Starting a First Nation’s Economic Development Corporation Workshop

Links to Learning

Starting a First Nation’s Economic Development Corporation Workshop

December 18th, 2013 8 am 11 am

Westin Bayshore

By Transformation: Social and Economic Development

Carol Anne Hilton, MBA

For AFOA BC

Outline

• Why an Economic Development Corporation?

• Vision and Mandate

• Legal overview

• Structure

• Functions- HR, operations, finance, marketing, and governance

• Board strategy

• Link to lands management

Why a Development Corporation?

• Systematically remove barriers to development

• Is a structure for accessing business opportunity

• Structure to manage business, projects and distinguish from the FN Government

• Separate risk from the FN

The Development Corporation

• Is a vehicle that communities create in order to travel toward a destination

• Corporate/business approach- instead of program/services

• Means to access business funding- capital/equity

The Development Corporation

• EDCs are the economic and business development arm

• Responsible for developing a Strategic Plan, and approving annual business plans and budgets consistent with the Strategic Plan.

• The Board also approves new business ventures, contracts and major financial transactions

Continued

• Support of new and existing economic development projects and businesses

• Increase investment readiness

• Increase engagement with outside partners and organizations

• Container for development

• Pivotal point of business relationships

• Entry point for industry participation

Example: White Cap Dakota

• Economic Mission

•  “To create an economically self-sustaining community with financially independent members through the effective use of economic tools that maximize the available resources, respect the Dakota culture and protect the environment while protecting and enhancing inherent rights.”

Example: Na Cho Nuk Dun First Nation

• The primate mandate of NND Development Corporation as the primary business arm of the NND Government is to maximize NND’s economic interests. This will be achieved through investment and development in three solid industries:• ■ Mining/Reclamation – utilizes and maximizes

existing resources effectively and efficiently while developing skills and technology throughout North America.■ Renewable Energy – is a growth industry of hat NND is in a perfect position to capitalize on.■ Real Estate – proven track record of cash flow and equity preservation.

Vision Statements

A vision is:

• Often confused with mission, goals, statement of purpose, and other terms used by organizations.

• The preferred future, a desirable state, and ideal state

• A general statement encompassing the direction an organization wants to take and the desired end result once it gets there. It is the vision of what those involved what their organization to become or impact it will have

Vision Checklist

• Provides the necessary framework within which business planning occurs

• Tells how to see the future

• Sets out the desired destination

• Remember simplicity is best!

• Embrace key values of the organization/community

• Focus on key words and outcomes

Vision Examples

• Enhance and strengthen the Long Plain First Nation economic base and meet the employment and economic needs of its citizens.

• We, the Champagne and Aishihik First Nations people and our government, shall promote a healthy, unified and self-reliant people, while conserving and enhancing our environment and culture.

Vision Samples (cont’d)

• To achieve self-reliance through economic development and to preserve the First Nation culture through the creation of jobs on our lands for future generations – Osoyoos Indian Band

• To create economic opportunities and develop business initiatives and partnerships for the primary benefit of our First Nation communities both on and off reserve - Wasaya Group, A Native Venture Corp.

Vision Samples (cont’d)

• To initiate, develop and manage business opportunities which are compatible with Cowichan Tribes culture and heritage. KDC shall strive to maximize long term profitability to support economic development and capacity building to be full participants in the local, regional and national economy – Khowutzun Development Corporation.

Vision Samples (cont’d)

• The Burns Lake Native Development Corporation will empower member First Nations to realize their economic aspirations within their traditional territories – Burns Lake Native Development Corporation.

• To create a strong and diverse tourism and business climate for the economic and social benefit of the people of Nocona and its surrounding areas.

Core Business Functions

• 1) HR

• 2)Administration/operations

• 3) Finance

• 4) Marketing

• 5) Governance

Human Resource Management

• Develop a long-term strategy for recruitment and retention.

• The board and the senior management team must recognize that human resources is a primary focus for the organization.

• This includes Corporation staff and recruitment of Board members.

