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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

December 2012: 

Regional Alaska Native Corporations: 

Status 40 Years after Establishment, and Future Considerations: 

GAO-13-121: 

GAO Highlights: 

Highlights of GAO-13-121, a report to congressional requesters. 

Why GAO Did This Study: 

In 1971, the Alaska Native Claims Settlement Act was enacted to 
resolve long-standing aboriginal land claims and to foster economic 
development for Alaska Natives. This federal law directed that 
corporations be created under Alaska state law, which were to be the 
vehicles for distributing the settlement. As directed by the act, 12 
for-profit regional corporations were established, representing 
geographical regions in the state. Later, a 13th regional corporation 
was formed to represent Alaska Natives residing outside of Alaska. 
Eligible Alaska Native applicants who were alive on December 18, 1971, 
became shareholders in the corporations. The Settlement Act, as 
amended, authorizes the corporations to provide benefits to 
shareholders and to other Alaska Natives. 

GAO was asked to review these corporations. This report examines (1) 
governance practices of the regional Alaska Native corporations, (2) 
requirements for and oversight of the corporations’ financial 
reporting practices, (3) benefits provided by the corporations to 
their shareholders and other Alaska Natives, and (4) questions to 
consider for the future. GAO reviewed relevant federal and state laws 
and regulations, as well as the corporations’ annual reports, proxy 
materials, and other documents. GAO interviewed representatives from 
each of the 13 regional corporations and visited seven of the Alaskan 
regions. 

What GAO Found: 

Incorporated under Alaska state law, regional Alaska Native 
corporations share fundamental characteristics, although they have 
chosen a variety of governance practices. Like other Alaska 
corporations, the regional corporations are subject to the state’s 
corporate laws (with limited exceptions) and are run by an elected 
board of directors. Nevertheless, each regional corporation has chosen 
its own organization and governance approach in terms of board 
operations, executive and board compensation, board elections, and 
shareholder involvement. 

Alaska Native corporations are subject to some financial reporting 
requirements under federal and state law, but oversight of the 
reporting is limited. The Alaska Native Claims Settlement Act 
generally exempts the corporations from complying with federal 
securities laws while requiring them to annually provide a report to 
their shareholders that contains “substantially all the information” 
required to be included in an annual report to shareholders by U.S. 
Securities and Exchange Commission registrants. The Settlement Act 
does not provide for a federal role to monitor the corporations’ 
compliance with this requirement, and oversight by the state of Alaska 
is generally limited to enforcement of state securities laws and proxy 
regulations. 

GAO found that the corporations provide a wide variety of monetary and 
nonmonetary benefits to their shareholders and other Alaska Natives. 
Monetary benefits include shareholder dividends, elder benefits, 
scholarships, memorial benefits, shareholders’ equity, and charitable 
donations. Nonmonetary benefits—-often offered in partnership with 
village corporations, tribal organizations, and nonprofit 
organizations within the region-—include employment opportunities, 
cultural preservation, land management, economic development, and 
advocacy on behalf of Alaska Natives and their communities. 

During this review, GAO identified three questions regarding the 
ambiguity of existing federal financial reporting requirements, the 
role of the federal government in maintaining the corporations’ 
solvency, and the implications of defining who is eligible to be a 
shareholder. These questions may warrant consideration and discussion 
by the federal government, the state, the regional corporations, 
shareholders, or a combination of these entities. 

* Should the “substantially all” federal reporting requirement be 
clarified and overseen? GAO was unable to determine whether the 
corporations are meeting the “substantially all” requirement in the 
Settlement Act because the phrase is not defined. 

* What is the appropriate role of the federal government in 
maintaining the solvency of Alaska Native corporations? The federal 
government has intervened in the past to help maintain the financial 
solvency of the corporations. The 13th Regional Corporation has been 
insolvent since 2007. 

* Who should be a shareholder? As authorized by amendments to the 
Settlement Act, shareholders of 5 of the 13 regional corporations have 
voted to issue shares to Alaska Natives born after December 18, 1971, 
who meet certain criteria. In deciding to offer new shares to more 
people, corporations and shareholders face a number of considerations 
such as, potential effects on dividends and shareholder involvement. 

What GAO Recommends: 

GAO is making no recommendations in this report. Responses provided on 
behalf of the corporations made several points about their financial 
reporting and operations that are more fully discussed in the report. 

View [hyperlink, http://www.gao.gov/products/GAO-13-121]. For more 
information, contact Anne-Marie Fennell at (202) 512-3841 or 
fennella@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

The Corporations Have Adopted a Variety of Governance Practices: 

The Corporations Are Subject to Some Federal and State Financial 
Reporting Requirements and Limited State Oversight: 

The Corporations Provide Diverse Monetary and Nonmonetary Benefits to 
Their Shareholders and Other Alaska Natives: 

Questions to Consider for the Future: 

Agency and Third-Party Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Comments on Behalf of the 12 Regional Alaska Native 
Corporations: 

Appendix III: Comments from Volunteers for the 13th Regional 
Corporation: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Characteristics of the Regional Alaska Native Corporations 
When Established in the 1970s: 

Table 2: Size and Scope of the 12 Regional Alaska Native Corporations 
in Alaska: 

Table 3: Regional Alaska Native Corporation Shareholder Demographics 
as Reported by the Corporations: 

Table 4: Characteristics of the Boards of Directors, Regional Alaska 
Native Corporations: 

Table 5: Election Information for the Regional Alaska Native 
Corporations, 2001-2011: 

Table 6: Financial and Dividend Information as Reported by the 
Regional Alaska Native Corporations, 2010: 

Table 7: Scholarship Information as Reported by the Regional Alaska 
Native Corporations, 2010: 

Table 8: Employment of Alaska Natives by the Regional Corporations and 
Their Subsidiaries, as Reported by the Corporations: 

Table 9: New Classes of Shares Authorized by the Regional Alaska 
Native Corporations: 

Table 10: Regional Alaska Native Corporations and Communities Visited: 

Table 11: Regional Alaska Native Corporations' Fiscal Years 
Corresponding to the 2010 Reporting Period: 

Figures: 

Figure 1: The Twelve Geographic Regions for the Regional Alaska Native 
Corporations in Alaska: 

Figure 2: Examples of Benefits Supported by the Regional Alaska Native 
Corporations: 

Abbreviations: 

SBA: Small Business Administration: 

SEC: U.S. Securities and Exchange Commission: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

December 13, 2012: 

The Honorable Edward J. Markey: 
Ranking Member: 
Committee on Natural Resources: 
House of Representatives: 

The Honorable Mark Begich: 
United States Senate: 

The Honorable Lisa Murkowski: 
United States Senate: 

On December 18, 1971, the Alaska Native Claims Settlement Act was 
enacted to resolve long-standing aboriginal land claims and to foster 
economic development for Alaska Natives.[Footnote 1] This federal law 
directed that corporations be created under Alaska state law, which 
were to be the vehicles for distributing the settlement's land and 
monetary benefits to Alaska Natives. The Settlement Act permitted the 
conveyance of about 44 million acres of land to the corporations, 
along with cash payments of almost $1 billion, in exchange for 
extinguishing aboriginal land claims in Alaska. As directed by the 
act, 12 for-profit regional corporations were established representing 
geographical regions in the state, with each region composed as far as 
practicable of Alaska Natives who have a common heritage and share 
common interests.[Footnote 2] In addition, a 13th regional Alaska 
Native corporation was subsequently formed to represent those Alaska 
Natives residing outside of Alaska. 

