Moderate Breeze- the Background Behind the Member Uprising

The second installment of the Lincoln Electric member uprising.  I need to include a bit of an explanation of the Rural Electrification Act and the Rural Electrification Administration – Rural Electrification Administration (REA) provides a good description of how and why legislation was passed that gave the Electric Cooperatives a financial advantage (over the private electric companies) in providing electrical service to rural areas.  Go ahead – read it.  I’ll wait.

Essentially, the conflict boiled down to structure – a private electric company (Montana Power for example) was supervised by Montana’s Public Service Commission.  With Lincoln Electric (and the other Montana Rural Electric Cooperatives) the assumption is that the coop board members will represent the cooperative’s owners and users.  The slogan is still on the wall: “Owned by the people we serve” and we still hear the deliberate misquote “Owned by the people we screw.”  Both versions can show some support.

I knew most of the board members.  I worked with many on projects unrelated to electricity before and after.  Still, Lincoln Electric’s management only needed to convince six out of ten to go along – and they had worked together for a long time, and developed trust.  Gareth Eaton and Duke Baney weren’t so easy to convince – and it was their dissatisfaction with the explanations that led to the member uprising.  Gareth talked to his son Craig.  Duke shared his concerns with Kenny Gwynn  and Al Luciano.  The management and remainder of the board didn’t see it – but the member uprising was coming.

There’s a 1944 publication online that tells of the strengths and weaknesses of cooperatives at

  1. A cooperative business is set up by a group of individuals to obtain services for themselves at cost—not to obtain profit from rendering services to others.
  2. A cooperative business tries to render the greatest possible benefit to its members—not to make the largest possible profit.
  3. A cooperative distributes any surplus income over the cost of doing business among those who are served by it, in proportion to their use of its services—not in proportion to their investment.
  4. A cooperative is controlled by its patron members, each of whom ordinarily is allowed a single vote—not by the owners of its capital stock, if any, in proportion to the number of shares they hold.

    In other words, the chief aim of cooperative business, as contrasted with other kinds of business, is to provide goods and services to its members at cost. A cooperative does not engage in buying and selling in order to make a profit for its members. Although it may buy and sell from the general public in order to carry on its own business, this is incidental to its chief aim—serving its members.

A common problem with co-ops is that the organization is theoretically operated for the benefit of its members, but there is a tendency for co-ops to shift from that emphasis to being operated more directly for the benefit of the employees.  A glance at Lincoln Electric’s declining numbers for a quorum at the annual meeting suggests that a lack of general interest from most of the membership.  At the most recent annual meeting, the report on the website shows 101 members required for a quorum and 25 employees of the cooperative.  Those numbers show how difficult it is to “render the greatest possible benefit to its members” as a priority over rendering the greatest possible benefit to its employees.  It is a natural tendency of management to look for agreeable board members.  (Board members have been known to argue against this statement, but I have yet to be convinced by those arguments)

The big concern that led to the members revolt was that the manager was retiring, had pretty much selected his own successor, and the board supported paying him his full wages for the next two years as a consultant.  Another concern was nepotism.  The electric service was probably close to the best in the state, and office services were available to the public 5 days a week. 

Next installment:  Force 5: Fresh Breeze – small trees in leaf begin to sway

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