Pyramids of Reporting

Managers

Employees

Partners/Clients

Community

Directors

Board

Corporation CEO

Board vs. Staff RoleBoard

Provides strategic directionRecruits and

manages senior staff person (Corporation

CEO)Sets the vision

and Mission

Monitors outcomes and performance

StaffSupports Board in

planningRecruits and

manages Corporation staffImplements the

Corporation’s strategic and

operational plansImplements operational plan

and oversees budget

Financial Models

Types of transactional models:

1. Fixed annual payments

2. Royalties based on outputs

3. Royalties based on value of outputs

4. Profit based royalties

5. Equity participation of shareholders

Wealth Management

• Wealth management is an investment advisory process that incorporates financial planning and investment portfolio management

• Wealth management calls for credentialed financial advisory - to coordinate retail banking, estate planning, legal resources, finance and tax professionals and investment management to maximize wealth

• The emerging ‘high net Nation’

Wealth Management

• First Nations are moving from the ‘underdevelopment of reserves’ towards wealth management through economic development and legal frameworks

• Nation building and wealth management are parallel processes

• need to manage investment risks, the need for sound financial advice, and a solid financial for First Nation governments.

Governance-Key Roles of the Board

• Providing strategic direction to the organization

• Manage the Senior staff person of the Corporation

• Monitor performance

• Risk identification and oversight

• Governance systems and processes

Signs of good governance

• Accountability and Transparency

• Legitimacy and Voice

• Direction

• Performance

• Fairness

Risk Management

• The process of risk management is a simple three-part activity. It involves: • looking at a situation and asking what can go

wrong and what harm could result; • identifying practical measures that can be

taken to keep such harm from occurring; and • if harm does occur, identifying practical

measures that can be taken to lessen the impacts of harm and pay for any resulting damage or losses.

Recruiting the Board

• Organization, Mission and Values

• Values

• Desire

• Availability

• Complementary

• Motivation

Selecting Directors

• Ensure a broad talent pool

• Diversify board membership

• Develop a matrix of potential Directors

• Revolving succession list

• Ensure bylaws have a turnover requirement

• Regular and ongoing evaluation

• Clear expectations of Directors

Competencies of Directors

• Knowledge, experiences

• Relationships and connections

• Aligned with values and culture of the organization

• Familiarity with Governance/Boards

• Committed, can deal with role dichotomy

Recruitment Role of Boards

• Recruit and retain senior staff person to run the corporation

• Manage the CEO/Senior Manager

• Support training and development

• Ongoing performance evaluation of Senior Manager

• Two-way communication

Legal Overview

• There are many types of business entities defined in the legal system-

• These include corporations, cooperatives, partnerships, sole proprietorships and limited liability companies

Continued

• Builds strong relationships with members, clients and other key stakeholders

• Actively involved in Strategic Planning

• Implements systems and controls to safe guard finances

• Selects, supports, advises, evaluates and terminates the Executive Director/CEO

• Provides and develops institutionalized accountability structure

• Focuses on results and impact of its services

• Makes objective and independent decisions based on solid information

Legal Overview

• DIFFERENT CORPORATE STRUCTURES

• Non-Indigenous Companies• Shareholders• Directors• Officers

• Indigenous Companies• How do they from non-indigenous companies?• Community members• Chief and Council

• Partnerships• What types of partnerships are there?• How do they differ from each other?

• Parent Entities• What are they and when do you need them?

Continued

• WHEN AND HOW TO CHOOSE A STRUCTURE (Compare/Contrast)

• Only incorporate if you have a deal!

• Protection from Liability• Liability of People (Owners, Chief and Council, Directors)• Asset Protection & Profit/Loss: Who bears the risk?• Case law

• Tax Considerations• On-reserve vs. off-reserve

• Management and Control• Reporting, participation, changes, business planning

• Complexity and Cost

Foundation of Formal Partnerships

• Letters of Agreement

• Partnership Agreement

• Contracts

• Shareholders Agreement

• Society Constitution

Role and Responsibility

• BUSINESS ASSETS = COMMUNAL ASSETS

• Chief & Council have a fiduciary duty to manage communal assets

• “Separation of Business and Politics” – What does this mean?

• Chief and Council involvement/control – striking a balance• Role of Board of Directors• Role of Chief and Council

Continued

• Communications: Board -- Chief and Council -- members• Members of Council on Board of directors• Formal reporting obligations• Advisory committees

• Legal structure to meet governance goals• Shareholders• Directors• Articles – tailoring corporate governing documents to meet

indigenous company needs

Key elements of starting an Ec Dev Corp

• Issues to be considered

• Defining goals and objectives of the process

• Determining milestones or targets with timelines

• How to add an issue/factor

• Sharing of information

• Dealing with media

• Designation of roles

• Involvement of legal counsel, financial advisory or technical advisors

• What happens without agreement

• Decision making framework

• Conflict management

Example of Key Questions

• What interests are present?

