Tag: newsletter articles

Phil Kenkel

Bill Fitzwater Cooperative Chair

I sometimes classify cooperative financial decisions as “the good, the bad and the ugly”.  Some decisions are clearly in line with cooperative principles and the long-term interest of the membership.  Some are contrary to those goals.  Some are “ugly” or maybe “clunky” is a better term.  They may be creating some outcomes but those outcomes are not necessarily tailored for the cooperative.  “Ugly” practices can also be artificially linked decisions that could be better …

Phil Kenkel

Bill Fitzwater Cooperative Chair

I often hear statements about cooperative finance that might not hit the level of “fake news” but are highly questionable.  The first “fallacy” is that retaining profits as revolving equity creates a future obligation that will be difficult to meet.  When an investor owned firm reinvests in infrastructure they expect that future profits will provide a return on that investment.  In a cooperative, we do not provide a return on equity and we expect …

Phil Kenkel

Bill Fitzwater Cooperative Chair

The week of Independence Day might be a good time to note the independence of U.S. cooperatives.  “Autonomy and Independence” is one of the ICA cooperative principles.  I have given up trying to explain it and simply say that it is not very relevant in the U.S. but is important in some countries.  In contrast to some countries where the government was heavily involved in developing the cooperative sector, most U.S. cooperatives started at …

Phil Kenkel

Bill Fitzwater Cooperative Chair

The Tax Reform and Jobs Act of 2017 (tax reform) created the Section 199A deduction for cooperatives and their members.  You don’t need me to tell you that a least on provision of Section 199A is controversial.  The tax reform process has greatly raised the profile of the cooperative business model.  Agricultural cooperatives were one of the few sectors that received a special provision in the tax reform act.  There has been debate as …

Phil Kenkel

Bill Fitzwater Cooperative Chair

In my last newsletter I discussed a recent research article analyzing the impact of board of director characteristics and operations to cooperative profitability and success.  The more profitable cooperatives had a slightly smaller board size, participated in more director education activities and had more active board members.  The study also investigated other areas such as the tenure of the board chair and CEO, the frequency of board meetings and the use of executive sessions.…

Phil Kenkel

Bill Fitzwater Cooperative Chair

In my last newsletter I discussed a recent research article analyzing the impact of board of director characteristics and operations to cooperative profitability and success.  The more profitable cooperatives had a slightly smaller board size, participated in more director education activities and had more active board members.  The study also investigated other areas such as the tenure of the board chair and CEO, the frequency of board meetings and the use of executive sessions.…

Phil Kenkel

Bill Fitzwaer Cooperative Chair

Last week I discussed the circles of responsibility in a cooperative (member, board member, employee and CEO) and pondered the issues of an employee or ex-employee running for a board seat.  Another interesting possibility is the concept of a board member becoming an employee, or more specifically a CEO.  That practice is not unheard of in Fortune 500 companies. Many of those firms have outside directors selected on the basis of financial or technical …

Phil Kenkel

Bill Fitzwater Cooperative Chair

I recently saw a research article investigating the linkages between characteristics of cooperative board of directors and the firm’s return on assets and return on equity.  As in any study of this nature, the existence of a relationship doesn’t necessarily mean that the board characteristic caused the profitability difference.  It is still interesting to see where there are apparent differences between the boards of more profitable cooperative and less profitable one.

The average board …

Phil Kenkel

Bill Fitzwater Cooperative Chair

As I have been discussing, Section 199A creates another level of decision for cooperative boards.  Before getting lost in the details of retaining or distributing tax credits and profits it is good to examine your overall strategy.  On part of that strategy is how much emphasis you place on keeping most members equivalent or better off from a tax standpoint.  The second strategy question is whether you want to use any tax savings to …

Phil Kenkel

Bill Fitzwater Cooperative Chair

The cooperative business form is unique in that it is owned and governed by its customers.  That means that every member has multiple relationships or roles with the cooperative. The customer role involves marketing commodities and purchasing goods and services.  Cooperative websites and newsletter are full of information relating to the customer role.  Information on market conditions, marketing programs, product specials and risk management services are all useful to cooperative members in their customer …