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A House Divided – the Wright Farmer’s Cooperative

On Sunday, June 22, the newly appointed board of the Wright-Cooperative met at the Wright Senior Center to hold a special election for new board members.  At the very same time, the previously and maybe still incumbent board members that were voted out in a small vote of 12-5, held another meeting just blocks away at the fire hall.

 

At 6:01 p.m. newly appointed President Jerri Haugen called the meeting to order and read the letter sent to all former board members regarding the special election.  The required certified letters were sent to each member and legal notices were run in the newspaper for two weeks.

Some debate followed while everyone waited for Coop Store Manager Tim Bury to return from the other meeting where he was requesting their presence at the Senior Center.

 

The floor was opened to discuss voting rights.  Jennie Hanson, a past board member, said that anyone could run as a shareholder or patron in the past.

The consensus was that everyone that had voted in August did so without knowing what constituted a voting member.  In discussing the vote, there was continued confusion as to what the bylaws allowed since it had not been updated since 1983 and not registered with the state.  Were resolutions passed that changed voting rights to patrons as well as shareholders?  Some say there were, but the bylaws were never updated to reflect the change.  There was also the question as to whether the existing shareholder list was of much value because people were listed that were now deceased, some were patron shareholders (prior to 1984), and others may have been restricted to one per household (rather than by actual shareholders).

 

The debate ensued as to what the previous board did to justify removal.  Repeatedly, the claim was made that the board was micromanaging the Co-op Store while letting the feed mill do anything it wanted.  The key example given was that the Point of Sale (P.O.S.) system was installed in the coop store without notice.  The system is currently not allowing meat to be entered because another program is needed, a store clerk stated.  There were also questions as to the accuracy of the inventory of other items in the store.  The manual for using the system was not received until well after the installation of the P.O.S.

 

As far as the validity of the board removal, Linda Shelton reiterated the language of MN Statute 308A.321 that states "Members may remove a director at a members' meeting for cause related to the duties of the position of director and fill the vacancy caused by the removal."  The “other meeting” called by the ‘ousted’ board member was not posted in the newspaper and had just been posted June 15 in the coop store.  This would have been just a seven day notice.

 

Recess Call & Move to other Meeting

 

By this time it was approaching 6:30 p.m. and Mr. Bury did not arrive.  A recess was called and everyone started migrating to the Fire Hall to catch the meeting going on there.  Dissension clearly filled the air as those opposing the previous board piled into the fire hall, spilling out into the garage.  Those favoring the removal of the board roughly outnumbered those in favor of retaining them by a margin of at least 3-1.

 

Attorney Frank Yetka Intervenes

 

The old board hired Attorney Frank Yetka to represent them, presumably on cooperative funds.  This was not approved through an official board meeting and seems to lack the proper authority of the cooperative.  A simple motion by the board to hire an attorney, seconded by another, would have made it official.

Generally, if the articles or bylaws so provide, any action, other than an action requiring member approval, may be taken by written action signed by the number of directors that would be required to take the same action at a meeting of the board at which all directors were present.  The bylaws are silent on the issue, thus making a board meeting necessary.   Normally, the hiring of an attorney or purchase of equipment, such as the P.O.S., would require board approval first, either in a meeting or by the signatures needed.

 

Mr. Yetka interrupted the banter in the room to say that members could sign up to give a two minute talk.  What constituted a member was not explained.  A representative from the Floodwood Forum requested to ask questions and was denied.  Mr. Yetka said that he would field his questions after the meeting.  Mr. Pirila said, “Wouldn’t it be better to have the discussion publicly rather than privately.”   “Members only,” said Mr. Yetka.  Even so, non-members had plenty of discussion with the board and attorney.

 

Board Member Under Fire

 

Under fire for micromanaging the store, board member James Kangas said that he was “guiding, steering” and “depositing money, signing checks, which I had the power to do.”  “I guided Gary at the feed mill.”  Mr. Kangas had been helping out at the feed mill after its manager resigned.  Voluntarily or not, it was considered a conflict of interest by some.  However, Article IV of the bylaws states, "It shall be the policy of this association, but not mandatory...no member of the Board of Directors..shall be employed as manager or otherwise."