• What issues are being considered?

• How will the parties access information?

• How will the parties deal with external interests?

• How will the agreement be defined?

• How will the cost of the process be met?

Key Elements for Agreement –Process Initiation

• Identify purpose of process- goals and interests

• Identify necessary Commitments

• Who needs to be involved?

• How will decisions be made?

• How should the process be structured?

• How will activities be established- record keeping, agendas?

• Conduct of discussions

• How to prioritize projects

Board Strategy

• Approve the vision and mission

• Engage in planning

• Identify and weigh risks

• Approve the plan and strategies

• Oversee and monitor plan implementation

• Monitor performance of organization

Board continued

• Determine a governance model and ensure that appropriate organizational policies and structures are in place

• Participate in the development of a mission and strategic plan for the organization

• Hire and ensure that an effective management team is in place (i.e., Executive Director)

• Maintain effective partnerships and communication with the community, the organization's members and its stakeholders

• Maintain fiscal responsibility, including raising income, managing income, and approving and monitoring annual budgets

• Ensure transparency in all communication to members, stakeholders and the public

• Evaluate the organization's work in relation to a strategic plan

• Evaluate the work of the board of directors, ensuring continuous renewal of the board, and plan for the succession and diversity of the board

Continued

• Contracts

• Proposals/grants – funding agreements

• Leases/rentals/ agreements

• Insurance - Get a copy of your Directors and Officers Liability insurance policy, your Comprehensive Insurance policy, or any other insurance policies and read them.

• Organizational Calendar - Make a note of any deadlines or renewal dates and add them to your Organizational Calendar

Directors

• Act in the best interests of the organization

• Understand the roles and responsibilities of being a board member

• Be familiar with the organization's bylaws, policies and procedures, strategic plan, mission, etc.

• Ensure he/she avoids conflicts of interest including operating in the best interest of the organization not in self-interest or the interest of a stakeholder group

• Respect confidentiality policies that pertain to membership and board discussions

• Keep informed about the organization's financial activity and legal obligations

• Bring his/her own skills, experience and knowledge to the organization

• Attend board meetings regularly and arrive prepared for meetings

• Support board decisions once they have been voted on

Types of Policy Board decision-making and meeting practices (usually covered partially by by-laws)

• ♦  Conflict of interest

• ♦  Board member conduct

• ♦  Role, responsibilities, and authority of the executive director or CEO

• ♦  Financial management

• ♦  Personnel, hiring and other human resource practices

• ♦  Treatment and protection of consumers, customers, clients or users

• ♦  Fundraising (including ethical considerations)

• ♦  Advocacy and public education

• ♦  Accountability to members, stakeholders and community (may be partially addressed by laws in references to annual general meeting and annual financial report)

Operational Policies Some organizations also try to distinguish between board or governing policies and management or operational policies. Also use Comprehensive Community Plan and Land Use plan as guiding documents for development

Organizational Binder

• Creating an organizational binder keeps all your important information in one place for easy reference and tracking and contains:

• Governing statute – incorporation papers - Certificate of Incorporation

• Key dates - note of any deadlines or other important dates in your Organizational Calendar.

• Policies and practice – bylaws

• Minutes of board meetings

• Minutes of AGMs

• Minutes of committees

• Financial affairs - annual budget , your audited financial statements, and , monthly or quarterly financial statements you receive as a board member. -Notes your organization’s major sources of revenue. Notes your organization’s major expenses. Note your organization’s debts.

Example WEDC

• Example- The Wuikinuxv Economic Development Corporation, Wedco, is owned by the Wuikinuxv Nation and its purpose is to foster economic development for the Nation and its members.

• The corporation is structured as an independent business that operates at arm’s length from the influence of Wuikinuxv council and administration.

• The shares of the Corporation are held in trust by a set of trustees which are composed of Wuikinuxv members appointed by Wuikinuxv Council.

• The trustees appoint the board of directors that manage the corporation.

• Thank you! • Please contact Carol Anne Hilton at• 250 508 1778 • [email protected]• www.transformationinternational.ca• Twitter @Hesquiaht