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What role should a corporation have concerning the control of the remaining Native lands in Alaska? What is "Native" about the structure and direction of regional and village corporations? The debate about the Native and direction of ANCSA corporations is critical to Alaska Natives. This article provides another perspective on the topic. — Paul Ongtooguk

Chapter 7

Incompatible Goals in Unconventional Organizations: The Politics of Alaska Native Corporations*

Gary C. Anders, Associate Professor
University of Alaska, Juneau

Kathleen Anders, Visiting Instructor
University of Alaska, Juneau

excerpted from

Developing America's Northern Frontier

Theodore Lane, ed., University Press of America, 1987

Developing America's Northern Frontier, Theodore Lane, ed. University Press of Amica, 1987. Chapter 4: The Labor Force Status of Alaska's Native Population, pp. 68-89; Chapter 7: Incompatible Goals in Unconventional Organizations: the Politics of Alaska Native Corporations, pp. 133-157. Used with permission of the publisher, for educational purposes only.

CONTENTS

Introduction

     Regional and Village Corporations

     Cash Settlement

Value Conflicts in Alaska Native Organizations

Management in ANCSA Corporations

Conclusions

Bibliography

List of Figure and Tables

Figure 6. The Alaska Regional Native Corporations

Table 22. Regional Corporation Financial Data . . . 1972-1978

Table 23. Profit and Losses by Regional and Village Corporations

 

When those subject to bureaucratic control seek to escape the influence of the bureaucratic apparatus, this is normally possible only by creating an organization of their own which is equally subject to the process of bureaucratization. (Weber, 1952: 25)

INTRODUCTION

Can the design of an organizational structure lead to incompatibility between social and economic goals? The answer to this question may determine the survival of the Arctic indigenous peoples. In 1971 the Alaska Native Claims Settlement Act (ANCSA) Public Law 92-203 brought the corporation to aboriginal cultures—creating new tribes of "shareholders." In an effort to achieve a "fair and just settlement" of aboriginal land claims, the United States Congress chose for-profit corporations to become the mechanism to generate Alaska Natives' future prosperity (Olson, 1976). For the first time in U.S. history, Native people were empowered with substantial amounts of both land and money (43.7 million acres of land and $962.5 million). Yet, Alaska Native benefits from this settlement are only partly determined by the corporations' ability to pursue conventional profit-making objectives. An equally important issue is whether or not Native traditional values can be successfully integrated within the imposed corporate organizational framework.

The ANCSA corporate structure resulting from government fiat began when the Alaska Native leadership decided that Congress could expediently resolve the land ownership conflict. In the late sixties, oil company executives were also persuaded to use their influence on behalf of Native interests. The unlikely coalition of multinational energy companies and Natives resulted in ANCSA being signed into law on December 18, 1971.

ANCSA is the equivalent of a treaty through which the Federal Government was able to provide for the construction of the Trans-Alaska Oil Pipeline (Anders, 1983). Two important settlement components were established in early negotiations with the Native leadership. First, Natives, in addition to a cash settlement, would also receive legal title to a sufficiently large land base to continue traditional subsistence practices (i.e., hunting, fishing, and whaling). Second, to protect this award, the Native leadership insisted that all Alaska Natives be formed into corporate entities representing collective regional associations. The corporate approach was selected because it afforded a greater degree of Native self-control than had been known through governmental administration by the Bureau of Indian Affairs. Unfortunately, as Hanrahan and Gruenstein (1977) poignantly emphasize, little effort was made by Natives or their legal consultants to evaluate the corporation against other models of organization.

Given the limitations and potential pitfalls involved in the modern corporate structure, it is somewhat surprising that, during the years of debate preceding the Alaska Native Claims Settlement Act, the focus was almost solely on the corporation as the vehicle for a settlement. Remarkably, the presettlement debate gave no serious consideration to developing a more democratic entity that would more nearly meet the economic and cultural needs of the Native peoples. As established, the Native corporations leave important decision-making power in the hands of a few corporate leaders. (Hanrahan and Gruenstein, 1977: 118)

Regional and Village Corporations

The act stipulates that Alaska be divided into twelve geographic regions, with boundaries corresponding to those twelve Native associations formed prior to the land settlement. Each region—composed of a relatively culturally homogeneous Native people—was mandated to establish a regional corporation under Alaska state law. Natives who were not permanent residents of Alaska later organized a thirteenth Native corporation which received its share of the cash settlement, but no land (see Figure 6 for locations).

