The Benefits of a Benefit Corporation Statute for Alaska Native Corporations

• Jurisdiction: Alaska,United States
• Publication year: 2017
• Citation: Vol. 34

§ 33 Alaska L. Rev. 329. THE BENEFITS OF A BENEFIT CORPORATION STATUTE FOR ALASKA NATIVE CORPORATIONS

Alaska Law Review
Volume 33, No. 2, December 2016
Cited: 33 Alaska L. Rev. 329

THE BENEFITS OF A BENEFIT CORPORATION STATUTE FOR ALASKA NATIVE CORPORATIONS

William Robinson ^[*]

ABSTRACT

In the forty-five years since the Alaska Native Claims Settlement Act (ANCSA) created the Alaska Native regional corporation and village corporations, shareholders and outside observers have criticized the statute's use of the traditional corporate form as inappropriate for Alaska Native communities. The emergence of the benefit corporation entity across the United States may soon mean that Native corporations have a promising alternative. If Alaska joins the majority of states that have adopted this new legal entity, Native corporations would have an opportunity to significantly reform their corporate governance within the existing framework of ANCSA. This Note will argue that Alaska should enact a benefit corporation statute because it would give Native corporations a legal entity that better fits their purpose. As benefit corporations, Native corporations would commit to pursuing public benefits, and their directors would be required to consider factors beyond shareholder value in making decisions.

INTRODUCTION

Forty-five years ago President Richard Nixon signed the Alaska Native Claims Settlement Act (ANCSA), granting roughly forty-five million acres of land and about $1 billion to Alaska's Native population in exchange for relinquishing any other land claims they might have in the state. ^[1] ANCSA also directed the incorporation of regional and village corporations to manage the resources of Alaska Natives. ^[2] The larger regional corporations were required to be organized "for profit" under Alaska state law. ^[3] Congress and the Alaska Natives who advocated for the statute hoped the corporations would foster self-determination among Alaska Natives, allowing them to serve as stewards of the land and assets they received under ANCSA. ^[4]

Although many have recognized that ANCSA was a significant legislative accomplishment for Alaska Natives, ^[5] both Native corporation shareholders and outside observers have argued that the corporation was the wrong legal entity to effectuate the broad objectives of the Native corporations and ANCSA. ^[6] Critics of the Native corporation model have argued that corporate law and its imposition of shareholder primacy is at odds with Alaska Native culture and many of the broader goals of Native corporations. ^[7] For instance, Native corporation shareholders may prefer that Native corporation directors be required to consider factors other than maximizing dividends and shareholder value. ^[8] While ANCSA requires that regional corporations exist as "for profit" entities under Alaska law, some have argued that Native corporations would be better off as legal entities that more closely resemble non-profits. ^[9] For the past forty-five years, no such quasi-non-profit legal entity has existed in Alaska, ^[10] and Native corporations have had no transformative alternative option to consider. ^[11] However, that may soon change. ^[12]

In 2016, Alaska's House of Representatives considered whether to pass a bill that would have allowed businesses to incorporate as benefit corporations (commonly referred to as "B Corps") under state law. ^[13] If Alaska had passed the benefit corporation statute, it would have joined the majority of states that have already enacted similar statutes. ^[14] Under the proposed legislation, Native corporation shareholders would have been able to vote on whether to convert to benefit corporations. ^[15] If a Native corporation became a benefit corporation, its directors would be required to consider a range of factors beyond maximizing dividends and shareholder value. ^[16] The Native corporation would also need to commit to pursuing public benefits, and report biennially on its progress in furthering these objectives. ^[17] Directors would risk liability to the public if they failed to pursue these broad goals. ^[18] Converting to a benefit corporation would be a significant legal transformation for a Native corporation. This Note will argue that, given the criticism of Native corporations that has persisted since ANCSA's enactment, Native corporations and their shareholders should at least have the chance to consider making this transformation.

