual meeting was required. Now, it has grown to 5,000 to 9,000 in most elections.
Hoff says he’s not surprised by jumps like this when co-ops do the work to reach members where they’re most comfortable.
“We’ve seen dramatic participation increases when cooperatives offer multiple voting options such as paper, online, telephone, and onsite ballots,” he says. “If you make it convenient for all members to participate at any time during the voting period, you should see higher numbers among voters of all ages.”
Give Capital Credits Their Due
Another high-profile area that can be affected by governance is capital credits. Several co-ops around the country have been hit with lawsuits regarding their capital credits retirement practices. While Thompson says few of the lawsuits are driven by disgruntled members, he cautions that boards need to make sure they are behaving with a transparency that reassures members the co-op is putting them first.
“They need to remember their fiduciary duty to do what is in the cooperative’s best interest, regardless of whether it’s in their personal best interest,” he says.
Members can become frustrated when cooperatives don’t address or explain their capital credits practices and equity level, Thompson says, adding that co-ops may have valid justifications for their practices, but communication is key.
Pat Mangan, NRECA’s director of governance education, agrees. “You get cases where some members may not understand the concept of capital credits or their co-op’s particular philosophy on capital credits. Once a board has captured its philosophy in a policy, it may be a good idea to include a provision for informing and educating the membership on what capital credits are and how they’re treated.”
Many electric cooperatives recognize that capital credits provide a valuable opportunity to strengthen their relationship with members.
“How better to distinguish yourself from an investor-owned than capital credits?” says Verendrye Electric’s Carlson. “We retire capital credits every year. You pick up your capital credit check, and it’s a great event.”
Educating Members is Key
Whether it’s explaining the co-op’s capital credits policy, how it sets rates, or other policies, co-op directors need to recognize that part of their job is communicating with members, Mangan says.
“Many co-ops have never asked directors to go out and speak to the community,” he says. “That was the manager’s job. But today it’s different. We need all hands on deck to engage with members.”
This is particularly important as members try to sort through their energy options, which can include things like rooftop solar and sales pitches from third-party vendors. In this environment, Mangan says, the cooperative has to maintain open lines of communication that make members feel comfortable turning to its leaders.
Mangan’s responsibilities at NRECA include development of the director education program, which includes the Credentialed Cooperative Director certificate (CCD) and Board Leadership Certificate (BLC). These programs stress good governance practices, the advantages of the cooperative business model, board oversight responsibilities, and the importance of transparency, along with other functions. Sixty-five percent of currently active directors have earned their CCD, while 30 percent have earned their BLC. A new Director Gold certificate, which requires a commitment to continuing education throughout a director’s service on the board, has also been strongly embraced.
“This level of commitment to ongoing education is an indication of the importance that the electric cooperative program has long placed on governance,” he says.
The Pedernales Model
PEC has undergone a massive overhaul of its board nomination and election process, with new procedures that CEO John Hewa says put it in the vanguard of modern co-op governance.
Voting measures include proactive invitations for members to become director candidates; director candidate orientation programs; candidate forum that are recorded and posted; mail, web, and in-person voting; and get-out-the-vote campaigns that include early voting incentives.
Governance initiatives include livestreamed board meetings; archived meeting videos; online access to co-op policies and other documents; regular member feedback surveys; a formal open records program with a dedicated staff member, among other things.
PEC’s progressive efforts bring out some 24,000 members for board votes and have led to what is likely the first-ever electric co-op board with a female majority (4 women; 3 men). They even attracted two millennials to the board.
“There are dramatic shifts going on across the country in the way co-ops engage with their members,” Hewa says. “It’s more important than ever that we educate members on the value of the cooperative business model, member involvement, and the changing political and utility landscape.”
Carlson says it all comes down to staying true to the democratic nature of co-ops.
“You can’t be afraid of the membership. If you’re afraid of the member-owners, you shouldn’t be a general manager; you shouldn’t be a director,” Carlson says. “They’re the bosses. You’re gonna tell the owner of the outfit they can’t ask a question? You’re gonna tell them they shouldn’t get involved?”