 

Figure 6. The Alaska Regional Native Corporations

Note: This map indicates Alaska Native Regional Corporation boundaries.
In some instances, due to a lack of available land, regional corporations have
been allowed to select lands in other regions.

Source: Alaska Business and Industry, September 1983, p. 25.

ANCSA extinguished any further Native claims based on aboriginal use and occupancy. Furthermore, the act had the effect of revoking all reservations (with the exception of Annette Island). Native villages, however, did have the option of taking fee simple title to the surface and subsurface of their former reserves and becoming the equivalent of reserves by not participating in the cash settlement, or participating in the settlement as any Native village under the act and giving up their former reserve status and boundaries. Of the more than 200 Native villages affected by ANCSA, only seven (Arctic Village, Venetie, Elim, Tetlin, Klukwan, Gamble, and Savoonga) chose not to participate. These seven received additional land comprising their former reserves which were not part of the 40 million acres set aside for the other corporations. The villages taking part in the settlement elected to form profit-making corporations. Every regional and village corporation has its own corporate body composed of elected officers, directors, and staff who are charged with managing the corporation's land and financial resources.

All Alaska Natives of at least one-quarter or more Aleut, Eskimo, or Indian blood born before December 18, 1971, were eligible to enroll in both regional and village corporations. Each resident Native received 100 shares of stock in both regional and village corporations. These stocks are subject to a twenty-year exclusion and cannot be sold or transferred except through the courts in such cases as the probate of wills. Some individuals, whose residence in a particular village was obscure, were allowed to enroll in a regional corporation on an "at large" basis. "At large" shareholders did not receive any shares of stock in a village corporation; however, after the first five years, when payments to individuals stopped, only "at large" shareholders continued to be paid directly until all installments were completed.

Table 21 presents data on Alaska Native Corporations. Twelve in-state corporations were awarded entitlements of land and money on the basis of several factors, including population and traditional land use. The thirteenth regional corporation was created for nonresident Alaska Natives and received only a cash settlement. A total of 78,765 applications for membership in the Native corporations were declared eligible.

Cash Settlement

When Congress passed the ANCSA, it agreed on a payment of $462.5 million to be paid by the U.S. government and $500 million to be paid by the State of Alaska from a 2 percent overriding royalty on mineral-leasing activities. These payments were scheduled over a period of eleven years with the final installment paid by December 1981. Payments made to the Alaska Native Fund were transferred to the various regional corporations on the basis of their proportion of Native representation. Some funds (45 percent) were kept to be invested in corporate activities, and the rest were required to be paid to village corporations and/or individual "at large" shareholders.

During the first five years after settlement, at least 10 percent of all monies received by each regional corporation was distributed directly to individuals, and at least 45 percent to village corporations within its boundaries. Allocations made to village corporations were based on their proportion of regional shareholders.

Monies paid to corporations and individuals from the Alaska Native Fund were not subjected to taxation. Also, lands received by the Native corporations are not to be taxed for a period of twenty years after December 1971, unless the land is developed or leased according to Section 21(d). All profits made from the sale or rent of the land is subject to local, state, and federal taxes.

Section 7(i) of ANCSA specifies that 70 percent of all revenues received by each regional corporation through subsurface development or timber harvesting shall be divided by all twelve Alaska regional corporations according to their respective shareholder enrollments.

Various mergers, such as those between a regional corporation and its villages, are allowed; however, under ANCSA there can be no fewer than seven regional corporations due to mergers (Anders, 1983: 561-565).

Unlike conventional American businesses, Alaska Native corporations did not develop as a result of a successful product or innovation. Instead, Native corporations were created by a government act. These corporations began with a minimum of business experience to draw from and have frequently had to rely upon non-Native professionals to establish procedures, mold the organization, and create an identity. In many cases, attracting greater Native participation has been difficult because promising individuals have been spread out over several positions within their community organizations. Due to their numbers, Native corporations have been forced to compete with each other in new ventures. Subsequently, current investment policies sometimes create situations that impinge on village subsistence economies, as in the case of off-shore drilling rigs in the whaling grounds of the Beaufort Sea.

Alaska Native corporations are only about fifteen years old, but their basic organizational framework has been fairly well established despite the fact that many important issues are still unresolved and the corporate entities created under ANCSA are evolving. For example, the law excludes those Alaska Natives born after December 18, 1971, from participating in the claims settlement. According to population trends, it is estimated that approximately one-half of all Alaska Natives will be ineligible by 1991 (ISER, 1984: 3-8).