The Settlement Act was intended to conform "with the real economic and 
social needs" of Alaska Natives, without establishing any permanent 
racially defined institutions and without creating a reservation 
system, among other aims.[Footnote 3] Toward these ends, the 
Settlement Act, as originally enacted, entitled certain Alaska Natives 
to be shareholders in the corporations and prohibited sales of the 
corporations' stock for 20 years. Subsequent amendments, however, have 
authorized issuance of stock to other Alaska Natives and their 
descendants, extended the prohibition on the sale of stock, and 
generally exempted the corporations from regulation by the U.S. 
Securities and Exchange Commission (SEC). Under the Settlement Act and 
state law, the corporations are required to provide certain 
information to shareholders, such as annual reports including the 
corporations' audited financial statements. The Settlement Act, as 
amended, also authorizes but does not require corporations to provide 
benefits to their shareholders and other Alaska Natives to promote 
their health, education, or welfare. 

To inform your understanding of the financial information being 
reported by the regional Alaska Native corporations and how these 
corporations are addressing the needs of Alaska Natives, you asked us 
to describe various corporate practices. This report examines (1) 
governance practices of the regional Alaska Native corporations, (2) 
requirements for and oversight of the corporations' financial 
reporting practices, (3) benefits provided by the corporations to 
their shareholders and other Alaska Natives, and (4) questions to 
consider for the future.[Footnote 4] 

To conduct this work, we reviewed the Alaska Native Claims Settlement 
Act, as amended; the Alaska Corporations Code; and other federal and 
state laws and regulations relevant to corporate governance and 
financial reporting by regional Alaska Native corporations. We 
examined the corporations' annual shareholder reports from 2010 and 
proxy materials from 2011(the most recent years for which consistent 
information was available across the corporations). We also asked SEC 
staff to provide observations on the corporations' 2010 annual 
shareholder reports. In this report, we define an SEC registrant as a 
corporation subject to the registration and reporting requirements of 
the Securities Exchange Act of 1934. We reviewed documentation 
provided by the regional corporations on their governance practices 
and on monetary and nonmonetary benefits provided to shareholders and 
others. Throughout this report, we refer to the corporations' 2010 
reporting period to describe each corporation's fiscal year 
corresponding most closely to calendar year 2010. We report all dollar 
amounts as they were reported to us by the corporations for the period 
in question; none have been adjusted for inflation. We interviewed 
representatives from all 13 regional corporations and visited multiple 
locations across 7 of the 12 Alaskan regions. During our site visits, 
we met with corporate executives and board directors, tribal 
officials, representatives from nongovernmental organizations, and 
shareholders to discuss their perspectives on the regional 
corporations and benefits provided. In addition, from the Alaska State 
Division of Banking and Securities, we obtained information on 
inquiries and complaints received by the division, and steps the 
division took to investigate and act on these claims, including 
administrative orders issued by the state. Appendix I describes our 
scope and methodology in greater detail. 

We conducted this performance audit from October 2011 to December 2012 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

The Alaska Native Claims Settlement Act required the Secretary of the 
Interior to divide Alaska into 12 geographic regions, with each 
region, as far as practicable, composed of Alaska Natives having a 
common heritage and sharing common interests (see fig. 1).[Footnote 5] 
The Secretary of the Interior was also required to enroll into a 
region every Alaska Native alive when the Settlement Act was enacted 
on December 18, 1971, generally according to residence. As defined by 
the Settlement Act, an Alaska Native is a person with 25 percent or 
more of Alaska Indian, Eskimo, or Aleut blood or combination thereof 
(called a blood quantum requirement). Each region in the 1970s 
established a regional corporation as directed by the Settlement Act, 
and the Alaska Natives enrolled into the region became its 
shareholders. Certain Alaska Native villages were also eligible to 
form village corporations under state law. In addition, Alaska Natives 
who were not residing in Alaska could elect to enroll in a 13th 
region. Such a corporation, referred to as the 13th Regional 
Corporation, was established by a vote of nonresidents, and only those 
nonresident Alaska Natives who voted for the 13th Regional 
Corporation's formation were enrolled in that region and became its 
shareholders (nonresidents who did not vote for it were enrolled in 
another region and became shareholders of that regional corporation). 
[Footnote 6] Enrolled Alaska Natives received no more than 100 shares 
of their regional corporation's stock and, if they were enrolled in a 
village, no more than 100 shares of their village corporation's stock. 
Under the original Settlement Act, shares could be inherited upon a 
shareholder's death, but inherited shares entitled the new shareholder 
to vote only if the shareholder was an Alaska Native with a blood 
quantum of 25 percent or more.[Footnote 7] 

Figure 1: The Twelve Geographic Regions for the Regional Alaska Native 
Corporations in Alaska: 

[Refer to PDF for image: illustrated map] 

Regions: 
Aleut; 
Ahtna; 
Arctic Slope; 
Bering Straits; 
Bristol Bay; 
Calista; 
Chugach; 
Cook Inlet; 
Doyon; 
Koniag; 
NANA; 
Sealaska. 

Source: First Alaskan Institute. 

[End of figure] 

The corporations established under the Settlement Act were to receive 
title to about 44 million acres of land in exchange for the 
extinguishment of Alaska Native aboriginal land claims.[Footnote 8] 
Specifically, the 12 regional corporations received rights to the 
subsurface and some surface lands, and certain village corporations 
received title to surface lands.[Footnote 9] Under the act, the 13th 
Regional Corporation is not entitled to any land or subsurface rights. 
Under section 7(i) of the act, 70 percent of all revenues annually 
received by each regional corporation from the timber and subsurface 
resources conveyed to them under the Settlement Act is then divided 
among the 12 regional corporations according to the number of Alaska 
Natives enrolled in each region.[Footnote 10] The 13th Regional 
Corporation does not share in this natural resource revenue, known as 
the 7(i) distribution. 

In addition, each of the regional and village corporations established 
under the Settlement Act received a portion of the nearly $1 billion 
monetary settlement (see table 1). The portion of the settlement money 
given to each regional corporation was based on the relative number of 
Alaska Natives enrolled in the region. The 12 regional corporations in 
Alaska were required to distribute to shareholders each year until 
1976 not less than 10 percent of the settlement money and all other 
net income, including the 7(i) distribution. After 1976, the regional 
corporations must distribute 50 percent of funds from such sources 
among the village corporations in the region and regional corporation 
shareholders who are not residents of those villages.[Footnote 11] The 
13th Regional Corporation was required to distribute to its 
shareholders not less than 50 percent of its settlement money. As a 
House committee report accompanying the Settlement Act stated, the 
money provided by the settlement was intended to provide the capital 
necessary to raise the standard of living of Alaska Natives--many 
lived in extreme poverty and underprivileged status--through their own 
efforts.[Footnote 12] 

Table 1: Characteristics of the Regional Alaska Native Corporations 
When Established in the 1970s: 

Corporation: Ahtna, Incorporated; 
Land entitlement[A]: 1.78 million acres; 
Total cash distributions: $13,365,000; 
Number of shareholders[B]: 1,074; 
Number of village corporations[C]: 8. 

Corporation: The Aleut Corporation; 
Land entitlement[A]: 1.43 million acres; 
Total cash distributions: $40,537,000; 
Number of shareholders[B]: 3,249; 
Number of village corporations[C]: 13. 