 

Mr. Kangas was questioned about comments he made about shopping in Moose Lake and McGregor for feed and groceries, respectively.  Mr. Kangas admitted he was buying his feed in Moose Lake, rather than the local feed mill.  I “will not gamble my own money at my own risk.”  “I’ve had a few farmers say the product is not the same quality.”  He added that if he lost a cow he was out a lot more than the 100 pound bag of feed the feed mill would refund him.  I want “properly made feed.”

 

In regards to shopping for groceries in McGregor, Mr. Kangas said that he had picked up a few items from the cooperative and the same at the Big Dollar in McGregor.  “I was comparison shopping.”  He could have picked up a shopper from McGregor and done the same thing without going elsewhere.

Mary Selix shared her feelings on the matter.  “When Tim [Coop Grocery Store Manager] came in, the first thing I noticed was ‘Oh my God’ I could find things or Tim would order it right away.  The crew we have at the store is the best we have had in a long time.  The prices are competitive and I know because I’m a stingy shopper.”

 

The confessions of board member Jim Kangas supports a breach of the standard of conduct required under both 308A.328, Subd. 1, “A director shall discharge the duties of the position of director in good faith, in a manner the director reasonably believes to be in the best interests of the cooperative, and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.”  Emphasis added.  Discouraging customers is not in the best interests of the cooperative. If someone sees you shopping elsewhere, let alone hear you belittle the cooperative you are director of, you have caused harm to the association.

 

As an acting board member, Mr. Kangas has the duty, along with other board members, to meet and discuss the situation and seek a solution.  By taking his business elsewhere, he failed to perform his obligated duties, and assumed the role of a patron, rather than that of a board member.

When asked if he called the Voyageur Press to tell them the feed mill was closed, Mr. Kangas said it was “the Voyageur Press that called him to ask if the mill was closed and asked about doing another article.”

 

Did the Board Assent to the Vote for Removal?

 

Another asked the board, “I heard you through down your keys and walked out?”  Jim Stokke, board member, responded, “We were just about to adjourn and there was a request to dismiss the board.  A vote was taken that ended up 12-5.  The meeting was over and people appointed themselves.”  Mr. Stokke says the meeting was “just about to adjourn" and not that it was over.  There is a question as to whether or not they were adjourned at all, or just left.  However, the question regarding the legality of the vote (percentage of members, proper motion, etc.) still remained and was to be corrected with the special meeting being held at the Senior Center.

 

308A.328, Subd. 3, states that “A director who is present at a meeting of the board when an action is approved by the affirmative vote of a majority of the directors present is presumed to have assented to the action approved, unless the director:

 

(1) objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened and does not participate in the meeting after the objection, in which case the director is not considered to be present at the meeting for any purpose of this chapter; [none]

(2) votes against the action at the meeting; or [none]

(3) is prohibited by a conflict of interest from voting on the action [none].”

 

Even if no official motion was made by the board, they both heard and discussed the numbers necessary for a vote, and allowed the vote on actual meeting time.  Upon reaching the conclusion they had been voted out, they dropped their keys and left.  There was no adjournment.  If the board entertained the motion, allowed the vote, and acted on it (by leaving), it would seem to be “assented.”  The proper objections were not made and in its absence, does the absence of a clearly defined motion by a board member discount the actions taken?

 

Mr. Yetka intervened, “No business exists without a quorum and the board stays the board.”  The problem is that there was a quorum present.

 

Mr. Yetka said “The regular month meeting must be posted by the secretary [true, but which secretary.  If the prior removal was proper, the 20% existed (between those in attendance and the petition signatures)].  I [Yetka] instructed them [board members] to attend this one.” “When the board left no quorum existed and nothing was legal.” 

 

The day of the regular meeting was advanced one week because of Father’s Day, said the board, in accordance with the bylaws.  There is no provision within the bylaws, so was it determined in a previous meeting?  Article I, Section 7 (Regular Directors’ Meetings) state that “Regular meetings of the Board of Directors shall be held at such time and place as the Board of Directors, by proper resolution duly adopted and recorded upon the minutes, shall from time to time determine.”  When the board walked out, nothing more was heard from them until their posting went up June 15.

