The term transparency has been around since the 16th century referring then to clearness or clarity.
In today’s business world, the Merriam-Webster dictionary defines transparency as a lack of hidden agendas and conditions, accompanied by the availability of full information required for collaboration, cooperation, and collective decision making.
After more than 400 years of relative obscurity in a business context, the term transparency shot to fame in the wake of the ‘dot com’ meltdown in 2000 and the Sarbanes-Oxley Act of 2002. Transparency became the focus of regulatory agencies, corporations, shareholders, attorneys, and all other stakeholders interested in viewing the inner workings of business.
Sarbanes-Oxley Instigates Self-Examination and Change
Almost immediately after its passage, SARBOX, as the act was tagged, cascaded into the world of nonprofit governance. Though SARBOX imperatives did not directly apply to most co-ops, questions about transparency took on new urgency and SARBOX shined a bright light on how electric cooperatives would respond. Some of those questions were:
- What were members legally entitled to see?
- How would information be made available?
- How does a board find proper balance between privacy, confidentiality and transparency?
- What policies are needed regarding member access to information?
- What are the pros and cons of transparency beyond the legal requirement?
- What does state law require?
NOTE: While “confidentiality” is similar to “privacy,” consider that confidentiality is related to cooperative information; privacy is more related to specific member or employee information.
Cooperative boards continue to wrestle with these and other questions as they strive to find the right level of transparency for their co-op.
One way to approach the question is to consider information members expect.
Says Monica Schmidt, head of NRECA’s National Consulting Group: “Cooperative members have varying expectations about their rights to information about their cooperative, but there are areas where they are right to expect a certain amount of transparency in their cooperative’s dealings: director and officer compensation, board nominations and elections, bylaws, annual audit/financial report, minutes of member meetings, and service rules and regulations.”
Avoiding ‘Fixed and Forgotten’ Syndrome
Transparency, like so many other challenges faced by cooperatives, is an evolving issue – not one that can be “fixed” and forgotten. Making it a regular agenda item (e.g., semi-annually, or annually) for a full board discussion with the co-op’s attorney present may be a good way to ensure that a co-op’s approach to transparency is commonly understood and up-to-date.
Possible starter questions for a board’s discussion on transparency:
How do we define transparency?
Are we satisfied with our level of transparency?
How is our level of transparency perceived by our members?
How do we know?
To what level of transparency does our co-op aspire?
NOTE: Talking to neighboring co-ops and those in other states to see how they’re addressing transparency can also be useful.
Possible questions to ask directors from other co-ops:
What information is being sought by your members?
What information does your co-op make available to members?
How is this information shared with members (e.g. via the co-op’s website; upon request, etc.)?
What policies are needed regarding member access to information?
To Share and Not to Share…
Generally, there are three types of information held by cooperatives (and most other corporations). These include information that the co-op is legally required to disclose to the membership (e.g., articles of incorporation, bylaws, rate schedules, among other items). Next, there is information that cannot, except under very limited circumstances, be shared with the membership because it is either confidential, proprietary, a trade secret, legally prohibited or limited or attorney-client privileged, (e.g., medical records of employees; employee salaries).
NOTE: The “very limited” circumstances where this information can be shared include:
There are also extenuating circumstances for releasing some information, like a membership list. In many states, an electric cooperative must provide the membership list, but only upon request and for a proper purpose. Here, the advice of a co-op counsel is paramount. This applies to all information sharing questions, including rate schedules, where actual legal requirements may vary.
Finally, there is the “gray area” in the middle where the board has discretion to decide what information to make available to its members.
It’s a good idea to have a full board discussion about what to share and to seek the co-o attorney’s advice regarding legal disclosure requirements. For a general look, the table below includes sample items only for the three types of information. Importantly, because the legal requirement varies by state, the below samples apply in many, but not all, states.
A Look at National Survey Data
So, what types of information are cooperatives routinely sharing? Below, see a table listing the response of co-ops in NRECA’s 2015 National Directors Study. They were asked: Does your co-op provide the following information on its website, in a co-op publication, on a bill or bill insert, in a separate mailing, or upon request by any member?
Your Co-op has the Answer
As with most questions among electric cooperatives, there is no one size fits all solution. Each individual cooperative is free to determine its own level of transparency. But be aware: Legal, regulatory, contractual, and other considerations impact an electric cooperative’s transparency practices, and these considerations vary by state and by cooperative.
What level of transparency does your co-op aspire to? Is it time for a frank talk?