Corporation: Arctic Slope Regional Corporation; 
Land entitlement[A]: 5.00 million acres; 
Total cash distributions: $46,889,000; 
Number of shareholders[B]: 3,738; 
Number of village corporations[C]: 8. 

Corporation: Bering Straits Native Corporation; 
Land entitlement[A]: 2.28 million acres; 
Total cash distributions: $80,067,000; 
Number of shareholders[B]: 6,333; 
Number of village corporations[C]: 17. 

Corporation: Bristol Bay Native Corporation; 
Land entitlement[A]: 3.07 million acres; 
Total cash distributions: $67,443,000; 
Number of shareholders[B]: 5,401; 
Number of village corporations[C]: 29. 

Corporation: Calista Corporation; 
Land entitlement[A]: 6.52 million acres; 
Total cash distributions: $166,100,000; 
Number of shareholders[B]: 13,306; 
Number of village corporations[C]: 56. 

Corporation: Chugach Alaska Corporation; 
Land entitlement[A]: 0.95 million acres; 
Total cash distributions: $24,153,000; 
Number of shareholders[B]: 1,908; 
Number of village corporations[C]: 5. 

Corporation: Cook Inlet Region, Inc.; 
Land entitlement[A]: 2.41 million acres; 
Total cash distributions: $77,797,000; 
Number of shareholders[B]: 6,264; 
Number of village corporations[C]: 7. 

Corporation: Doyon, Limited; 
Land entitlement[A]: 12.22 million acres; 
Total cash distributions: $113,160,000; 
Number of shareholders[B]: 9,061; 
Number of village corporations[C]: 34. 

Corporation: Koniag, Incorporated; 
Land entitlement[A]: 1.16 million acres; 
Total cash distributions: $41,675,000; 
Number of shareholders[B]: 3,342; 
Number of village corporations[C]: 9[D]. 

Corporation: NANA Regional Corporation; 
Land entitlement[A]: 2.25 million acres; 
Total cash distributions: $60,269,000; 
Number of shareholders[B]: 4,828; 
Number of village corporations[C]: 11. 

Corporation: Sealaska Corporation; 
Land entitlement[A]: 0.59 million acres; 
Total cash distributions: $198,649,000; 
Number of shareholders[B]: 15,787; 
Number of village corporations[C]: 9. 

Corporation: The 13th Regional Corporation; 
Land entitlement[A]: 0; 
Total cash distributions: $46,601,000; 
Number of shareholders[B]: 4,426; 
Number of village corporations[C]: 0. 

Corporation: Total; 
Land entitlement[A]: 39.66 million acres; 
Total cash distributions: $976,705,000; 
Number of shareholders[B]: 78,717; 
Number of village corporations[C]: 206[E]. 

Source: Department of the Interior. 

[A] Approximate totals include both surface and subsurface estates; 
surface amounts are generally owned by the village corporations within 
the region. Total acres do not include 4 million acres that villages 
elected to take title to as "revoked reserves" under section 19 of the 
Alaska Native Claims Settlement Act. Until late 1973, village 
corporations could elect to acquire title to the surface and 
subsurface estates in certain reserves established before the 
Settlement Act, reserves the Settlement Act revoked. Village 
corporations that elected to take title to revoked reserves were not 
eligible for any distributions from the regional corporation, and 
their shareholders were not eligible to become regional corporation 
shareholders. Seven village corporations elected to take title to five 
former reserves: Elim (Elim Native Corporation), Klukwan (Klukwan 
Corporation), St. Lawrence (Gambell Native Corporation and the 
Savoonga Native Corporation), Tetlin (Tetlin Native Corporation), and 
Venetie (Neets'ai Corporation and the Venetie Indian Corporation). The 
Klukwan Corporation, however, later chose to receive benefits from the 
settlement rather than taking title to the former reserve, and under 
section 16(d) of the Settlement Act, as amended, the Klukwan 
Corporation received settlement land after conveying title to its 
former reserve lands to the Chilkat Indian Village tribal government. 

[B] Figures represent the number of shareholders determined to be 
eligible after reopening eligibility as of December 31, 1982; the 
numbers do not include 1,522 eligible shareholders who were enrolled 
in village corporations that elected to take title to the revoked 
reserves. 

[C] These numbers do not include the seven village corporations that 
elected to take title to the revoked reserves, and they represent the 
number of village corporations before any village corporation 
consolidations or mergers with their regional corporation. For 
example, 10 of the 11 village corporations in the NANA region merged 
with NANA Regional Corporation. 

[D] The 1980 amendments to the Settlement Act authorized seven 
additional village corporations in the Koniag region with modified 
settlement entitlements. Pub. L. No. 96-487, § 1427(e) (1980). 

[E] There were a total of 220 eligible village corporations under the 
Settlement Act--the 206 included in the table, plus the 7 that elected 
revoked reserves, plus the 7 additional Koniag village corporations. 

[End of table] 

Alaska Native Claims Settlement Act Amendments: 

Although the Settlement Act's basic structure has not changed in the 
last 40 years, the act has been amended several times. Some of the 
amendments pertain to the expansion of eligible shareholders, extended 
restrictions on the sales of stock, exemptions from federal securities 
laws, and participation in the Small Business Administration's 8(a) 
program, as follows: 

* Expansion of eligible shareholders. The Settlement Act was amended 
in 1988 to permit the addition of new shareholders under certain 
circumstances. Specifically, corporation shareholders could vote to 
amend the articles of incorporation to authorize the issuance of 
additional shares to (1) eligible Alaska Natives who missed 
enrollment, (2) Alaska Natives born after the Settlement Act's 
enactment, or both.[Footnote 13] A subsequent amendment in 1992 also 
permitted corporation shareholders to vote on amending the articles of 
incorporation to authorize the issuance of additional shares to 
descendants of Alaska Natives born after December 18, 1971. This 
provision allows corporations to issue stock to descendants of its 
original shareholders without regard to blood quantum--as long as 
shareholders vote to amend the articles of incorporation to authorize 
such action. 

* Restrictions on sales of stock. The 1988 amendments also extended 
the prohibition on sales of stock unless and until the shareholders of 
the corporation decide to allow them. The Senate committee report 
accompanying the amendments recognized that by the end of 1991--the 
date when stock could be sold under the original act--many Alaska 
Native shareholders would not have acquired sufficient experience 
dealing with corporate activities to sell their stock on the open 
market without risking the loss of continued Alaska Native corporate 
ownership.[Footnote 14] The amendment allows the shareholders to vote 
to amend the articles of incorporation to lift restrictions on stock 
sales. 

* Federal securities laws. In 1976, the act was amended to exempt the 
corporations from certain federal securities laws during the 20-year 
prohibition on the sale or disposition of stock. Specifically, the 
amendment exempted the corporations from the Investment Company Act of 
1940,[Footnote 15] the Securities Act of 1933,[Footnote 16] and the 
Securities Exchange Act of 1934.[Footnote 17] Because of this 
exemption, the corporations are also not subject to any amendments to 
these laws, including amendments in the Dodd-Frank Wall Street Reform 
and Consumer Protection Act[Footnote 18] and the Sarbanes-Oxley Act of 
2002.[Footnote 19] These laws, and their implementing regulations, 
require certain corporations to register with and report periodically 
to the SEC, which regulates the securities industry. In 1988, when the 
act was amended to extend the prohibition on stock sales, the act was 
also amended to extend the exemption from securities law until after 
the corporation offers shares of its stock to the public, shareholders 
vote to allow stock sales, or the corporation registers with the SEC. 

