HB 149-NATIVE CORP. ART. AMENDMENTS  9:16:32 AM VICE CHAIR SEATON announced that the final order of business would be HOUSE BILL NO. 149, "An Act relating to an amendment of the articles of incorporation of certain Native corporations to establish a lower quorum requirement for shareholder meetings." 9:16:48 AM REPRESENTATIVE LANCE PRUITT, Alaska State Legislature, speaking as the sponsor of HB 149, informed the committee that HB 149 was introduced at the request of the Native corporations in Alaska. He explained that a two-thirds vote of the corporation members in the affirmative is required to change the articles of incorporation for corporations formed prior to 1989, which is the case for most of the Alaska Native corporations. However, a vote of 50 percent in the affirmative is required to change the articles of incorporation for those corporations formed after 1989. Further, current statute includes a provision that allows a quorum requirement to be as low as one-third. Over the course of the last 40 years, Alaska Native corporations have experienced an increase in the number shareholders as newer and younger shareholders have joined while at the same time there has been a demographic shift of individuals leaving the villages and even Alaska such that they aren't able to attend annual corporation meetings. Therefore, there has been a decrease in the numbers of a quorum. He clarified that currently the Alaska Native corporations are meeting quorum requirements, but they recognize the aforementioned trends and want to address it before it becomes a problem. However, the Alaska Native corporations feel that there's virtually no way they can meet the two-thirds requirement to amend the articles of incorporation. The aforementioned is why the Alaska Native corporations have requested changing the articles of incorporation vote requirement to 50 percent so that they can reduce the quorum requirement for a meeting to one-third [of the shareholders entitled to vote at a meeting]. 9:20:35 AM REPRESENTATIVE NAGEAK, speaking as a shareholder of an Alaska Native corporation, related that he has observed the difficulties of obtaining a quorum first hand. Therefore, he viewed HB 149 as an opportunity to adjust the quorum requirements. 9:21:29 AM VICE CHAIR SEATON opened public testimony. 9:21:56 AM NICHOLA RUEDY, Director, Alaska Native Village Corporation Association (ANVCA), began by informing the committee that ANVCA is a nonprofit organization with a mission to provide services that will improve the efficiency, profitability, and stability of its member village corporations to provide a network of support and technical assistance. Currently, 60 village corporations belong to ANVCA. The ANVCA membership is comprised of representatives from the village corporations, which work collaboratively on issues they have in common to contribute to the future health of these groups by sharing knowledge and resources. Ms. Ruedy then related support for HB 149 as it could be used as a tool to change the quorum requirements for village corporations, which also face similar challenges as regional corporations in terms of voter turnout. In response to Vice Chair Seaton, Ms. Ruedy explained that the village CEOs didn't pass a resolution on this matter, but the board voted to support this issue. The board, which is comprised of nine board members all of which are CEOs of village corporations, voted unanimously to support HB 149. 9:23:53 AM VICE CHAIR SEATON mentioned that it would be helpful to have a written statement from ANVCA to include in the bill packet. 9:24:27 AM KIM REITMEIER, President, ANCSA Regional Association, informed the committee that the mission of the ANCSA Regional Association is to promote and foster the continued growth and economic strength of the Alaska Native Regional Corporations on behalf of the shareholders. She explained that the ANCSA Regional Association represents the chief executive officer of the 12 land-based regional Alaska Native corporations as well as the president of the Alaska Federation of Natives (AFN). Alaska Native corporations are owned by 116,000 Alaska Native people and when measured against the top 49 Alaska-owned companies, they account for 73 percent of the revenue earned, 66 percent of Alaskan jobs, 84 percent of the worldwide employment, and make up 22 of the top 49 Alaskan-owned companies. The ANCSA Regional Corporations have grown into an economic engine of Alaska. Ms. Reitmeier then related support for HB 149. As mentioned earlier, there has been a marked trend amongst shareholders in which there has been a decline in voter turnout. She noted that while shares in Alaska Native corporations are limited in nature, the shareholder base of these corporations are growing through inheritance of shares and broadening eligibility requirements. Trend analysis relate that respected elders are always willing to turn out and vote, particularly those living within the region. However, younger shareholders and those living outside the state, the demographics for which are growing, are less likely to turnout to vote. In response to the aforementioned, Alaska Native Regional Corporations have initiated voter turnout initiatives including shareholder surveys and implemented incentives for voting. However, increases in prizes have only resulted in incremental improvements in voter turnout. This legislation provides the opportunity to address what could become a problem before it arises. The State of Alaska Corporation Code Section 10.06.415 sets the quorum requirements to hold an annual meeting for Alaska Native corporations at 50 percent plus one of shares eligible to vote. If an Alaska Native corporation fails to meet the aforementioned