Part I of this Note gives an overview of the Alaska Native corporations, tracing their history and some criticism received in the last forty-five years. ^[19] Part II describes the emergence of the benefit corporation entity in the U.S. and examines the implications of its possible introduction in Alaska. Part III argues that Alaska should seize the opportunity to pass a benefit corporation statute, and thus give Native corporations the chance to consider an alternative legal entity.

I. OVERVIEW OF ANCSA'S ALASKA NATIVE CORPORATIONS

Following Alaska's first major oil strike in 1957 and its statehood two years later, oil companies began advocating ^[20] for resolution of the uncertainty around Alaska Native land ownership in the state. ^[21] Congress enacted ANCSA in 1971 as a comprehensive response. ^[22] The statute deals almost entirely with land. ^[23] Under ANCSA, Alaska Natives gave up "any claim" they might have to about 360 million acres of land in exchange for 45.5 million acres and $962.5 million. ^[24]

ANCSA required that regional corporations be formed "for profit" under Alaska law to manage these assets. ^[25] ANCSA also required the formation of village corporations, and some assets were transferred to these local entities. ^[26] Village corporations typically received the "surface estate." ^[27] Regional corporations received some of the surface estate, but also acquired the resource-rich "subsurface estate." ^[28]

Each Alaska Native person alive on December 18, 1971 ^[29] was entitled to receive one hundred shares in a corresponding regional corporation. ^[30] Share transfer was temporarily restricted by ANCSA ^[31] and later restricted indefinitely by the so-called 1991 amendments to ANCSA. ^[32] ANCSA generally exempted the Native corporations from the federal securities laws. ^[33] Further, ANCSA compels the regional Native corporations to share their timber and subsurface natural resource revenues with each other proportionally. ^[34] Regional corporations must also share revenue with the village corporations. ^[35] Otherwise, Native corporation shareholders are treated like other corporate shareholders under the Alaska Corporations Code. ^[36] Shareholders elect a board of directors that owes fiduciary duties, and they count on receiving regular dividend payments from the corporation. ^[37] Although their financial track record has been mixed, ^[38] Native corporations have developed businesses in oil and gas, mining, construction, timber, real estate, and a variety of other areas. ^[39] They have also taken advantage of preferences that allow them to receive discounts in Federal Communications Commission auctions by participating in high-profile transactions with other major U.S. corporations like Dish Network. ^[40]

A. The Purpose of the Alaska Native Corporations

At their incorporation, shareholders, legislators, and other stakeholders ascribed an array of purposes to Alaska Native corporations. Congress mandated the corporate form for Alaska Native corporations in ANCSA because legislators and Alaska Native advocates for the statute believed it would promote self-determination for Alaska Natives. ^[41] Legislators also hoped to integrate Alaska Natives into the framework of American capitalism. ^[42] ANCSA said the statute's settlement "should be accomplished rapidly, with certainty, in conformity with the real economic and social needs of Natives, without litigation, with maximum participation by Natives in decisions affecting their rights and property . . . ." ^[43]

The regional corporations' original certificates of incorporation include the standard corporate language, ^[44] such as the broad statement that the corporation will be formed to engage in "any and all lawful enterprises, businesses, undertakings and activities . . . ." ^[45] However, some Native corporations went further in their charters. Ahtna, Inc., for example, adopted as one of its corporate purposes: "to promote the economic, social, cultural and personal well-being of all Natives" in its ANCSA-designated region. ^[46] Bristol Bay Native Corporation listed among its corporate purposes the goal of furthering the interests of its stockholders, but also promoting the "economic development" of stockholders and villages. ^[47] Native corporations also listed land management as another corporate purpose in their original charters. ^[48]

Native corporations have often taken on roles more commonly associated with governments than with corporate entities because ANCSA did nothing to address questions surrounding tribal self-governance. ^[49] Many of the Native corporation mission statements reveal that they are guardians of Native culture, ^[50] as much as managers of shareholder value. On its website, Cook Inlet Region, Inc. (CIRI) states that its mission is: "to promote the economic and social well-being and Alaska Native heritage of our shareholders, now and into the future, through prudent stewardship of the company's resources, while furthering self-sufficiency among...