* Small Business Administration's (SBA) 8(a) program participation. In 
1988, the Settlement Act was amended to designate Alaska Native 
corporations as minority and economically disadvantaged business 
enterprises owned and controlled by Alaska Natives if Alaska Natives 
and descendant shareholders represent a majority of both the 
corporation's total equity (shares) and voting power. Furthermore, the 
amendment designated any direct and indirect subsidiary corporations, 
joint ventures, or partnerships of these Alaska Native corporations as 
minority and economically disadvantaged business enterprises if Alaska 
Natives and descendant shareholders represent a majority of both the 
total equity and voting power of the subsidiaries, joint ventures, or 
partnerships. Alaska Native corporations' qualifying subsidiaries, 
joint ventures, or partnerships are eligible to participate in the 
SBA's 8(a) program--one of the federal government's primary means for 
developing small businesses owned by socially and economically 
disadvantaged individuals.[Footnote 20] Under the 8(a) program, Alaska 
Native corporations, along with other tribal entities, have been 
afforded special advantages, which have come under congressional 
scrutiny in recent years.[Footnote 21] Some of the regional 
corporations generate a high percentage of their revenues from their 
subsidiaries' participation in the 8(a) program. 

Regional Corporation Organization: 

The regional corporations are organized as for-profit corporations 
under Alaska state law and are separate and distinct from the Alaska 
Native tribal governments recognized by the federal government as 
Indian tribes.[Footnote 22] Incorporated under Alaska state law, 
regional corporations share fundamental characteristics with other 
corporations in Alaska. For instance, to form a for-profit 
corporation, articles of incorporation--which contain basic 
information about the corporation and its structure--must be filed 
with the state and a fee paid. The articles of incorporation specify, 
for instance, how many shares the corporation is authorized to issue, 
whether the shares will be divided into classes, who is eligible to 
receive shares, and who serves on the initial board of directors. 
[Footnote 23] Corporations are required to submit biennial reports to 
the state containing information about the current board of directors, 
number of shares issued, and other related information. The state can 
dissolve corporations involuntarily for several reasons, such as 
failure to file required biennial reports or pay a biennial 
corporation tax.[Footnote 24] 

The Settlement Act confirms that management of the regional 
corporations is the responsibility of their boards of directors and 
generally subjects the Alaska Native regional corporations to state 
law, although the state does not have a role in overseeing any 
corporations' corporate governance or business decisions. According to 
the Settlement Act's legislative history, board members and officers 
were expected to avoid abuses of the act's intent; any unreasonable 
staff, officer, board member, consultant, attorney, or other salaries, 
expenses, and fees; and expenditure of funds for purposes other than 
those reasonably necessary in ordinary business operations.[Footnote 
25] State corporate law does not authorize the state to oversee such 
actions of any corporations' directors, and the act did not establish 
any oversight mechanism for the regional corporations. 

Under state corporate law, a corporation's board of directors--who are 
fiduciaries of the corporation and owe it the duties of good faith, 
care, and loyalty--manages the corporation and makes business 
decisions. The board hires and monitors corporate officers, such as 
president and secretary. In contrast to the board of directors' role, 
shareholders have limited power to participate in management and 
control of a corporation. Shareholders do not make business decisions 
for the corporation, but they are responsible for electing the 
directors who do. Except for the initial board, directors are elected 
by shareholders at an annual meeting. The elections are usually 
conducted by an independent third party, such as an accounting firm. 
In order for a shareholder election (or other action) to be valid, a 
certain number of shares--specified in state law or the articles of 
incorporation and known as a quorum--must be voted in person or by 
proxy at the meeting. Voting by proxy means that a shareholder who 
cannot attend the annual meeting in person directs someone else--a 
proxy holder--to vote his or her shares. Shareholders and the 
corporation can solicit shareholders to serve as their proxy holders 
in what is known as a proxy solicitation. Proxy solicitations from a 
corporation generally consist of an annual report to shareholders, a 
proxy statement containing information on nominees for the board, and 
a proxy form, among other things. In addition, shareholders must vote 
to approve any amendments to the articles of incorporation and certain 
other actions proposed by the board. Shareholders can also make 
recommendations to the board on various matters by presenting and 
voting on resolutions at annual meetings. 

Overview of the Regional Corporations: 

Over the past 40 years, the 12 regional corporations in Alaska have 
grown into diverse and often large businesses, important to Alaska's 
economy. Although many of the corporations struggled financially when 
they were first created and into the 1980s and 1990s--with at least 2 
declaring bankruptcy--by 2011, the 12 corporations were ranked as top 
businesses in Alaska. For example, in October 2011, Alaska Business 
Monthly reported that the 12 regional corporations were ranked within 
the top 25 Alaska-owned businesses in Alaska on the basis of 2010 
revenues.[Footnote 26] Furthermore, the Arctic Slope Regional 
Corporation has been ranked as the number one Alaska-owned corporation 
for 17 consecutive years, with gross revenues of $2.3 billion in 2010. 
Collectively, the 12 regional corporations' revenues in 2010 reached 
almost $8.2 billion, and the corporations have extensive operations 
both within Alaska and around the world. For example, NANA Regional 
Corporation owns the land on which one of the world's largest zinc-
lead mines is situated, and the Arctic Slope Regional Corporation is a 
major producer of oil on Alaska's North Slope. The regional 
corporations have multiple subsidiaries operating in Alaska, the lower 
48 states, and several other countries. Specifically, the corporations 
reported to us that they collectively operate more than 330 wholly 
owned subsidiaries, ranging from fewer than 10 at one regional 
corporation to more than 50 subsidiaries at another.[Footnote 27] 
Total employees as reported by the corporations ranged from more than 
500 at one corporation to almost 11,000 at another. Table 2 summarizes 
the regional corporations' major business operations, gross revenues, 
and net incomes. 

Table 2: Size and Scope of the 12 Regional Alaska Native Corporations 
in Alaska: 

Corporation: Ahtna, Incorporated; 
Major business operations[A]: Facilities management, construction 
services, environmental services, professional services and staffing, 
pipeline maintenance, range support and training, land management and 
protection services, land and natural resource development; 
Gross revenue (2010): $243,430,000; 
Net income (2010): $1,739,000. 

Corporation: The Aleut Corporation; 
Major business operations[A]: Fuel oil distribution, commercial real 
estate, government services, mechanical contracting, oil field 
services, water quality testing; 
Gross revenue (2010): $143,046,000; 
Net income (2010): $8,381,000. 

Corporation: Arctic Slope Regional Corporation; 
Major business operations[A]: Petroleum refining and marketing, 
government services, energy support services, construction, resource 
development; 
Gross revenue (2010): $2,331,681,000; 
Net income (2010): $164,433,000. 

Corporation: Bering Straits Native Corporation; 
Major business operations[A]: Facility operations and maintenance, 
construction services, computer facilities support and information 
technology, supply logistics, administrative support, security 
equipment, aircraft services and maintenance; 
Gross revenue (2010): $197,706,000; 
Net income (2010): $8,848,000. 

Corporation: Bristol Bay Native Corporation; 
Major business operations[A]: Petroleum distribution, oil field 
services, construction, government contracting services, natural 
resource management and development, tourism; 
Gross revenue (2010): $1,667,200,000; 
Net income (2010): $43,017,000. 

Corporation: Calista Corporation; 
Major business operations[A]: Federal contracting, construction 
equipment and excavating, communications and media, real estate, 
energy, engineering and environmental services; 
Gross revenue (2010): $234,866,000; 
Net income (2010): $18,301,000. 