 

Subd. 3 “Unless the articles or bylaws provide for a different time period, a director may call a board meeting by giving at least ten days' notice or…”  While the articles have not been reviewed, there is nothing in the bylaws allowing a seven day notice.

Subd. 4 states “If the day or date, time, and place of a board meeting have been provided in the articles or bylaws, or announced at a previous meeting of the board, no notice is required.”

If the board was confident they had discussed rescheduling the meeting, then why post the meetings date and time on June 15?  Lacking a clear directive, it begs the question, was the meeting date manufactured to create a conflict?

 

Claims of Micromanagement

 

A member’s statement that “You don’t hire a manager to micromanage” was met with thunderous applause.  In response, Mr. Kangas said, “I do not believe in micromanaging.”

 

A member said, you [board] have been forcing Tim [Bury] to write letters of reprimand for employees to put in their personal files and told him to get rid of the freezer of pay for it himself.  Tim paid for it.

 

It was a solid point because the board sets manager compensation and benefits, but it is the manager, not the board, that runs day-to-day business operations. 

Someone added, “Board members must vote on systems [P.O.S.] before deciding to purchase it.  Employees were entering items into inventory two weeks prior to its purchase.”  Another said, “P.O.S. still doesn’t work.  The board was told and still went with it.”

 

A director individually or collectively with other directors does not have authority to act for or on behalf of the cooperative unless authorized by the board.  This would seem to imply that it takes a board motion, recorded in the minutes, before taking action of any kind.

 

Legality of Vote Argued

 

Mr. Yetka said that “You can only remove board members at the annual meeting.”  “Only a board can remove a member” and “the other meeting lacked proper notice.”  Mr. Yetka would appear to be wrong on both counts.  A petition, with the proper number of votes and charges, may be used to remove a member or members, and in this case the other meeting had the proper notice.

 

Mr. Yetka’s statements that “Having a war and holding special meetings isn’t the solution” and you need to “Follow the direction of the board” was met with a large moan.

 

Lori Shelton stated that the special meeting rights of the members were specifically outlined in the bylaws and allowed the removal of the board [outside annual meetings].  Mr. Yetka countered with the need for “just cause.”

 

Minnesota Statute 308A.321 states that "Members may remove a director at a members' meeting for cause related to the duties of the position of director and fill the vacancy caused by the removal."  Emphasis added.

 

Questioned about the petition presented to the board in February, a board member said that they [the board] “couldn’t read some of them, they [petitioners] had to sign, and some signed up outside of a closed meeting.  Some shareholders thought they were voting to sign up for the meeting,” he claimed.  When asked further about how many shareholders on the list were, the board replied three to four [of the 78].”

 

How do you disqualify names you can't read as many signatures these days are unreadable?  It didn't matter if they signed up outside of a closed meeting or if they were thinking they were voting to sign up for the meeting.  The petition clearly stated the charges, making it difficult to confuse as signing up for a meeting.  This petition appears to have been dismissed without the proper consideration and may have been sufficient to warrant a special meeting as requested [Article I, Section 2, (Special Meetings), Bylaws].

 

Just Cause & Letters Sent to Board Members

 

Once the meeting adjourned, Mr. Pirila asked Mr. Yetka how the need for “just cause” wasn’t met.  He said that it “had to be directly stated in the certified letter to each board member and wasn’t.”  Are you saying the letters was missing just cause?  “I haven’t seen any letters,” Mr. Yetka responded.  After retrieving a copy from Ms. Haugen, Mr. Pirila presented it to Mr. Yetka and asked him if he had seen it.  “I guess I’ve seen it.”  What is wrong with it?  Ultimately, Mr. Yetka said the letters were correctly done, but the board president could not be in two places at once and he [Yetka] advised them to attend the meeting at the fire hall.  This conflict of times, Mr. Yetka claimed, invalidated the other meeting at the Senior Center.

 

The letter in question included “Be adviced [sic] that the bylaws of the Wright Farmers Cooperative were not followed in August 2013, as the Board was not legally voted in.  At such time all present candidates or voters were “Not” shareholders according to the Farmers’ Cooperative Bylaws.”

