Two problems in corporate America— and the Farm Credit Solution

by Dean W. Moreau, president and CEO, Yankee Farm Credit

The media has paid a lot of attention to corporate misdeeds for the past year or so, and I thought I’d take the time to offer some perspectives to separate Farm Credit from the rest of the crowd.

There are a couple of problems:

• First, we’ve all been reading about the weaknesses associated with having one person assume the roles of CEO and the board chair in corporate governance. A lot of people are talking about separating the two positions, which would require the board chair to manage the board and the CEO to report to the board.
• Second, there have been issues related to the selection of members for America’s corporate boards. The one big thing is that the CEO picks the board members and very often “stacks” the board with friends and allies. This means that you often have a rubberstamp board instead of an inquisitive, demanding board that holds the CEO accountable.

"... these problems do not exist at Farm Credit— and they never have."

Farm Credit Does It The Right Way

I’m happy to say that these problems do not exist at Farm Credit — and they never have.

Farm Credit’s CEOs have never been members of the board of directors. Instead, Farm Credit’s management reports to the board. So when we talk about independence and the “purity” of Farm Credit’s corporate governance structure, it’s because we don’t have the CEO on the board.

We also have a nominating/election process that insulates the board from cronyism. At the annual meetings, our stockholders elect a nominating committee, which is made up of customer-owners. The nominating committee then selects director candidates following interviews of interested individuals.

At Yankee Farm Credit, we have a nine-member board, with three board members from each of our three nominating regions.We do it this way because the numbers of stockholders in each region are relatively equal and we want to provide equal regional representation.

Thus, Farm Credit has stockholders selecting a nominating committee which, in turn, selects the candidates to run for election by the stockholders. It’s a stockholder-driven process, independent from management and far more democratic than what you find in mainstream corporations.

One Step Further

We even go one step further and have the board appoint two directors, not just the one required by Farm Credit regulations.* Currently, the two appointed board members at Yankee are Charlie Sniffen and Dr. Rocki-Lee DeWitt. These appointed directors are nonstockholders chosen by the board for specific expertise related to the Farm Credit mission.

Summary

When you sum it all up, stockholders should feel good about the Farm Credit election process, which delivers fairness and independence that exceeds anything similar than I can think of in corporate America. The nominating process just happened again successfully. The board recently began working with Rocki-Lee DeWitt, one of its two board appointed directors. And every Yankee Farm Credit member can take pride when you participate in the election process.

This letter appeared in the Winter 2004 issue of Financial Partner (F.P.) magazine, Yankee Farm Credit's customer publication. Click here if you would like to start receiving F.P. magazine in the mail.

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