quorum, business at an annual meeting can't be conducted and directors can't be elected. Therefore, the current directors would remain in place until an election can be held. Under current law, a corporation's articles of incorporation can be amended to lower quorum requirements. However, current statute for corporations created prior to 1989, which includes nearly all Alaska Native corporations, requires a two-thirds vote of eligible shares in favor of the change. The legislation, HB 149, before the committee amends the statute to reduce the percentage of votes required to amend the articles of incorporation of corporations established prior to 1989 to change the quorum requirement. The articles of incorporation change would be limited to a change in the quorum requirements and no other change would be allowed under this statute change. Ms. Reitmeier explained that HB 149 would allow a change in a corporation's articles of incorporation, for those corporations established prior to 1989, such that a majority of the quorum is at least 50 percent plus one of the shares eligible to vote. In closing, Ms. Reitmeier summarized that HB 149 changes the standard for the number of votes required to consider changes to a corporation's articles of incorporation, which would allow for changes in quorum requirements. If the proposed HB 149 passes, shareholders must still vote to amend the articles of incorporation and shareholders must still vote to change the quorum requirements. The ANCSA Regional Association membership has reviewed the proposed change embodied in HB 149 and all 12 regional CEOs unanimously support HB 149 and letters in support of HB 149 have been submitted to the sponsor. 9:29:43 AM REPRESENTATIVE REINBOLD emphasized the importance of getting younger people involved, but opined that she wasn't sure lowering the quorum requirement is the answer. Representative Reinbold clarified that she wouldn't oppose HB 149, but maintained concern with the direction of HB 149 and reiterated the need to involve young people. She then inquired as to whether all other options, such as voting by proxy, have been exhausted in an attempt to attract younger voters. MS. REITMEIER assured Representative Reinbold that there have been discussions regarding strategies of voter engagement at various levels. In fact, the [ANCSA Regional Association] runs the Get Out the Native Vote campaign. The proposal in HB 149 is merely one avenue to address the issue. 9:31:17 AM REPRESENTATIVE REINBOLD indicated the possibility of tying corporate dividends to voting in order to increase youth involvement. REPRESENTATIVE PRUITT noted that he has examples of how Doyon, Limited, has specifically tried to address the issue. REPRESENTATIVE REINBOLD said she has that information and opined that what Doyon, Limited, is doing isn't working. 9:32:38 AM REPRESENTATIVE NAGEAK emphasized the need to understand the population dynamics of rural Alaska villages and cities where the population is very young. In fact, in some rural Alaska villages and cities over 60 percent of the population is "young" in comparison to his generation. Furthermore, the original shareholders are dying off and their shares are being passed on to others. 9:34:25 AM VICE CHAIR SEATON referred to flow charts in the committee packet. The flow chart for quorum requirements says that under HB 149 the vote to change the quorum requirements for ANCSA corporations would change from the existing majority of eligible shareholders in person or by proxy to one-third of eligible shareholders in person or by proxy. The flow chart for amending articles of corporation, on the other hand, shows that under HB 149 ANCSA corporations would move from the existing requirement of two-thirds of eligible shareholders in person or by proxy to the majority of eligible shareholders present. MS. REITMEIER deferred to Mr. Schutt. 9:35:27 AM AARON SCHUTT, Doyon, Limited, noting that he doesn't have the flow charts, related that the intent [with HB 149] is to change to a vote requirement of 50 percent plus one [of eligible shareholders] in person or by proxy. He related that for the last 20 years Doyon, Limited, has regularly experienced well over 90 percent of the votes cast in corporate elections being cast by proxy. 9:35:57 AM VICE CHAIR SEATON requested that prior to the next meeting on HB 149, the sponsor work out the differences between the flow charts for the default provisions for quorum requirements versus for the default provisions for amending the articles of corporation. 9:36:40 AM REPRESENTATIVE HUGHES questioned whether the flow chart entitled "Default Provisions for Amending Articles of Corporation" would be better if it reflected that the legislation is specifically for amending the quorum of the articles of corporation. She related her understanding that the legislation refers to the majority of eligible shareholders present is only for making the one change, [the quorum change]. REPRESENTATIVE PRUITT replied yes, and clarified that HB 149 specifically relates to changing the quorum requirements not other aspects of the articles of corporation [for ANCSA corporations]. An affirmative two-thirds vote would still be required to change other pieces of the articles of corporation. 