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3. 2008 National Women in Agriculture Educators Conference

Understanding Cooperative Equity

Phil Kenkel

Summary

Most farm families are members of one or more cooperatives. Producers patronizing traditional cooperatives often receive equity interests as part of their patronage dividends. Producers participating in new value-added or bio-energy cooperatives may receive equity interests linked with delivery rights and obligations. Some types of cooperative equity are taxable to the producers at the time of issuance, while other types are taxable at the time of conversion to cash. Cooperatives are increasingly converting earnings to unallocated equity which has different property rights and cash flow implications for the producer and the firm. Some cooperatives are experimenting with new equity systems such as the issuance of preferred stock with fixed dividend payments. Many cooperatives are actively working to include more women on their board of directors. Cooperative board members must understand the complexities of cooperative equity from the perspective of both the firm and the member.

Cooperative equity is an important asset for agricultural producers. Unfortunately it is often poorly understood. This breakout session provides an overview of the various categories of cooperative equity. The property rights, cash flow and tax issues associated with these categories are described. Issues involving estate management and intergenerational transfer are also discussed. Equity management issues are discussed from both the perspective of the cooperative member and the cooperative firm. The breakout session is designed for the non-technical audience desiring a better understand of cooperative equity.

Details

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