To sum up, Alaska Natives are expected to use these institutions to generate dividends and jobs for their shareholders, and generate revenues to cover taxes that will most likely be imposed on some of their lands. In addition, ANCSA corporations were set up during one of the most serious economic recessions in recent history, when many major companies were failing. They operate in a relatively underdeveloped part of the Arctic with extremely limited human capital or business infrastructure. Moreover, these corporations must contend with problems of a social and economic nature that these entities were never designed to face. All of this emphasizes both the unconventional origins of these corporations and the possibly incompatible goals that they must resolve.

This article presents a framework for understanding differences between cultural and organizational values with special reference to Alaska Natives. It explains incompatibility between the design and organizational structure of corporations and their incongruency with the cultural values and the expectations of shareholders having a limited understanding of conventional business institutions. We argue that the corporations created under ANCSA are not likely to fulfill their legislative mandate unless they can reconcile differences between organizational and traditional Native cultures. Accordingly, the paper is divided into three sections. The first section discusses the importance of culture in determining the perceptions, goals, and operating styles of organizations. It contrasts Native traditional values with conventional corporate values and explains certain difficulties that have affected ANCSA corporate performance. The second section examines implications for the future of Alaska Native village and regional corporations. The final section argues that the long-term goals of maintaining Native ownership of the land may not be realized despite current efforts to enact significant amendments to ANCSA.

The basic research in this area began in 1980 when the principal author moved to Alaska. He was instrumental in developing an academic program to train Native students in economics and business. During the past five years he has worked closely with many of these graduates and discussed the problems of ANCSA implementation with literally countless corporation officials and shareholders—at both the village and regional levels. In addition, he has continued his interest as he has become more involved in the practical issues of rural Alaska development. Data sources for this article include personal interviews, participation in numerous shareholder meetings, village conferences, consulting studies, and extensive analysis of the published works (e.g. government-commissioned studies, scholarly articles, and newspaper accounts),

VALUE CONFLICTS IN ALASKA NATIVE ORGANIZATIONS

Without doubt, the single most important task facing Alaska Natives is the continued ownership and control of their corporations. This issue is significant, for as Blair and Kaserman (1983: 334) point out, the typical closely held corporation tends to become more diffused over time, resulting in a separation of ownership and control. In as much as the ANCSA corporations represent the only means for Alaska Natives to preserve their lands and Native heritage, the issue of culture and corporate organization provides an important central focus.

With a particular focus on the role of the founder, Schein (1983: 13-28) has studied corporate organizational culture (also see: Allaire and Firsirotu, 1984). He finds that the founders of an organization often start with a successful paradigm based upon their own vision of the world and then work to incorporate it into the processes of the organization they build. In our case study, the paradigm was shaped by the desire of Native people to remove themselves from the control of federal and state agencies by persuading the U.S. Congress to pass ANCSA. Schein believes that the original environment created by the founders of an organization is often based more upon personal relationships than formal business principles. Schein points to such basics as office size, location, furnishings, an executive tenor, dress codes, and other status differentiation mechanisms that reflect changes in the cultural assumptions of an organization. Although their make-up is ostensibly Native, the ANCSA corporations are the manifestation of political compromise. As such, these institutions have been imposed upon Alaska Natives without much adjustment in either their formal appearance or implicit values. For this and other reasons, executive turnover in Alaska Native regional corporations has been high except in two or three more successful cases.

In highly integrated study, Allaire and Firsirotu (1984: 193-226) seek a "conceptual framework for organizational culture as a particularistic system of symbols shaped by ambient society and the organization's history . . . " Their work suggests that culture may vary from organization to organization, and that culturally defined internal control mechanisms may influence the measurement of performance.

Organizational culture, thus conceived, is a powerful tool for interpreting organizational life and behavior and for understanding the process of decay, adaptation and radical change in organizations. (Allaire and Firsirotu, 1984: 216).

With examples drawn from American, French, British, and Japanese organizations, Inzerilli and Rosen (1983: 281-91) contrast orientations and cultural differences—highlighting some dominant patterns in these societies.

We argue that there is a fundamental conflict between Native values based upon millenia of harsh Arctic survival, and implicit values of a nonpersonal bureaucratic organizational structure based upon market economy ideology. While it is not easy to generalize, tribal groups such as the Alaska Natives and others consist of people adapted to a "survival-oriented, (seasonal), noncontractual economy" (Conaty, Mahmoudi, and Miller, 1984: 110) who have learned to endure hardships and sought survival through close personal relationships, cooperation, and sharing. Modern corporations, on the other hand, represent the antithesis of these values (Allaire and Firsirotu, 1984). In most large corporations there is an internationalized belief that competition and the search for profits provides the only means for survival. It would be difficult to find a greater set of differences between values regarding private property, materialism, and individualism than those found in the Alaska Natives and their corporations. In the Alaska Native case, an appreciation of Native cultural values as contrasted with their corporate organization and its decision-making capabilities is critical.