9:38:35 AM REPRESENTATIVE HUGHES, referring to the flow chart entitled "Default Provisions for Quorum Requirements," related her understanding that HB 149 merely makes ANCSA corporations have the same quorum requirements as other corporations, including non-Native corporations, formed after 1989. REPRESENTATIVE PRUITT answered yes. 9:39:19 AM REPRESENTATIVE HUGHES surmised that there will continue to be challenges going forward as the younger generation becomes more mobile, regardless of whether he/she is from a village or an urban area. Therefore, she opined that the [changing demographics] may apply outside of Alaska Native corporations as well. REPRESENTATIVE PRUITT noted his agreement, pointing out that voting trends illustrate the lack of engagement by youth or the utilization of other means to vote. He highlighted that Alaska Native youth have a unique opportunity/responsibility to be a part of a corporation, which is an extra burden that most youth don't have. Therefore, one can understand why a corporation isn't the first thing on the mind of an Alaska Native youth. However, as [the shareholders] age, they are likely to become more engaged. 9:41:34 AM REPRESENTATIVE HUGHES characterized the movement and travel of her own children since high school as incredible compared to herself. 9:41:59 AM REPRESENTATIVE DRUMMOND inquired as to whether HB 149 applies only to the Alaska Native Regional corporations or does it also apply to the Alaska Native Village corporations as well. REPRESENTATIVE PRUITT clarified that AS 10.06.960 specifically relates to Alaska Native corporations, which includes both the regional and village corporations. 9:43:23 AM REPRESENTATIVE DRUMMOND related her understanding that Alaska Native Village corporations are much smaller in terms of the numbers of shareholders. REPRESENTATIVE PRUITT responded yes, adding that some of the smaller village corporations wouldn't be able to perform marketing campaigns, such as that by Doyon, Limited, to encourage attendance and participation. 9:44:12 AM REPRESENTATIVE DRUMMOND asked if all 12 corporations of the ANCSA Regional Association and AFN agree with the need for the proposed change in the quorum requirements. MS. REITMEIER replied yes, reiterating that the vote was unanimously in support. 9:44:47 AM REPRESENTATIVE HUGHES, referring to the flow chart entitled "Default Provision for Quorum Requirements," asked whether any non-Native corporations formed prior to 1989 would benefit from this proposed quorum change in HB 149. If so, she asked whether the proposed quorum change in HB 149 should be allowed for all corporations formed prior to 1989. REPRESENTATIVE PRUITT characterized extending the change embodied in HB 149 to non-Native corporations as a policy question. He noted that although he hasn't heard from such corporations, he hasn't sought responses from non-Native corporations formed prior to 1989. Therefore, he said he couldn't speak to the ramifications of extending this to all corporations formed prior to 1989 since he didn't know if they face the same challenges as Alaska Native corporations formed prior to 1989. 9:47:20 AM REPRESENTATIVE HUGHES offered that she would be open to expanding the legislation to non-Native corporations formed prior to 1989, if they were interested in the option. She inquired as to whether the sponsor would consider the aforementioned. REPRESENTATIVE PRUITT answered that he doesn't have an issue with offering the same for non-Native corporations formed prior to 1989. However, the legislation would need to be changed as currently it amends statute that specifically relates to Alaska Native corporations. Although Representative Pruitt felt it would be acceptable to apply the proposed change to non-Native corporations formed prior to 1989, he emphasized that Alaska Native corporations have a unique challenge in which youth automatically become shareholders, which is unlikely to be the case in non-Native corporations formed prior to 1989. 9:49:08 AM REPRESENTATIVE NAGEAK pointed out that there is a difference between publicly owned corporations and regional corporations. For instance, shares of publicly traded corporations are different in that they are purchased rather than transferred as is the case in regional Native corporations. He informed the committee that in regional corporations those born after 1974 have 100 shares, but the original shareholders can transfer their shares to others. 9:50:45 AM REPRESENTATIVE HUGHES commented that she is of the mindset that if the quorum requirements for non-Native corporations isn't problematic, then it's not necessary to address it. She also said she understood the unique situation of Alaska Native corporations. 9:51:22 AM VICE CHAIR SEATON remarked that expanding the proposal in HB 149 to corporations beyond Alaska Native corporations without input would be difficult. Furthermore, including non-Native corporations in HB 149 would require more time in terms of obtaining agreement from all corporations throughout Alaska whereas all Alaska Native corporation heads have unanimously supported HB 149. 9:52:44 AM REPRESENTATIVE DRUMMOND related her personal experience as the president of a board of a homeowners' association that runs the water delivery system in her neighborhood. That association has the ability to change its own bylaws and articles of corporation, as she was sure most corporations in Alaska have. In fact, the association had to change its quorum requirements last year because it was unable to obtain enough homeowners to conduct business. Representative Drummond said she was fairly confident that most non-Native corporations have the ability to alter their own articles of incorporation and bylaws. Therefore, she noted her agreement with Vice Chair Seaton that the committee should just address HB 149 as it relates to Alaska Native corporations. 9:54:14 AM REPRESENTATIVE PRUITT offered to perform due diligence in terms of reaching out to non-Native corporations established prior to 1989, although he surmised that they are totally different. 9:54:53 AM VICE CHAIR SEATON reiterated his request for revised flow charts for the next meeting on HB 149.