Corporation: Chugach Alaska Corporation; 
Major business operations[A]: Base operation services, construction, 
information technology and telecom services, education, engineering, 
oil and gas services, mineral extraction; 
Gross revenue (2010): $936,975,000; 
Net income (2010): $26,492,000. 

Corporation: Cook Inlet Region, Inc.; 
Major business operations[A]: Real estate, oilfield and construction 
services, environmental remediation, government contracting, tourism 
and hospitality properties and attractions, telecommunications, 
resource and energy development; 
Gross revenue (2010): $188,357,000; 
Net income (2010): $16,535,000. 

Corporation: Doyon, Limited; 
Major business operations[A]: Oil and gas services, government 
contracting, tourism, natural resource development; 
Gross revenue (2010): $280,268,000; 
Net income (2010): $15,678,000. 

Corporation: Koniag, Incorporated; 
Major business operations[A]: Marine construction, aerospace 
manufacturing, information technology services, resource development 
and extraction, naval marine services; 
Gross revenue (2010): $131,052,000; 
Net income (2010): $8,654,000. 

Corporation: NANA Regional Corporation; 
Major business operations[A]: Government contracting, oilfield and 
mining services, professional services including engineering, 
hospitality, natural resources; 
Gross revenue (2010): $1,592,826,000; 
Net income (2010): $41,173,000. 

Corporation: Sealaska Corporation; 
Major business operations[A]: Plastics manufacturing and molding, 
environmental services and remediation, construction services, 
information technology services, security services, timber harvest and 
forest management, freight management and logistics; 
Gross revenue (2010): $223,823,000; 
Net income (2010): $15,154,000. 

Source: GAO analysis of information from the regional Alaska Native 
corporations. 

Note: Gross revenue and net income amounts are as reported by the 
regional corporations for the 2010 reporting period. 

[A] Listed are the major business operations of the regional 
corporations as provided to us by the corporations in October 2012; 
the corporations may also undertake many other business activities not 
listed here. 

[End of table] 

In contrast to the 12 regional corporations, the 13th Regional 
Corporation has experienced long-standing financial difficulties and 
has largely been insolvent since 2007.[Footnote 28] In a 2009 letter 
to shareholders, the corporation's board of directors explained that a 
series of events--including litigation involving the corporation's 
former chief executive officer and changes in the construction and 
real estate markets where the corporation had operations--negatively 
affected the corporation to the point of insolvency. The last annual 
meeting held to elect board directors was in 2006; as of October 2012, 
advocates for the 13th Regional Corporation are working without 
compensation to explore options for bringing the corporation back into 
solvency. (We discuss this issue more fully in the last section of our 
report.) 

Over time, the number and demographics of the regional corporations' 
shareholders have changed. For example, shareholders initially 
numbered around 79,000 and now exceed 111,000. In addition, in over 
half the regions, 25 percent or more of the shareholders now reside 
outside Alaska (see table 3), but throughout the regions, many 
shareholders reside in one of over 200 isolated villages in the state, 
often located near the sea or rivers. Most villages are accessible 
only by small planes, boats, or snow machines; 82 percent of the rural 
communities in Alaska have no road system. Costs are high in the 
villages, particularly for food, gas, and heating sources. Residents 
get much of their food from a subsistence lifestyle--hunting, fishing, 
and gathering wild plants for food--which remains a vital part of 
Alaska Native culture. Often, basic infrastructure such as housing and 
water are far below the standards of urban Alaska. For instance, some 
rural Alaskan homes lack running water and flush toilets and instead 
use washaterias that provide laundry, shower, and toilet facilities 
for a fee. In addition, employment opportunities are scarce, and 
gaining access to health care and educational opportunities is often 
challenging. 

Table 3: Regional Alaska Native Corporation Shareholder Demographics 
as Reported by the Corporations: 

Corporation[A]: Ahtna, Incorporated; 
Number of shareholders: 1,751; 
Number of shareholders residing in Alaska: 1,430; 
Number of shareholders residing outside Alaska: 321; 
Percentage of shareholders residing outside Alaska: 18%. 

Corporation[A]: The Aleut Corporation; 
Number of shareholders: 3,750; 
Number of shareholders residing in Alaska: 2,195; 
Number of shareholders residing outside Alaska: 1,551; 
Percentage of shareholders residing outside Alaska: 41%. 

Corporation[A]: Arctic Slope Regional Corporation; 
Number of shareholders: 11,090; 
Number of shareholders residing in Alaska: 9,052; 
Number of shareholders residing outside Alaska: 1,620; 
Percentage of shareholders residing outside Alaska: 15%. 

Corporation[A]: Bering Straits Native Corporation; 
Number of shareholders: 6,455; 
Number of shareholders residing in Alaska: 4,865; 
Number of shareholders residing outside Alaska: 1,590; 
Percentage of shareholders residing outside Alaska: 25%. 

Corporation[A]: Bristol Bay Native Corporation; 
Number of shareholders: 8,660; 
Number of shareholders residing in Alaska: 7,090; 
Number of shareholders residing outside Alaska: 1,570; 
Percentage of shareholders residing outside Alaska: 18%. 

Corporation[A]: Calista Corporation; 
Number of shareholders: 12,602; 
Number of shareholders residing in Alaska: 10,559; 
Number of shareholders residing outside Alaska: 830; 
Percentage of shareholders residing outside Alaska: 7%. 

Corporation[A]: Chugach Alaska Corporation; 
Number of shareholders: 2,520; 
Number of shareholders residing in Alaska: 1,380; 
Number of shareholders residing outside Alaska: 1,010; 
Percentage of shareholders residing outside Alaska: 40%. 

Corporation[A]: Cook Inlet Region, Inc.; 
Number of shareholders: 7,986; 
Number of shareholders residing in Alaska: 4,900; 
Number of shareholders residing outside Alaska: 3,086; 
Percentage of shareholders residing outside Alaska: 39%. 

Corporation[A]: Doyon, Limited; 
Number of shareholders: 18,536; 
Number of shareholders residing in Alaska: 13,891; 
Number of shareholders residing outside Alaska: 4,645; 
Percentage of shareholders residing outside Alaska: 25%. 

Corporation[A]: Koniag, Incorporated; 
Number of shareholders: 3,696; 
Number of shareholders residing in Alaska: 1,990; 
Number of shareholders residing outside Alaska: 1,706; 
Percentage of shareholders residing outside Alaska: 46%. 

Corporation[A]: NANA Regional Corporation; 
Number of shareholders: 12,923; 
Number of shareholders residing in Alaska: 11,155; 
Number of shareholders residing outside Alaska: 1,768; 
Percentage of shareholders residing outside Alaska: 14%. 

Corporation[A]: Sealaska Corporation; 
Number of shareholders: 21,263; 
Number of shareholders residing in Alaska: 11,159; 
Number of shareholders residing outside Alaska: 10,104; 
Percentage of shareholders residing outside Alaska: 48%. 

Corporation[A]: Total; 
Number of shareholders: 111,232; 
Number of shareholders residing in Alaska: 79,666;
Number of shareholders residing outside Alaska: 29,801;
Percentage of shareholders residing outside Alaska: 27%. 

Source: Regional Alaska Native corporations. 

Note: These data represent the regional corporations' shareholder 
numbers as reported by the regional corporations as of dates occurring 
from December 2011 to October 2012. 