Clearly, the intimations of culture found in the organizational literature differ markedly with respect to the underlying factors they emphasize as the shaping force on culture and structure of a social system. (Allaire and Firsirotu, 1984: 209).

While it can easily be seen that patterns of social organization are conditioned by a host of cultural influences, an important contribution of this work deals with two different concepts of a corporation, namely its functional aspects and its social responsibility. Inzerilli and Rosen view structure in the functional sense when different positions within the organization are thought of primarily as roles. On the other hand, structure is viewed in social terms when the position is used to define the status of the incumbent. Thus, two theoretical extremes arise which place conceptual treatments of management in a narrow formalized role, or in a broad context where relationships between individuals and reference groups regulate interaction and reinforce commitment to a shared goal. Both of these aspects can be observed in Native organizations. However, because of the elite position of Native corporate executives and the lack of sophistication of shareholders, symbolic manipulation of shareholder concerns has become an important management tool.

If this is true, an important consideration for Alaska Natives is whether or not the culture of the corporation has overridden the culture that people brought with them when they assumed their positions in the newly created companies. One possible explanation is that many of these individuals who aspired to the top positions had little investment in the old ways, and through their education and experience were deemed to be the most likely candidates for management positions.

In this respect, the self-selection of an elite conforms to previous American Indian cases, In the Cherokee tribe, for example, an outside, largely non-native, leadership took over the tribal government and used it for their own purposes when opportunities for huge cash settlements were authorized by the Federal Government (Anders, 1981: 225-238). Overall, the process of forced assimilation compromises the broad ethnic and tribal affiliations that qualify Native Americans and Alaska Natives for special benefits available only to those with the required "blood quantum." Moreover, intermarriage and socialization through education, as well as other personal experiences, condition perception and world view. Such factors must be taken into consideration when closely studying the make-up of Native organizations and the way that Native leaders interact with their respective shareholders (i.e. outwardly appearing sensitive to shareholders, but inwardly closed and manipulative).

Weber emphasized that the "capitalistic system has undeniably played a major role in the development of the bureaucracy," (1952: 25). This insight is particularly illuminating when one considers the processes working to absorb people from frontiers into political and economic structures of the dominant society. In the Alaska Native case, people from a non-capitalistic orientation have been placed in a situation which requires the adoption of corporations to preserve their homeland. In their escape from a form of colonial domination by the Bureau of Indian Affairs (Rogers, 1969), Alaska Natives struck upon the idea of corporations, but this is far from an ideal type of organizational form.

Federal wardship not only had the effect of officially lumping all Native Alaskans together without regard to their ethnic and geographical differences, but also officially reinforcing the pernicious division of a society on the basis of race and making this an element in the Alaskan brand of politics. Heavy-handed or incompetent administration, and the attempted application of national social programs designed to meet needs of a modern urbanized industrial society, caused unnecessary disruption and suffering. Overall was the stigma of inferiority arising from the paternalism, and patronization which was the basis of this relationship. Eighty years ago there may have been justification for special assistance and protection, but the Native is now asking if there can be any future in a system which continues to consider him as incompetent to manage his own affairs. (Rogers, 1969: 450).

ANCSA corporations as a rational-legal form of administration have affected the development and expansion of bureaucracies. We find strong reasons to agree with Abrahamssom, who writes:

Rarely the question is raised about which of the possibly legitimating forces are behind the growth of administration or to whose benefit the bureaucracy works. Bureaucracy all too often becomes another word for illegitimate administration, and the analysis of bureaucracy's dysfunctions seems to outnumber the analysis of its positive functions by about ten to one. (Abrahamssom, 1983: 279).

Our study of Alaska Native corporations raises serious doubts about the ability of traditional people who withstand the onslaughts of modernization and rapid social change. For many Alaska Natives still rooted in the subsistence lifestyle, the changes brought by ANCSA have not been favorable. Traditionally, Alaska Natives depended upon hunting, fishing, whaling, and other seasonal activities to satisfy their material needs. Now with the introduction of the corporations, western culture, and high technology, villagers of rural Alaska are painfully being forced to change.

