CHS Insights

The ability to join conversations on critical issues is an important point of difference for the member-owned CHS cooperative system, says CHS Chairman David Bielenberg.

“While there often are many viewpoints on issues, it’s rewarding to be part of an organization whose members care deeply about its future, including governance issues,” he says. “While as a board our primary duty is to put the best interests of CHS as a company first on behalf of all owners, we always value their opinions.”

At the 2015 CHS Annual Meeting, delegates voted to postpone consideration of the proposed amendments to the CHS Articles and Bylaws. Bielenberg says this gave the CHS Board the opportunity to gather member feedback as it considers next steps.

Paper surveys were sent to 745 member cooperatives and 67,210 individual producers. More than 1,100 responded – about 100 member cooperatives and 1,000 producers. Responders shared opinions and suggestions related to the proposed amendments which included modifying the company’s membership definition, providing the CHS Board with flexibility to approve non-member patronage relationships and removing obsolete language.

“Given the discussions, we recognize there are diverse opinions,” adds Steve Fritel, chair of the CHS Board’s Governance Committee. “Our format was a thought-gathering tool and it generated meaningful feedback.”

Many survey respondents supported removing obsolete language from the articles and bylaws. In addition, Bielenberg says, there was a strong message from those responding that clear, concise communication and adequate time to process the information will be essential going forward.

The CHS Board will continue its consideration of next steps and timing of any member action needed. CHS members will have another chance to be part of the conversation this summer at upcoming Your CHS Town Hall Meetings.

CHS owners in 10 geographies have an opportunity this summer to hear strategic company updates from President and CEO Carl Casale and other management team members, as well as be part of an interactive session with CHS directors on company governance issues. Several meetings also will include special gatherings for next generation producers.

June 1: Peoria, Ill. (includes next generation event) June 6: Kansas City June 17: Mankato, Minn. June 21: Middleton, Wis. (includes next generation event) June 22: Sioux Falls, S.D. (includes next generation event) June 23: D es Moines, Iowa June 24: Minot, N.D. June 27: Grand Forks, N.D. July 12: Oklahoma City, Okla. July 13: Dayton, Ohio

Farmers, ranchers and cooperatives across the United States will share in an estimated $519 million cash distribution from CHS during fiscal 2016. The distribution ranks among the largest in CHS history and extends a five-year record of significant cash returns to owners.

The 2016 cash returns to owners demonstrate CHS commitment to maintaining a strong financial foundation, says CHS Board Chairman David Bielenberg, providing economic returns to its owners and continuing to invest in the company’s future.

“The ability of our owners, who are also our customers, to directly share in the financial success of CHS is a unique benefit of a cooperative business,” Bielenberg says. ““And this cash return is added value that enables farmers, ranchers and member cooperatives to invest in their own futures and in the communities where they live and work.”

The 2016 cash return to owners is based on CHS net income of $781 million for the fiscal year ending Aug. 31, 2015. Between fiscal 2012 and 2016 (based on fiscal 2011 – 2015 earnings), CHS has distributed a total of $2.7 billion in cash, a $544 million annual average.

The patronage distribution was issued in early March to about 1,100 member cooperatives and approximately 50,000 individual members and others. it consisted of patronage paid on business conducted with CHS in fiscal 2015. in early April, CHS issued 2,693,195 million shares of its CHSCo preferred stock to redeem about $77 million in previously earned qualified equity to 1,171 eligible member cooperatives.

The CHS Board of directors has adopted a new individual member equity redemption program that adds an “age of equity” component to the company’s existing “age of producer” redemption method.

The policy is effective for fiscal 2016 for which any patronage and equity distributions will be made in fiscal 2017. Future equity redemptions to both member cooperatives and individual owners will be made on an age-of-equity basis. individual owners may continue to apply for redemption of all outstanding equity at age 70; going forward, any equity earned on future business would be redeemed under the new program.

Changes in patronage pools for bulk fertilizer purchases will create potential value opportunities for eligible member cooperative crop nutrients customers. The CHS Board of directors recently approved the consolidation of patronage pools for bulk fertilizer (nitrogen, phosphates, potassium – NPK – and other bulk products) into a single dry bulk fertilizer rate. A separate rate will be retained for specialty products including starter fertilizers and nitrogen efficiency products which have significantly lower volumes, but typically higher rates.