[A] Current shareholder numbers for the 13th Regional Corporation were 
not available. According to one of the corporation's shareholders, a 
former director, as of 2008, a total of 5,371 shareholders remained in 
the 13th Regional Corporation, of whom 695 resided in Alaska and 4,676 
outside Alaska. 

[End of table] 

The Corporations Have Adopted a Variety of Governance Practices: 

Incorporated under Alaska state law, regional corporations share 
fundamental characteristics, although they have chosen a variety of 
governance practices. Like any other Alaska corporation, the regional 
corporations are subject to the state's corporate laws, with a few 
limited exceptions,[Footnote 29] and are run by a board of directors 
elected by shareholders. Nevertheless, as allowed under state law, 
each of the regional corporations has adopted its own set of 
governance practices. In reviewing these practices for the regional 
corporations, we found a range of similarities and differences in 
terms of board composition and operation, executive and board 
compensation, board elections, and shareholder involvement; we did not 
review governance practices of the 13th Regional Corporation because 
it has largely been inactive since 2007. 

Board Composition and Operation: 

Under the Settlement Act, all regional corporation board directors 
must be shareholders of their corporations and over the age of 18, but 
otherwise the corporations have taken various approaches in composing 
and operating their boards. For instance, board sizes range from 9 to 
23 directors, and the corporations have established differing 
restrictions relating to the directors' employment with the 
corporation or their subsidiary companies. A few corporations specify 
that directors may not be employed by the corporation or any of its 
subsidiaries, while others specify that directors may not be employed 
by the corporation but may be employed by certain subsidiary 
companies. In contrast, several corporations do not restrict director 
employment with the corporation, but one restricts certain director 
involvement with entities that may compete with the corporation, and 
yet another requires that the position of corporate president be 
filled by a director. For those corporations that do not restrict 
director employment, we found several instances where board directors 
were also employed by the corporation or its subsidiaries. 

We also found that the age, sex, professional business experience, and 
board tenure of the corporations' boards varied.[Footnote 30] Very few 
directors were younger than 40, although directors' ages ranged from 
29 to 82 years. Males made up a majority of all directors, but some 
boards were more evenly divided by gender than others (see table 4). 
The professional business experiences listed by the directors 
represented diverse fields and professions, including commercial 
fishermen, construction operators, medical doctors, school teachers 
and university professors, and business managers and executives. 
Similarly, a director's tenure on a board ranged considerably across 
and within the corporations, from less than 1 year to 39 years. 

Table 4: Characteristics of the Boards of Directors, Regional Alaska 
Native Corporations: 

Corporation[A]: Ahtna, Incorporated; 
Number of directors: 13; 
Male:female ratio: 7:6; 
Number of directors by total time served: 
Less than 10 years: 6; 
From 10 to 20 years: 5; 
More than 20 years: 2. 

Corporation[A]: The Aleut Corporation; 
Number of directors: 9; 
Male:female ratio: 5:4; 
Number of directors by total time served: 
Less than 10 years: 4; 
From 10 to 20 years: 5; 
More than 20 years: 0. 

Corporation[A]: Arctic Slope Regional Corporation; 
Number of directors: 15; 
Male:female ratio: 9:6; 
Number of directors by total time served: 
Less than 10 years: 6; 
From 10 to 20 years: 8; 
More than 20 years: 1. 

Corporation[A]: Bering Straits Native Corporation; 
Number of directors: 15; 
Male:female ratio: 11:4; 
Number of directors by total time served: 
Less than 10 years: 5; 
From 10 to 20 years: 5; 
More than 20 years: 5. 

Corporation[A]: Bristol Bay Native Corporation; 
Number of directors: 12; 
Male:female ratio: 10:2; 
Number of directors by total time served: 
Less than 10 years: 6; 
From 10 to 20 years: 2; 
More than 20 years: 4. 

Corporation[A]: Calista Corporation; 
Number of directors: 11; 
Male:female ratio: 9:2; 
Number of directors by total time served: 
Less than 10 years: 5; 
From 10 to 20 years: 2; 
More than 20 years: 4. 

Corporation[A]: Chugach Alaska Corporation; 
Number of directors: 9; 
Male:female ratio: 5:4; 
Number of directors by total time served:
Less than 10 years: 5; 
From 10 to 20 years: 4; 
More than 20 years: 0. 

Corporation[A]: Cook Inlet Region, Inc.; 
Number of directors: 15; 
Male:female ratio: 11:4; 
Number of directors by total time served: 
Less than 10 years: 10; 
From 10 to 20 years: 1; 
More than 20 years: 4. 

Corporation[A]: Doyon, Limited; 
Number of directors: 13; 
Male:female ratio: 7:6; 
Number of directors by total time served: 
Less than 10 years: 8; 
From 10 to 20 years: 4; 
More than 20 years: 1. 

Corporation[A]: Koniag, Incorporated; 
Number of directors: 9; 
Male:female ratio: 7:2; 
Number of directors by total time served: 
Less than 10 years: 7; 
From 10 to 20 years: 2; 
More than 20 years: 0. 

Corporation[A]: NANA Regional Corporation; 
Number of directors: 23[B]; 
Male:female ratio: 13:9; 
Number of directors by total time served: 
Less than 10 years: 12; 
From 10 to 20 years: 7; 
More than 20 years: 3. 

Corporation[A]: Sealaska Corporation; 
Number of directors: 13; 
Male:female ratio: 9:4; 
Number of directors by total time served: 
Less than 10 years: 6; 
From 10 to 20 years: 2; 
More than 20 years: 5. 

Source: Regional Alaska Native corporations. 

Note: The information on board directors reported here is based on the 
directors in place with each corporation before its annual shareholder 
meeting held in calendar year 2011. 

[A] The 13th Regional Corporation has nine board director positions. 

[B] At the time NANA held its 2011 annual shareholder meeting, there 
was one vacancy on the board because one director had passed away; the 
data presented in this row apply to the 22 directors then serving. 

[End of table] 

In terms of board operations, the corporations' boards are led by a 
chair and have designated committees, often with written charters 
spelling out their operating rules and procedures, although the types 
of committees and authority granted to each committee vary among 
corporations. Eleven of the corporations' boards have audit committees 
to oversee the corporation's financial reporting practices.[Footnote 
31] Other common committees include executive, lands, compensation, 
and shareholder relations.[Footnote 32] In some instances, committee 
membership is determined by a vote of the board, while in others, 
committee members are appointed by the board chair. Depending on the 
specific corporation and board committee, a particular committee's 
authority may be advisory, or it may have some decision-making 
authority granted by the board. 

In addition, almost all of the corporations' boards have written codes 
of ethics outlining the directors' responsibilities, including legal 
duties and business practices, restricted activities (such as 
restrictions relating to individual contributions to political 
campaigns), and the avoidance or disclosure of potential conflicts of 
interest. Many of the corporations' codes of ethics discuss how 
conflicts of interest or the appearance of conflicts of interest 
should be avoided and what information is to be disclosed to the board 
in case of a potential conflict, such as when the corporation may be 
considering a business transaction with a member of a director's 
family. Additionally, in their annual proxy statements, the 
corporations generally disclose the family relationships of directors, 
board nominees, or executive officers of the corporation and its 
subsidiaries and certain financial transactions by the corporation 
with a director or director's family, as required by state regulation. 
[Footnote 33] 

Executive and Board Compensation: 

The regional corporations report compensation information for certain 
corporate officers and board directors, although the type of 
information reported varies. Under Alaska state regulation, boards' 
proxy statements must contain certain information on compensation 
distributed to or accrued by corporate officers and directors over the 
previous fiscal year, although the regulation does not prescribe the 
specific format to be used or require information to be included about 
the methods used to determine compensation.[Footnote 34] We heard 
concerns from several shareholders that clear information about 
executive or director compensation was lacking.[Footnote 35] Our 
review showed that the regional corporations' proxy statements provide 
varying levels of detail on compensation amounts and methods used to 
determine compensation. 