To most Americans caught up in the cash economy, the loss of the Alaskan Natives' way of life may seem of little consequence, or even beneficial. But the Natives' culture—involving subsistence, art, music, oral history, traditions—has a value that cannot be measured in dollars and cents. The majority of the Alaskan Natives still find that it is better to live off the land, despite its hardships, than to adapt totally to the Western way of life. But numerous forces, in addition to development that encroaches upon their villages, are making it increasingly difficult for them to sustain their varied and rich cultures. And many Natives fear that, ironically, their own corporations could be one of these forces. Thus, the conflict on Kodiak Island (Koniag, Inc.) is more than a distant, inconsequential squabble. It is a drama that will be reenacted, with variations, in most of the eleven other regions of Alaska: whether profits or a way of life—or a healthy combination of both—will prevail. The conflict between profits and culture has been particularly striking because corporations were introduced so suddenly to a people so culturally remote from them. (Hanrahan and Gruenstein, 1977: 90).

While it is difficult to generalize due to diversity of Alaska Native peoples, who are as varied as Europeans in many important respects, it is obvious that cultural values long embedded in every facet of Native life have been strongly affected by the new corporate reality and the expectations it has created among shareholders. Due to the power and intrusiveness of these forces, social problems among Alaska Natives have been exacerbated. The alarmingly high rates of Native suicide (approximately three times higher than for non-Native Alaskans) attest to the increasing severity of tensions. Frustration borne out of estrangement, and the erosion of social patterns that once bonded Natives into cohesive units often leads to alienation, crime, and acts of violence and self-destruction.

Socioeconomic indicators on Alaska Natives reveals a continuation of their subordinate position to other state citizens despite the creation of the ANCSA corporate organizations. For instance, in 1970, 40 percent of Native men and 27 percent of Native women were considered to be participating in the labor force. Ten years later labor force participation had only increased to 42 percent for Alaska Native males and 37 percent for Native women. The corresponding 1980 labor force participation figures for non-Natives are 79 percent for men and 58 percent for women (ANCSA Study, 1985: IV-11). The nominal increases in employment that did take place have been primarily attributable to state government spending backed by increased oil revenues.

But comparisons between Native and non-Native economic conditions do not explain the full story behind situations that are worlds apart, For example, the arrest rate for Alaska Natives is three times higher than for non-Natives, the murder rate is twelve times higher, and rape is seven times more prevalent. Furthermore, Natives account for about one-third of the admissions to the state mental hospital despite the fact that they account for less than 16 percent of the total state population. (ANCSA Study, 1985: ES-10).

It is indeed hard to ignore such conditions when one realizes that Alaska Natives have an opportunity to create institutions capable of offering each shareholder the means to secure a higher level of material comfort. Only a brief survey of the resource base is needed to demonstrate the wealth possible from the natural resources contained on their lands. Yet, it is increasingly clear that the apparatus created by the U.S. Congress is failing to benefit the majority of Alaska Natives.

MANAGEMENT IN ANCSA CORPORATIONS

Native organizations in Alaska can accurately be characterized as heavily political. Quite often the management styles embedded in this particular political environment affect the ability of the corporate organizations to achieve even modest goals. For example, average earnings per share for seven of the twelve in-state corporations are negative. Table 22 reviews financial data for each of the thirteen ANCSA corporations. The first entry indicates the number of outstanding shares of stock issued. Current assets include cash and other types of liquid assets, such as property, securities, and inventories. Current liabilities are all debts that fall due within the latest year reported. Average net income reflects amounts remaining after costs are deducted from revenues. Average earnings per share is net income or loss divided by the number of outstanding shares.

Table 22

Regional Corporation Financial Data Average of Five-Year Period 1972-1978

Corporations

Number of Shares

Current Assets

Current Liabilities

Average Net Income (Loss)

Average Earnings per Share

Ahtna, Inc.

174,000

$12,304,141

$1,354,467

$452,600

2.53

Aleut Corp.

324,900

7,613,000

1,528,000

-49,700

-0.15

Arctic Slope Reg. Corp

373,800

15,684,270

14,938,602

-153,700

-0.41

Bering Straits Native Corp.

633,300

1,368,000

3,311,000

-3,642,400

-5.75

Bristol Bay Native Corp.

540,000

7,979,725

3,761,338

977,400

1.81

Calista Corp.

1,330,800

21,571,630

3,600,541

-2,191,800

-1.65

Chugach Natives, Inc.