 

“Be adviced [sic] that only shareholders are able to vote.  Also Candidates must be shareholders at the time they are elected onto the Wright Farmers Cooperative Board.  This was not the case in August 2013, as not all candidates held shares until they bought them in November 2013.”  Signed and sent June 12, 2014.

 

The board represented by Mr. Yetka did not inform the membership of their position regarding “special meetings” and allowed two meetings to be concurrently set.

 

The "Just Cause" claimed by the new board was that the board had been illegally voted in, prompting their call for a special meeting and new election.

 

What the Bylaws Say

 

A review of the bylaws shed some light on the issues.  Article I (Meetings), Section 2 (Special Meetings) cites that “The president shall cause a special meeting of the stockholders to be called upon a written request of at least twenty per cent [sic] of the stockholders, or upon the majority vote of the directors.”  Mr. Yetka claimed only the board of directors could do it and that is not true.  Once again, we are back to the petition of 78 signatures.  If there was 20%, the “Special Meeting” was obligated in late February or early March.

 

Mr. Yetka claimed that a quorum failed to exist during the meeting where the board was ousted because the meeting had adjourned.  The truth is that the board allowed the motion from the stockholders present, felt it was legal at the time by the shareholder figures on record, and left only after the vote, not before.  There was no adjournment.  Even so, motions should not have come from the floor in a regular meeting.  However, if the motion was entertained by the board, was it not also their motion? 

 

Article II, Section 5 (Removal) says “Any director of the association may, for cause, at any annual or special meeting called for the purpose, at which a quorum of the members shall be present, be removed from office by vote of the majority of the members [board] present.”  Emphasis added.  Outside of the annual or special meeting the shareholders are restricted from such a vote.

 

Article II (Membership), Section 2 (Termination) states that “At any time if a member…fail to patronize it…the association may elect to cancel his membership…”  Emphasis added.  Mr. Kangas admittedly is failing to patronize it and subject to termination.  It continues, “…the voting stock of said member shall be cancelled and said member shall thereafter have no voting rights in this association.”

 

Article II, Section 1 (Qualifications) says you must abide by the “requirements of the Bylaws, contracts and agreements and by becoming the owner of at least share of Capital Stock.”  Five of the seven board members elected in August of 2013 are claimed to have not bought shares until November.  If true, they would have been disqualified from holding office, or even running.  Essentially, you must own the capital stock to be qualified, and until you own it, you are not.

The conversation regarding the purchase of the P.O.S. is relevant to the Duties and Powers of Directors under Article IV, Section 1 (Management of Business).  If the P.O.S. was installed before a vote authorized its purchase, and no competitive bids were sought, the duties of the directors may have been disregarded.

Records of meetings seem to be slim at best when the secretary is to “Keep a complete record of the meetings of the association and of the Board of Directors.” [Article V Duties and Powers of Officers, Section 3 (a) (Secretary)]

 

The treasurer is to “Keep a complete record of all financial transactions of the association and perform such other duties pertaining to his office as may be required by the Board of Director.”  [Article V, Section 4 (b)].  If the P.O.S. was properly purchased, the paperwork should exist to establish that as fact.

In reference to who owned stock certificates once a person was deceased was left unclear.  The fact is that “Shares of stock shall be transferable only on the books of the corporation with the consent and approval of the Board of Directors…Before a new certificate is issued, the old certificate must be surrendered…”  Emphasis added.  This would negate the automatic transfer of shareholder rights to a spouse or beneficiary upon death.

 

Although patronage funds have not been distributed since 1984 (according to some in attendance), patrons appear to become shareholders once patronage funds equal the par value of a share of Capital Stock.   [Article VIII (Allocation and Reserves), Section 3].  The automatic disqualification of signatures on the petition in February may have been premature.

 

With the needs and desires of member-patrons in mind, considering those for and against a change in leadership, a change is due.  A cooperative is owned and controlled by its members.

 

Managers and directors have an obligation to know and make ruse the association follows all applicable laws in order to make decisions for the corporation.

Contrary to the belief of some, bylaws are normally not filed with the State.  The articles of incorporation have to be registered.  Any amendment to the articles generally requires a copy to be filed with the office of the Secretary of State.

 

One is not an actual member until they have been approved for membership.

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