9 minute read
ALASKA NATIVE CORPORATIONS: TERMS AND TALES
Alaska Native Corporations (ANCs) were an entirely new way to resolve long-standing issues surrounding Indigenous land claims in the United States. With this unique solution came new terms, as well as new twists on common corporate words. Understanding the language of ANCs provides deeper insights into the organizations, their origins, and their goals.
While many terms only play a role for ANCs, other terms that are shared across corporate entities take on slightly different meanings within an ANC. At the top of the list is shareholder, because a shareholder of an ANC is different from an IBM shareholder or some other company that someone bought publicly traded stocks in.
“The rights and responsibilities of an Alaska Native shareholder are different than the rights and responsibilities of a shareholder of Boeing or General Motors or Amazon,” says Bristol Bay Native Corporation President and CEO Jason Metrokin.
“In the early 1970s when Alaskan Native people were literally enrolling to be shareholders of this new Alaska Native Corporation, I don't know that people really understood what it was going to be like to be a shareholder of Alaska Native Corporation.”
While shareholder benefits for ANCs are similar to other corporations in that many of them choose to pay out dividends, they can also provide additional benefits including scholarships, funeral services, cultural programs, and community development.
Shareholders
There are three types of ANC shareholders: original shareholders, voting shareholders, and nonvoting shareholders.
Original shareholders are Alaska Natives who met the criteria established when the corporations were created through Alaska Native Claims Settlement Act (ANCSA) in 1971. These were the people whose names were submitted to the Bureau of Indian Affairs to create the corporations and establish shareholders.
“There can be extra perks associated with being an original shareholder for www.akbizmag.com
Brennan Cain, Vice President and General Counsel, Eyak Corporation
many Alaska Native Corporations,” says Eyak Corporation Vice President and General Counsel Brennan Cain, pointing toward what are known as Elder dividends.
Unlike shares a person might own in a publicly traded corporation, the shares established through ANCSA cannot be sold or traded. They can either be handed down through wills when an original shareholder dies or can be gifted to a downstream relative, such as child, grandchild, niece, nephew, brother, or sister.
In the case where a shareholder wills their shares to a non-Native spouse, that person becomes a nonvoting shareholder, Cain explains. In such cases, the person will generally receive the same benefits of a standard shareholder but not be allowed to vote in the election of directors and other ANC matters.
“I think ANCs would love to address non-voting shareholders in a respectful way,” Cain says. “I think it's fair to say that for the most part, ANCs would often prefer the shares to be held by Alaskan Natives to ensure they remain voting shares.”
As long as the shares are willed or gifted to an Alaska Native or a descendant of an Alaska Native, they retain the rights of a standard shareholder.
“You're a voting shareholder, even if you have less than the one-quarter blood quantum,” Cain says.
There are plenty of terms connected to ANCs that are not typically found in a corporate boardroom. Blood quantum is certainly one of them. However, the concept was baked into the very foundation of ANCs. When ANCSA passed, there was a 25 percent blood quantum requirement, which meant that—barring some exceptions— anyone who was enrolled as a shareholder had to be biologically a quarter Alaska Native.
The major exception was for those who were “regarded as an Alaska Native by the Native village or Native group of which he/she claimed to be a member and whose father or mother was regarded as Native by any village or group,” says Cain.
Fifty years since President Richard Nixon signed ANCSA into law, the idea of blood quantum can often lead to more confusion than anything else.
“Once you get below one quarter of blood quantum, some people think that you've basically lost the ability to vote, that you're truly not Alaska Native anymore for the purposes of ANCSA—and that's not true,” Cain explains.
The blood quantum had been used previously in the Lower 48 by the federal government in an effort to limit tribal citizenship. It’s role in ANC was similar in the idea that it established a baseline of who could be an original shareholder in one of the corporations.
Ken Johns Chairman Ahtna
Region and Village
The two primary types of corporations created for Alaska Native shareholders were regional corporations and village corporations. The state of Alaska was divided up into twelve regions, each represented by a regional ANC, and more than 200 village, group, and urban corporations.
As a general rule, Alaska Natives who lived in villages enrolled as shareholders into their village corporations, as well as shareholders in the regional corporation in which the village was located.
Cain uses the metaphor of a person who is a resident of a city, as well as a resident of the county that encompasses the city. In the same way, an Alaska Native could choose to be a shareholder of a village corporation, as well as of the regional corporation that encompasses the village.
Alaska Natives who lived in an area that did not qualify as a village for the purposes of ANCSA, such as Alaska’s bigger cities, became “atlarge” shareholders in their regional corporation instead.
