An Argument For A Member-Adviser Selection and Vet Process

As Directors of PEC we are wisely required to submit to background checks to determine if a past history of unlawful or illegal actions exists. We also complete Non-Disclosure and Conflict of Interest forms. These steps are part of a defined system which protects the financial interests of our members.

To ask the same of "Member-Advisers" should not be any, if much different. To call the Advisers "member-advisers" and not pay them board meeting fees, etc. creates no negligible difference in our accountability to the membership. To accept member-advisers without understanding their backgrounds, intention and qualifications is tantamount to opening the hen-house to the foxes. At a minimum this Board should consider asking of any adviser that they would:

• Be willing to submit to a background check
• Provide proof of PEC membership
• Provide a professional resume
• Sign a Non-Disclosure statement
• Complete a Conflict of Interest form
• Be approved by a majority vote of the Board of Directors in Open Session

If you had the opportunity to listen to the discussion of the Board concerning this topic you would have heard the argument that "in all likelihood" no sensitive information would be passed to these advisers. Sounds okay but if you listen closely you will clearly hear the hedging and uncertainty in the statement. At no time was it emphatically stated by those supporting the appointment of member-advisers that unequivocally there would be no opportunity for sensitive information to be passed on to these member-advisers.

As a Board we have already had numerous lengthy and controversial discussions centered on the use and viability of either elected or appointed advisers to the Board of Directors. It was discussed as recently as the past two monthly meetings that Mr. James Spellman's candidacy for Advisory Director would not be considered by committee until an even newer process is in place. How is this situation any different in that it doesn't have a formal process? If we are truly committed to protecting member's interests we need to formally ask and answer the following questions:

• What is the difference between an Adviser/Member-Adviser and an Advisory Director?
• Do the Bylaws provide any opportunity to seat advisers on sub-committees or other? What about the removal of these same advisers? Will this panel be termed as a sub-committee?
• Will this panel/sub-committee be chaired by a seated Director?
• Will this panel/sub-committee be approved by the Board prior to action?
• Will there be a specific charter for this panel/sub-committee?
• Do the Bylaws allow for compensation for non-elected advisers?
• Will these advisers expect compensation for travel or time? Will they expect a services contract?
• Have the proponents of the issue taken the time to consider the potential costs if compensation is to be considered and ultimately awarded to the advisers?
• What powers are granted by the Bylaws to volunteers, advisers, or member-advisers?
• What powers do the Bylaws give to the Board in seating/contracting volunteers, advisers, or member-advisers?
• What cooperative policy or process discussed and defined advisers?
• What cooperative policy or process provides the mechanism for seating advisers? We've already heard that we cannot seat advisory directors without a new policy so what governs the member-advisors?
  
• How do we ensure that the advisers are competent, represent the true best interests of the membership, and that they have nothing to gain financially from the experience of being on a committee?

These are questions I asked of the Board and Legal Counsel since our last meeting and until yesterday's session I had received little to no response from either. It was only in open session that it was finally determined that the cooperative needed some controls in place prior to seating advisers.

It is unconscionable to ignore the potential ramifications of an action that could place the cooperative at risk. Since these advisers are not democratically elected by the membership I think we owe it to our member-owners to scrutinize these candidates before they are considered for member-adviser appointment.

Furthermore, neither the Board nor the committees seeking to appoint member-advisers have determined any minimum qualifications or criteria for selection. To select one member over another without any predetermined and approved process leaves the Board in prime position for accusations of bias and cronyism. If there is to be no selection criteria, no minimum qualifications, and no position description for these member-advisers then how are we to responsibly and ethically determine who to select? if we select six advisers over the remaining volunteers without a template then how will we make selections that are not based on a personal preference and that do not create a platform of prejudice? In fact, in the absence of all normally accepted criteria shouldn't we accept all twelve applicants as advisers? 


I remain very concerned by the fact that the majority of this Board is willing to push previously promised Bylaw revisions out a year, but is not willing to take the time to put into place a process that either scrutinizes or defines our member-adviser candidates. At the very least this sounds an awful lot like we are conveniently ignoring policy, procedures and processes so that we can do what want now regardless of long term consequences.

I have made my arguments in open session regarding this issue and I now believe that this Board is giving more consideration into the ramifications of putting advisers into place without proper scrutiny, and the harm that it could cause the cooperative. I do believe we have the time to make the right decisions without harming the initiatives that this board wants into place. But with the reluctance that was demonstrated by some Board members to commit to a member-adviser process that is fair, responsible and defined, I remain concerned.

Clearing the Smoke and Mirrors with PEC Bonuses

The word “bonus” is a pretty dirty word these days. It brings to mind corporate greed, excessive executive bonuses, and everything that is wrong with the American financial situation of today. But before bonuses became an incentive that some corporations handed out like free candy, they were actually a useful tool for providing motivated workers with a road map for exceeding average goals. In return, any overachievers up to the task of meeting bonus goals were rewarded for their assistance in making their company a stronger institution.

When I joined the Board of the Pedernales Electric Cooperative last year I discovered that they also had a practice of handing out large financial bonuses to their general manager that had no ties to work performance. PEC had a long-standing tradition of awarding these “performance” bonuses to its managers. In fact, the General Manager received bonuses in excess of $300,000 without any basis or plan to be measured against. Bonuses were expected yearly and were based solely upon a rank, tenure, or even just a recommendation. The quality of performance of the respective manager had no bearing upon what or how much was rewarded.