191,200

15,068,799

8,727,070

-1,215,100

-6.37

Cook Inlet Region, Inc.

626,400

65,208,897

26,677,029

7,880,000

12.58

Doyon, Ltd.

906,100

11,602,000

19,144,000

847,000

1.35

Koniag, Inc.

334,400

8,696,176

8,314,927

-1,077,700

-2.39

NANA Reg. Corp., Inc.

482,800

20,593,646

20,183,660

848,800

1.16

Sealaska Corp.

1,581,900

100,756,000

101,828,000

-5,352,400

-3.39

   TOTAL

7,496,600

$288,446,284

$213,368,634

$-2,677,000

-0.35

Source: Prepared from Corporation Annual Reports.

Because managerial talent, what little there has been, has tended to be centralized in the large regional corporations, the village corporations (some with very substantial assets) have sought help from non-Natives. In numerous cases, the people who took control over these corporations had neither technical business ability nor allegiance to the traditional Native shareholders. As a result, there are numerous cases in which villagers have been cheated out of their cash settlement. Although the circumstances differ from one part of the state to another, it should be noted that this is part of a widespread and continuing story.

All too often some Native businesses hide information, blame others, and rely upon personal relationships to affect corporate decision-making. Moreover, using pressure and conflict have been characteristic of a certain managerial style. A few Native corporation executives have relied upon their personal charisma to sell their decisions and policies to the shareholders. Instead of leading to greater participation, this tendency has had a reverse effect. During various phases of ANCSA implementation, Native corporations relied upon outside consultants for help. This dependence did not promote internal competence in most cases. Costs incurred to create Native managers have been very high as reflected by extensive losses (Table 2). Despite their progress, a great deal of improvement is needed to bring Native corporations to an acceptable level of performance.

Since core values between corporations and their shareholders differ dramatically, there are often internal contradictions between sincere concern for, and arrogance toward, shareholders. Some of this conflict stems from the methods used by managers at higher levels to stay in power, i.e., making deals with members of important families.

In some corporations, when bad investments resulted in large losses, the typical response was to ignore it if a prominent Native was responsible. After several major failures, it was necessary to withdraw from certain investment areas where management knew little about the operations. Eventually, a few Native leaders banded together to establish a working concept of their core mission, but often this consuming effort did not reconcile the inconsistency between maximization of shareholder wealth and traditional Native values of sharing and cooperation. Subsequent manipulations of shareholders in several cases created an atmosphere of distrust and confrontation. Two Native corporations, Koniag and the thirteenth regional corporation (which was created for nonresident shareholders) have already declared bankruptcy. In the face of an increasing series of lawsuits between shareholders [of] these regional corporations, it is extremely likely that there will be more failures in the years to come (Alaska Business and Industry, 1983: 27).

The history of the Native American demonstrates their ability to take an instrument of western culture, modify it according to their own cultural disposition, and use it with exceptional effectiveness. But, at the time the corporations were created, three-fourths of Alaska's Native population lived in remote areas with no connecting roads, and low levels of housing, sanitation, health, and education. Income levels were well below the national average. The creation of multimillion-dollar corporations in the midst of such circumstances made it difficult for profit corporations to deal with the important functions of business without getting involved in social needs and community service issues. Due to a lack of business experience, most Natives were unfamiliar with the corporate model. There was a great deal of confusion about what could or could not be accomplished. In addition, the demands of the shareholders for jobs, dividends, lands, and a host of other items seemed to escalate.

Early setbacks in forming an organization that could transcend these problems created opportunities for individuals with the ability to arbitrate between the corporation and its shareholders. Over time, prominent Native leaders who had spearheaded the land claims settlement negotiations were replaced by extremely astute politicians who officially or unofficially moved into corporation hierarchy after ANCSA was passed. As McBeath and Morehouse (1980: 25-33) demonstrated, these Native corporate leaders received their training through an involvement with government antipoverty programs, the military, or local politics. Subsequently, elections to various boards of directors became hotly contested political events where business experience and ability often took a backseat to popularity.

The danger in this lack of understanding of the corporation by most Natives is that the Native community in Alaska is becoming corporatized. As with most economically disadvantaged minorities, the Native leadership pool is limited. And the action has switched from the political to the economic front. Former political leaders, many of whom were instrumental in getting the Claims Act passed, were naturally attracted by the economic clout of the corporations—as well as the $40,000 to $50,000 salaries many top officers are paid. Because of their former political status and because of the corporations' overwhelming importance to the Native community, the firms' officers are frequently still looked upon by their shareholders as broad-based community leaders, even though their perspectives and interests have narrowed somewhat. (Hanrahan and Gruenstein, 1977: 188).