Those at-large regional shareholders receive a 7(j) payment directly instead of that money going through the village corporation.
7(i) and 7(j)
Both the terms 7(j) and 7(i) are specific to ANCs and are an important element underpinning the system created by ANCSA, as they are the revenue sharing provisions in the legislation.
Aware that some regions were richer in specific natural resources than others, and since the goal of creating the corporations was to provide greater economic opportunities for all Alaska Natives, a mechanism was built into ANCSA to provide some equality. The goal was to ensure that all Alaska Native Corporations benefited from the revenues derived from natural resources across the state.
“Seventy per centum of all revenues received by each Regional Corporation from the timber resources and subsurface estate patented to it pursuant to this Act shall be divided annually by the Regional Corporation among all twelve Regional Corporations organized pursuant to this section according to the number of Natives enrolled in each region pursuant to Section 5,” the original language of Section 7(i) states.
“If you're the one who's producing it, you get the 30 percent and then you also get your portion of the 70 percent,” Cain clarifies.
Section 7(j) further distributes revenue from natural resource wealth, as it directs Alaska Native regional corporations to disperse 50 percent of the Section 7(i) revenues they receive
to Alaska Native village corporations within the region.
ANCSA Regional Association notes that while many traditional for-profit organizations might have balked at such a provision, many people believe that ANCSA would not have passed without it.
SBA 8(a)
A newer term appearing in conversations about ANCs and their potential to create additional revenue streams comes from the Small Business Administration. The SBA 8(a) program has the goal of awarding at least 5 percent of all federal contracting dollars to small, disadvantaged businesses annually.
As many ANCs continue to diversify their portfolios, 8(a) certification for their businesses offer them important opportunities in federal contracting.
Settlement Trusts
Another important tool ANCs have in their toolbox for maximizing benefit for shareholders are settlement trusts, which is a trust organized under the provisions of the Alaska Native Claims Settlement Act
Matt Mead, a partner with Landye Bennett Blumstein, estimates that more than twenty-five Settlement Trusts have been passed by ANCs in the last few years. While dividends paid out by a corporation are taxable distributions through the settlement trusts are generally not, Mead explains. These distributions end up going directly to the beneficiary— ANC shareholders.
Managing Shares
In the corporate world, the dilution of shares can happen by a corporation offering new shares in exchange for acquisitions or services or through secondary offerings to raise additional capital. Because ANC shares are not and cannot be sold, the creation of more shares does not create more capital. However, there are other reasons some ANCs have chosen to expand their shareholder base through something called “open enrollment.”
What are commonly known as the 1991 Amendments (despite being passed in 1989) allowed ANCs the ability to expand their shareholder eligibility through open enrollment.
One of the ANCs that chose to open their rolls to include descendants is Arctic Slope Regional Corporation, which expanded on its original shareholder enrollment of about 3,700 to more than 13,000 by opening enrollment to those born after the enactment of ANCSA.
While open enrollment is a done deal for some ANCs, it is an ongoing conversation for others that are still weighing the pros
Jason Metrokin CEO Bristol Bay Native Corporation Heightened Responsibility
ANCs walk a tightrope in many respects, needing to be both forward looking for the business interests of the corporation and cognizant of the importance of culture and traditional lifestyles.
When leaders of ANCs talk of their corporate responsibilities, many of them end up using words rarely found in a corporate boardroom, such as ancestors, tradition, descendants, and subsistence.
“From one perspective, that can make service as an ANC director more difficult because of the broad range of corporate and shareholder priorities that can go way beyond what your average corporate director will have to consider at any given board meeting,” Mead says. “In other words, it’s often more complicated than simply focusing on profit and distributions.”
Unlike other corporations, ANCs must not only weigh the direct economic opportunities they can create through natural resources extraction but also community needs for food sovereignty through traditional, subsistence lifestyles.
“I think the elders instilled in our mind that the land was the most precious gem out of all this cooperation,” says Ahtna Chairman Ken Johns, referring to the land selected by ANCs through the ANCSA. “You can lose the money, but don't lose the land.”
When land was selected by Ahtna, Johns says that the corporation focused on securing plots vital to the subsistence lifestyle of the people in the area.
“We have unique responsibilities as an Alaska Native Corporation,” Metrokin says. “We're not living quarter to quarter or from financial statement to financial statement, we're thinking about the long-term and always looking at ways in which we can benefit our shareholders— today, and years into the future.”