This archaic method of reward without exception did little more than create a system of entitlement. There were no benefits to the cooperative in adhering to this old bonus system—it forced no improvement in processes and did not support corrections to problems. Initiative was stymied and growth—collective or individual—was stunted through lack of goals. I saw in PEC a mirror image of the corruption and greed we currently see in our U.S. banking institutions and corporations who we are now burdened to support through government bailouts.

Knowing this situation was critical, I began to develop a 2009 Performance Management Matrix for the General Manager in 2008. Following open discussion, the 2009 Key Performance Indicators (KPI) was unanimously approved in our March 16 board meeting. The new bonus plan consists of quantifiable measurements that accurately reflect what we believe to be the critical success factors of the cooperative. For 2009, the KPI includes goals for safety, cooperative cost control, member satisfaction, relevant industry comparisons, and program development. These KPIs manifest the cooperative’s new goals in that they are critical to improving our bottom line, promoting a safe environment for employees, creating more efficient work processes, and ultimately restoring the trust of the membership.

The General Manager will use the Key Performance Indicators that have been established for him as benchmarks for his staff. All PEC employees will then become partners in achieving the measurable goals the board has defined. Every department and employee will be recruited to work in synergy towards our overall success.

The PEC’s bond rating was recently dropped due to poor past business practices such as this unhealthy bonus system. It was also recognized by Fitch, the bond rating service, that PEC was under pressure to reduce costs and rebuild trust with its membership. The Fitch report is affirmation that the new KPI driven bonus plan is a step in the right direction. By establishing performance goals which promote financial stability for the cooperative we will both reduce costs and rebuild trust.

We’ve removed the smoke and mirrors from the PEC bonus system and provided intelligently defined targets that give the board, the management, the employees—and even the membership—the benefit of a high-level, real-time view of the progress of our cooperative. As with all Key Performance Indicators, the target will change as the organizational goals change and as the organization gets closer to reaching a milestone. This serves as incentive to ensure that the cooperative management remains flexible and nimble to a changing climate and membership.

Typically, a bonus plan is not a newsworthy or even very interesting topic. Many companies annually define or redefine their goals to provide incentive for the executive officer to drive company performance. Yet for PEC this is another historic moment. PEC now has a clear direction of what needs to be done to meet goals, make improvements, and ultimately serve the membership.

http://www.sanmarcosmercury.com/archives/7352

New PEC Policy Promotes Open Communication

On Jan. 26, the Pedernales Electric Cooperative Board of Directors passed a board communications policy. The board followed a democratic process to review, debate, revise, and ultimately pass a final policy. I have written and disseminated this account of that process under those new board communication guidelines.

In researching this policy, it became clear that many companies, both public, private, for profit and not for profit, have communication policies. These policies fulfill many needs: they protect entities from lawsuits resulting from libelous statements; they guide board communications through defined channels; and they educate the public on how they can expect to hear from their elected representatives. And in the case of our cooperative, it also protects the members from unnecessary expenditures of the PEC staff and resources that they pay for.

Our new communications policy is a process that helps us define when a statement from the board is an official PEC communication or a personal statement. Once this determination is made it guides the person making the statement on how they can transmit that to the public. Official PEC Board communications will be disseminated through our communications department. Personal board communications will be disseminated through the board members’ own accord.

The policy contains no restrictions on the individual board member’s communications other than that it must contain a disclosure clause at the end stating the piece reflects their personal opinion and not necessarily that of the cooperative. The policy suggests that the board member submit it to our Board General Counsel to review it for any libelous statements. This is offered for the board member’s own protection, not to alter the content or tone of their message. The individual board member is free to distribute their communication to whomever he or she wishes in any manner they desire.

The policy also contains guidelines for internal communications. The policy requests that any board member wishing to communicate with PEC staff go through the General Manager. This is done to respect the PEC working hierarchy and company resources that the membership pays for through their electric rates. The policy does not in any way restrict the content of a Board member’s communications with the staff. The policy merely asks that they make arrangements to do so through the General Manager so that the managers and their supervisors are aware of it.

I appreciate the input received from PEC members, PEC staff and Board Members in drafting this policy. While some people were under the impression that the policy might hinder board members from communicating freely with the public, I want to assure our members that this policy as adopted is intended to have quite the opposite effect. By having a set of standards all board members can now communicate with the public within a process that they can trust and that protects both them and the cooperative. All board members can now communicate openly with the public without fear of unintended legal consequences. The result of this is that our communications policy creates a safe environment, which encourages communication between the board members and the staff, membership, and media.

The events leading up to the adoption of the policy have been an excellent challenge for the PEC board to test its commitment to frank dialogue and debate in a forum open to our membership. The experience detailed here shows the challenges in making “openness and transparency” more than just a phrase.

I am encouraged by the debate among our board members on this and other issues. The fact that we have disagreements is proof that we have a diverse board. Our willingness to accept that diversity and still work together is what will support our efforts to remake the Pedernales Electric Cooperative into an institution of respect and reliability.

http://www.sanmarcosmercury.com/archives/6456