For the regional corporations' 2010 reporting period, all the 
corporations reported in their proxy statements the total remuneration 
paid or accrued to their five most highly compensated officers or 
directors for services to the corporation and any subsidiaries, as 
required by state regulation.[Footnote 36] The top reported 
compensation amount for any one officer or director ranged from 
$137,578 to $2,514,961. For seven of the corporations, corporate 
officers were generally the five most highly compensated individuals, 
while at the other five, officers of subsidiaries were commonly the 
five most highly compensated. Some corporations provided annual 
salary, bonus, or pension amounts, whereas others reported a total 
without specifying what made up the total or what amounts were 
distributed versus accrued during the time period. 

Similarly, state regulation requires the corporations to report the 
total remuneration paid to or accrued by all their officers and 
directors as a group, as well as the number of persons in the group; 
the regulation does not, however, specify whether this group is to 
include officers and directors of any of the corporations' 
subsidiaries.[Footnote 37] For the corporations' 2010 reporting 
period, total reported compensation ranged from $1.4 million for 14 
officers and directors to $19 million for 115 officers and directors. 
Five corporations indicated that corporate and subsidiary officers and 
directors were included in their totals; two indicated they included 
corporate officers and directors only; and for the five others, it was 
not clear whether the totals included officers and directors of 
subsidiaries. 

In addition, for their boards of directors, the regional corporations 
reported in their annual proxy statements general information on the 
fees directors were paid for their service on the board and the types 
of expenses for which they could be reimbursed. The way compensation 
was reported varied by corporation; the regulations do not specify a 
format for reporting. Three corporations provided the total amount 
they paid to each director for the reporting period (amounts reported 
ranged from less than $17,000 to more than $49,000). Five reported 
monthly or annual salaries for the directors, along with a description 
of other expenses for which directors could be reimbursed, such as 
travel and technology expenses. At these five corporations, salaries 
reported ranged from $1,500 per month to $48,000 per year. The other 
four corporations reported director compensation per day or per half 
day for attending board meetings (sometimes in addition to a monthly 
or annual fee), along with a description of expenses for which they 
could be reimbursed. These corporations did not report the total 
number of days the directors spent in meetings, however, making it 
difficult to estimate total compensation for the directors. Further, 
several corporations reported that directors serving as board chair, 
as chair of board committees, or on subsidiary board committees 
received additional compensation in varying amounts, depending on the 
corporation. 

Although not required to by state regulation, several regional 
corporations provide additional information in their proxy statements 
about their executive pay practices. In the wake of public concern, 
executive compensation at private and publicly traded companies has 
received considerable scrutiny in recent years, and we heard similar 
concerns from several regional corporation shareholders, particularly 
about the transparency of compensation amounts or methods for 
determining such amounts as reported to shareholders.[Footnote 38] We 
found that several corporations detailed the process they used to make 
executive compensation decisions in their proxy statements, including 
how the corporations evaluated management performance. For example, 
one corporation reported in its 2011 proxy statement that its 
compensation committee recommended a compensation plan after reviewing 
national independent labor market studies of compensation paid by 
comparable companies, including other regional corporations. This 
corporation reported that it used independent compensation consultants 
to assist its compensation committee in developing a performance-based 
executive compensation plan, which included a base salary plus 
potential additional performance-based compensation. In contrast, 
although the other corporations did not include detailed information 
in their proxy statements, when we asked the corporations to describe 
their executive compensation policies, many of them reported that they 
rely on outside corporate salary surveys and studies; a few reported 
that they strive to set their compensation levels near the midpoint of 
the market for comparable positions. Similarly, several corporations 
reported that they had detailed methods in place to monitor and 
evaluate the performance of their executive officers and described 
incentive plans or bonuses available for meeting specific performance 
targets. 

Board Elections: 

For each of the regional corporations, board directors' terms are 3 
years and staggered, so that generally one-third of the director 
positions are up for election every year. Five corporations also 
require representation on their boards from specific geographic areas 
within the region (see table 5). For example, one corporation requires 
that at least one director come from each of the region's villages, 
whereas another established units corresponding to certain villages or 
communities and specified a minimum number of directors who must come 
from each unit. In addition, the corporations have varied in how they 
evaluate and recommend candidates and conduct their elections. For 
instance, about half the corporations' boards have nominating 
committees to assess potential candidates and develop or recommend to 
the board a slate of nominees. These corporations often pay campaign 
expenses for their board slate, but most of them also provide 
information in their proxy statements on other candidates, known as 
independent candidates, and include the independents' names on their 
proxy at no cost to the candidates. Independent candidates may also 
run for election using their own proxy solicitations. Successful 
independent candidates may or may not be reimbursed by the corporation 
for their campaign expenses, depending on the corporation. 

In contrast to those corporations with a board slate, five 
corporations' boards do not develop a board slate but, rather, 
generally include in their proxy statements all interested and 
qualifying candidates, as long as the candidates submit certain 
required information, such as biographical and conflict-of-interest 
information and, in the case of one corporation, petition signatures 
by at least 10 voting shareholders other than the candidate. These 
corporations pay for the proxy solicitations, but similar to those 
corporations with board slates, candidates may or may not be 
reimbursed by the corporation for other campaign expenses. A few 
shareholders we heard from said it is expensive to run for a board 
position. For example, they said, sending campaign information through 
the mail to all shareholders could cost thousands of dollars, given 
the shareholders' dispersed and often remote locations. We heard from 
a few shareholders that the corporations will share only mailing 
addresses and campaigning via e-mail or other electronic means may 
therefore not be an option for interested candidates.[Footnote 39] 
Several corporate officials we spoke with noted that their 
corporations do not use e-mail to solicit proxy solicitations and that 
they provide only shareholder mailing addresses to interested 
independent candidates because the corporations solicit proxies by 
mail. 

Table 5: Election Information for the Regional Alaska Native 
Corporations, 2001-2011: 

Corporation: Ahtna, Incorporated; 
Number of board directors: 13; 
Geographic representation requirements: Yes; 
Board slate: No; 
Number of 2001 directors serving in 2011: 5. 

Corporation: The Aleut Corporation; 
Number of board directors: 9; 
Geographic representation requirements: No; 
Board slate: No; 
Number of 2001 directors serving in 2011: 3. 

Corporation: Arctic Slope Regional Corporation; 
Number of board directors: 15; 
Geographic representation requirements: Yes; 
Board slate: No[A]; 
Number of 2001 directors serving in 2011: 8. 

Corporation: Bering Straits Native Corporation; 
Number of board directors: 15; 
Geographic representation requirements: No; 
Board slate: No; 
Number of 2001 directors serving in 2011: 9. 

Corporation: Bristol Bay Native Corporation; 
Number of board directors: 12; 
Geographic representation requirements: No; 
Board slate: Yes; 
Number of 2001 directors serving in 2011: 4. 

Corporation: Calista Corporation; 
Number of board directors: 11; 
Geographic representation requirements: Yes; 
Board slate: Yes; 
Number of 2001 directors serving in 2011: 6. 