The revision is effective for products purchased during fiscal 2016 (Sept. 1, 2015 – Aug. 31, 2016).

The path to the boardroom began early for a majority of CHS directors with many starting local board service in their 20s and 30s. Member cooperative leaders have pinpointed attracting the rising generation of producers as owners and directors as a major priority. in response, the CHS Board has heightened its emphasis on next generation leaders with efforts including a strengthened new leader Forum program, Your CHS Experience programming and research. Several directors share their perspectives on engaging next generation farmers and ranchers and ensuring they realize the value of working with their local cooperative.

“You hear ‘i don’t have time.’ i was no different at 33, but my cooperative made it clear the time was worth it. i gained a lot of personal growth and business acumen at my local co-op.”

“When i joined my local board at age 32, i learned the size, scale and value of the co-op equity system, and i learned how a non-farm business runs, how to deal with people and how to deal with management. All of this added value to my operation.”

“When i meet these new leaders, i’m amazed by their optimism and their unbelievable level of knowledge. we need to leverage that.”

“There are a lot of smart young spouses who would do a great job on boards. we need an organized effort to get them involved.”

“Their time is valuable. we need to communicate with them the way they prefer, but we can’t stereotype them.”

“The next generation is very time-constrained. we must demonstrate our value or they aren’t interested. These challenging times provide an opportunity to do that.”

“it’s really critical to the future of cooperatives, including CHS, to bring the new generation in through education programs and steps like the one we’ve taken to get equity back to individual members sooner. For me as a young producer, the key was being a leader of a business you owned and able to make a difference in the direction of your co-op.”

“The cooperative system’s strength has always been grassroots and education driven. Today, we can leverage the internet to connect with future cooperative leaders on an ongoing basis.”

Have a much higher interest in serving on a board because of CHS New Leader Program

"if you can take time to listen to somebody’s problems and help solve them — and do that time and time again — that’s what leadership is. That’s how you inspire people to follow you and your vision.

Care. Loyalty. While those words typically have a warm and gentle connotation, for cooperative board members they define the rock-solid foundation of directors’ fiduciary duties.

“Ultimately as directors, our role is to protect the balance sheet and bring value back to our owners,” says Director Dan Schurr, Iowa. “We are a large and diverse company with a diverse membership. You need to be in touch with your membership and understand their concerns, but ultimately you have to act in the best interest of the company as a whole.”

As is best practice for all cooperative boards, CHS directors regularly review director fiduciary duties with an emphasis on the components of care and loyalty.

Director Perry Meyer, Minnesota, says that requires looking beyond the needs of individual producers, geographies or businesses and ensuring that board oversight and decision strengthens the entire cooperative.

“For example, when we’re looking at a grain facility investment in the northwest, I know that while we don’t raise a lot of wheat in my area of southern Minnesota, I need to consider that facility in the broader interest of CHS and all its owners,” he says.

Several directors noted that the duty to act with care, loyalty and prudence in the best interest of the entire company was at the forefront as the CHS Board determined the company’s future in fertilizer manufacturing, ultimately deciding to invest in CF Industries Nitrogen rather than build a CHS plant.

“As a director, you need to ask questions to learn new ideas or point out flaws in what has been presented,” says Don Anthony, Nebraska. “Sometimes that can take courage. When I come into the boardroom, I need to share input from my region while doing what’s best for CHS as a company.”

In the end, that means supporting boardroom decisions and communicating them to owners as a unified board. “Honesty, integrity and transparency are core to our roles,” says Director Randy Knecht, South Dakota.

“A director should always take the long-term view. A cooperative doesn't have a retirement date.”

“Cooperative owners elect directors to make decisions on their behalf. They expect us to do the due diligence and be very thoughtful in our work.”

“Our owners expect us to keep CHS financially strong to protect their investment.”

• In a manner that the director reasonably believes to be in the best interests of the company

• With the care an ordinarily prudent person in a like circumstance would exercise under similar circumstances

• Ensure all actions have the purpose of advancing the best interests of the company as a whole

TO LEARN MORE ABOUT THE CHS BOARD OF DIRECTORS , VISIT WWW.CHSINC.COM /OUR-COMPAN Y/CHS-LEADERSHIP

CHS Stewardship investments made possible by CHS Foundation and Corporate Citizenship.