In effect, the problems of corporate management have occurred because of the limited ability of Natives to adapt self-serving corporate organizations to their cultural, economic, and social philosophy. Furthermore, the conflicts inherent in the settlement act itself did much to prevent Native corporations from overcoming their competitive rivalries and collectively addressing the issue of survival, given relatively shallow pools of talent to draw from within the Native community (Anders, 1983: 555-575). Coupled with this was the emerging class structure that resulted from high-paying job opportunities in the corporations, which in many instances were created in the image of the most successful businesses in Alaska—multinational oil companies. Furthermore, even in cases where Native corporations are succeeding financially, it is likely that their business activities (oil drilling, mining, and logging) may undermine the subsistence economies that provide a cultural basis to the village (Anders, 1985: 7-8).

CONCLUSIONS

There is little question that the year 1991 is critical to Native corporations, because shareholders will then be free to dispose of their stock, and all undeveloped land owned by Native corporations will become subject to taxation. ANCSA corporations are different from general business corporations in that they were selected to be a reimbursement mechanism for the loss of Native lands and even a way of life. If they survive, it appears that they are almost destined to become public corporations in 1991. In order to meet the mission of retaining ownership by individual Native shareholders, the ANCSA corporations must develop investment policies that provide people with an incentive to retain their stock. Individuals must feel some positive economic impact of their corporations through dividends, jobs, local investments, and a track record that assures continued growth of shareholder equity. Of course, it may be argued that evaluating Native corporations on the basis of such criteria reinforces a strong cultural bias. Yet, the necessity of operating a business in an environment requiring profits for survival may still allow room to maneuver.

ANCSA corporations are novel entities which represent congressional efforts to legislate a recombination of economy, society, and private government. In a more pragmatic sense, they represent an attempt to use the corporate structure to achieve the self-determination of a Native minority.

While a few of the Native corporations have made the successful transformation and begun to work for the social and economic needs of their shareholders, most have not lived up to their shareholders' expectations. For example, in 1982, out of a total of ninety-seven of the more than 200 village corporations reporting to a government survey, forty-four indicated they operated at a loss that year, and thirty-five said they had lost money for the past three years. Table 23 presents profit/loss data for both regional and village corporations. As past reports indicate, in an average year one-third of all regional corporations and about one-half of all village corporations post losses—some consistently in the one-to-five-million-dollar range.

Table 23

Profit and Losses by Regional and Village Corporations

 

Number of Regional Corporations (12 reported)

 

1982

1981

1980

Range of Profit or Loss

Profit

Loss

Profit

Loss

Profit

Loss

Less than $100,000

0

0

0

0

0

0

$100,000 to $499,999

2

0

2

1

2

0

$500,000 to $999,999

1

1

0

1

2

0

$1,000,000 to $4,999,999

4

2

2

4

0

4

$5,000,000 to $9,999,999

0

0

0

1

2

2

$10,000,000 or more

1

1

1

0

0

0

Total

8

4

5

7

6

6

             
 

Number of Village Corporations (97 reported)

 

1982

1981

1980

Range of Profit or Loss

Profit

Loss

Profit

Loss

Profit

Loss

Less than $100,000

32

21

36

23

37

32

$100,000 to $499,999

17

11

9

17

9

12

$500,000 to $999,999

3

3

5

3

0

5

$1,000,000 to $4,999,999

3

6

0

47

0

2

Total

55

41

50

47

46

51

Source: U.S. General Accounting Office, Information on Native Corporations, June 1983.

The issue of differing cultural values, and the need for an alternative approach to economic development is extremely relevant. The ANCSA corporations provide an interesting study because of the exceptional origins and unusual nature of their shareholders. The discontinuity between what corporations as institutions are capable of accomplishing financially and what individual Native shareholders need is strong.

Native corporations in Alaska cannot ensure that their shareholders will have a future without a substantial profit posted on the income statement; however, this does not mean that Native corporations can afford to be insensitive to their constituencies. On the contrary, it is increasingly clear that greater affluence amid a deteriorating environment and community life does not make much sense. As a result, the corporate decision-making processes must balance shareholder concerns with important long-term goals. Successful strategies must be uniquely determined in the light of painful experiences drawn from each corporation.

