Keeping Membership Roles Current
Phil Kenkel
Bill Fitzwater Cooperative Chair
Member control is one of the fundamental cooperative principles. One weakness of many cooperatives is the presence of inactive and ineligible members on their membership list. An inaccurate membership list has tax implications in the calculation of member business andincreases mailing and administrative costs. Former members who retain voting rights have, at time, been a major obstacle to an expansion, merger, reorganization or joint venture. The presence of even one ineligible member (non-producer) voids the cooperatives protection under the Capper Volstead Act. Historically, cooperatives have only liquidated upon bankruptcy. However, in recent years the preference to increase the amount of unallocated equity has resulted in situations where the market value of the cooperative exceeds the total value of the stock. Inactive members with retained equity investments are particularly likely to vote for a liquidation or sale of the cooperative rather than wait for the eventual revolvement of their equities.
Membership criteria is stated in your Articles of Incorporation and Bylaws. Most cooperatives do a good job of checking eligibility status when an individual applies for membership. They are less vigilant in removing inactive members or individuals no longer engaged in farming. Your bylaw and policy provisions should specify the conditions for removing an individual from the voting membership role. The policies and bylaws should also describe how the action will be communicated, procedural safeguards by which a member can regain voting rights if they can show the termination is not justified, and the impact (or more commonly lack of impact) on the retirement of the former member’s stock. The procedures should provide a reasonable time frame to accommodate a member who must stop using the cooperative, but hopes or plans toresume patronizing at a later date.
Most cooperatives have adequate provisions concerning membership roles but fail to take actions to keep them current. The termination of voting rights is a touchy subject and the cooperative will want to take great care in changing membership status. Former members should be reassured that the change in voting status does not impact their claims on allocated equities. Updating membership roles requires a short-term investment in administrative costs but reaps long term savings. Cooperatives that have updated membership roles report very few problems. Most inactive members are no longer interested inthe services provided by the association and either ignore the notice orprovide a polite response accepting the termination.
9-16-2009