Whether they do so because they think it is politically prudent or socially necessary or even because they feel it is right, Native corporate management must find ways to reconcile stockholders' needs and corporate profit. One means by which regional corporations could show greater sensitivity would be to support employment-generating activities with high social but low economic return (i.e., encourage worker cooperatives among their village corporations and other interested groups, such as nonprofit corporations and local governments). A collaborative effort concentrated in the regional center or largest town would lessen the economic burden and allow the pursuit of multiple objectives beyond those of profitability.

The signs of individual and social stress are numerous. Alcohol-related deaths and violence (intra- and inter-family) are arguably the most dramatic: in some villages the loss and suffering they entail is of crisis proportions. Extreme alcohol abuse is an example of self-destructive behavior common among individuals whose self-esteem is low. In economies of all kinds—cash, subsistence, mixed-self-esteem is intimately bound up with the ability to engage in meaningful activities, of which work is among the most important. Lack of meaningful work, and the related low level of income, is therefore a significant source of stress in the villages of rural Alaska (Marshall, 1985: 11).

The most interesting question in the Alaska Native situation deals with the pernicious imposition of the corporate institution as an instrument of acculturation. Alaska Natives, under well-intentioned leadership, were drawn into the corporate realm to escape dependence upon the Bureau of Indian Affairs, In the past, the BIA, as the self-imposed protector of Native peoples, actually created barriers to progress by fostering a persuasive dependence (Anders, 1981). Native people have demonstrated a remarkable determination to make the best of these alien institutions; however, the probability of failure is very real. Given this scenario with its serious implications for land ownership and reduced viability of rural subsistence economies, unless major changes occur soon, we doubt that the lasting effects of ANCSA will be positive for most Native shareholders.

Currently, efforts spearheaded by the Alaska Federation of Natives, a statewide Native political organization, are being directed at Congress to enact fundamental changes in ANCSA. Resolutions put forward by the Native leadership incorporate the following amendments to the existing law:

  • Giving each corporation (both village and regional) the option of prohibiting the sale of stock.
  • Allowing corporations to purchase their own shares back before 1991.
  • Issuing additional stock to Natives born after the 1971 enrollment deadline.
  • Prohibiting the transfer of stock to non-Natives.
  • Granting voting rights to shareholders who are not legally Natives, but who are descendants of Alaska Natives.
  • Establishing tax exemption in perpetuity for all lands held by Natives, including ANCSA corporations.

While these measures would do much to safeguard unwanted transfers of land to non-Natives, it is not likely that the amendments package will be passed by Congress. Discussions on the ANCSA changes has provoked a strong vocal reaction among many influential non-Natives. A political backlash against Natives is possible. Many opponents argue that the Natives have been given too much already, and that the proposed amendments would give Native corporations an unfair advantage. It is too early to make a determination about the outcome of the current Native lobbying effort; however, as observed in the past, a political resolution to major issues often produces unforeseeable consequences.

In the past, policies of the federal government have frequently worked to undermine Native ownership of land and valuable natural resources.

As Professor Young persuasively argues:

To the extent that both continuing and new problems forcing the Native peoples of Alaska are traceable to the organizational structure laid down in the Settlement Act, Congress cannot escape responsibility for the ensuing situation. If the basic argument . . . is correct, therefore, the United States government must bear a heavy, though by no means exclusive, burden of responsibility for the grave problems confronting the Native communities of Alaska (Young, 1981: 43).

Seen in this light, the conspicuous imposition of the corporations with the attendant profit motive increased the probability of early failures. Native people who struggle with the powerful machinery of the corporations must use them to achieve fundamentally different ends than they were intended. Conventional obstacles to economic success in Alaska (underdeveloped infrastructure, remoteness, scarce management talent, etc.) are very real threats facing Native corporations. The ability of these hybrids to balance traditional culture with profit making may be the only way their identity as Alaska Native corporations will survive the next decade. The stakes of the contest include land, wealth, and the destiny of peoples whose continuing ties with nature are too distant to measure.

NOTES

*This article deals with a very complex situation. An attempt is made to provide the salient aspects of Alaska Native Corporate organizations. Given the many considerations that can be brought to bear on such an analysis, we extend appreciation to the many people that have read and commented on the earlier drafts. In particular we would like to thank Dr. Peter Iverson, Migael Scherer, Dennis Burns, Dr. David J. Hickson, and two anonymous reviewers. Any remaining errors or omissions are solely our responsibility.

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Anders, Gary. "The reduction of the Cherokees, a self-sufficient people to poverty and welfare dependence," The American Journal of Economics and Sociology 40,3 (1981): 225-238.

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