Corporation: Chugach Alaska Corporation; 
Number of board directors: 9; 
Geographic representation requirements: No; 
Board slate: Yes; 
Number of 2001 directors serving in 2011: 3. 

Corporation: Cook Inlet Region, Inc.; 
Number of board directors: 15; 
Geographic representation requirements: No; 
Board slate: Yes; 
Number of 2001 directors serving in 2011: 4. 

Corporation: Doyon, Limited; 
Number of board directors: 13; 
Geographic representation requirements: Yes; 
Board slate: Yes[B]; 
Number of 2001 directors serving in 2011: 5. 

Corporation: Koniag, Incorporated; 
Number of board directors: 9; 
Geographic representation requirements: No; 
Board slate: Yes; 
Number of 2001 directors serving in 2011: 1. 

Corporation: NANA Regional Corporation; 
Number of board directors: 23; 
Geographic representation requirements: Yes; 
Board slate: No; 
Number of 2001 directors serving in 2011: 5. 

Corporation: Sealaska Corporation; 
Number of board directors: 13; 
Geographic representation requirements: No; 
Board slate: Yes; 
Number of 2001 directors serving in 2011: 7. 

Source: Regional Alaska Native corporations. 

[A] Through its 2005 election, the Arctic Slope Regional Corporation 
identified board-endorsed candidates. 

[B] In August 2010, Doyon, Limited's board voted to cease developing a 
board slate, starting with its 2011 elections. 

[End of table] 

All of the corporations use cumulative voting for their elections of 
directors. Cumulative voting means that each shareholder has a number 
of votes equal to the number of shares he or she owns multiplied by 
the number of directors to be elected. For example, if a shareholder 
owned 100 shares and four directors were up for election, the 
shareholder would have 400 votes and could cast all 400 votes for one 
candidate or divide his or her votes among the candidates. In 
addition, nine corporations allow their shareholders to return a 
discretionary proxy, meaning that shareholders may grant the board or 
other specified proxy holders discretion to cast their votes as the 
proxy holders see fit; for the three corporations that do not solicit 
discretionary proxies, any votes that are not directed to a particular 
candidate are counted only toward reaching a quorum. 

Several corporations indicated that achieving a quorum for their 
annual elections can be challenging, but they have been successful 
over the last several years in obtaining the required participation of 
shareholders to elect directors for the board. To have a valid 
election, a quorum of shareholders must be represented at the meeting 
in person or by proxy. Four corporations' quorum is one-third of 
voting shares, and the other eight corporations' quorum is a majority 
of voting shares.[Footnote 40] To encourage shareholders to vote, all 
12 corporations offer monetary prizes or other incentives to 
shareholders voting in the annual election of directors.[Footnote 41] 
Seven corporations also allow shareholders to vote online; a few 
corporations said they have considered online voting but determined it 
may not be feasible or worthwhile, because, for example, many of their 
shareholders live in remote locations where Internet access is limited. 

In reviewing the regional corporations' election outcomes during the 
10-year period from 2001 to 2011, we found that more board-endorsed 
candidates or incumbents have won elections than independent 
candidates but that board director positions have also changed hands 
numerous times. Some shareholders we spoke with said that their 
corporation's use of a board slate and discretionary voting has made 
it difficult to elect independent candidates. We found that for the 
corporations with board slates, elections were won mostly by board 
slate nominees. We also found, however, that at least one independent 
candidate was elected during the 10-year period at all but one of 
these corporations; one corporation elected no independent candidates. 
Similarly, for the corporations without board slates, we found that 
incumbent directors who ran for reelection largely won, but it was not 
uncommon for at least one incumbent candidate to be unseated across 
these corporations during any one election cycle. In addition, in most 
elections across the 10-year period, candidates outnumbered the 
available seats on the board of directors, although we found that for 
the corporations with village-specific or other geographical 
restrictions on certain board seats, a specific seat went uncontested 
in several elections. Across the 12 corporations, director positions 
have turned over several times during the last 10-year period. Roughly 
half or fewer of the directors who were serving in 2001 were still 
serving in 2011 (see table 5). Turnover has occurred for a variety of 
reasons, including resignations, deaths, nominating committees not 
selecting incumbent board directors for reelection, and incumbents 
losing board elections. 

Shareholder Involvement: 

Legally, the role of shareholders in a corporation is limited, 
although the regional corporations have developed a number of methods 
to seek feedback from and encourage the involvement of their 
shareholders. For instance, in addition to annual shareholder 
meetings, most regional corporations annually hold informational 
meetings in all or a portion of the villages located in their region 
and in other locations where significant numbers of shareholders 
reside, such as Anchorage or the Pacific Northwest. For these 
meetings, corporate officials or board directors travel to communities 
to update shareholders on the corporation's business activities and 
finances and to enable shareholders to ask questions, raise concerns, 
and offer comments and suggestions. The corporations also provide 
news, updates, and other information to their shareholders via 
corporate websites, electronic or printed monthly or quarterly 
newsletters, and online social media like Facebook. In addition, nine 
regional corporations stream their annual meetings online, allowing 
shareholders to participate remotely. Several corporations reported 
that they have received good online participation, allowing some 
shareholders to participate who might not otherwise be able to attend. 
For instance, one corporation reported to us that shareholders could 
view its 2012 annual meeting via webcast for the first time, and 
approximately 400 shareholders participated. 

Three corporations have established shareholder advisory committees 
comprising volunteer shareholders--representing shareholders living 
both within and outside of Alaska--to learn about what matters to 
shareholders, hear how the corporations can improve communications and 
interactions with shareholders, and educate shareholders about 
corporate policies and procedures, among other things. For example, 
one corporation has established three shareholder committees to 
represent shareholders living (1) in Anchorage, (2) in Alaska but 
outside Anchorage, and (3) in the lower 48 states. Each committee 
consists of nine members who are chosen by a random drawing from the 
names of those who indicated interest in serving on the committee; 
chosen members serve 3-year terms. Two current directors from this 
corporation previously served on the shareholder advisory committee, 
one of whom told us that it was a great opportunity to learn more 
about the corporation and become interested in serving on the board. 

Further, six of the corporations open at least a portion of their 
regular board meetings to shareholders. In a few instances, a request 
to attend must be made in advance; in others, any interested 
shareholders may attend. A few other corporations said they offered 
limited instances when shareholders are invited to attend specific 
board meetings, such as when the board may be meeting with visiting 
dignitaries or discussing a cultural artifact. Additionally, many 
corporate officials we spoke with said they have an "open door" 
policy, whereby shareholders can call or come to their corporate 
offices to directly express concerns or obtain information. Corporate 
officials also noted that many of the directors live in villages in 
their region, and they receive feedback on corporate matters from 
shareholders on a daily basis because their families, neighbors, and 
coworkers are also shareholders. 

We found that most regional corporations have surveyed their 
shareholders for feedback over the past several years, although 
obtaining a high survey response rate has been a challenge. All but 
two corporations reported to us that they have surveyed their 
shareholders; a few reported that they survey their shareholders on a 
regular basis, such as every other year. Regional corporations have 
surveyed their shareholders to gauge their general satisfaction with 
the corporation or to obtain their views on specific topics, such as 
opening enrollment to Alaska Natives or descendants born after the law 
was enacted in December 1971, training or employment preferences, or 
special payments to elders. In the survey results we reviewed for the 
handful of corporations that shared them with us, the corporations 
reported that most shareholders expressed satisfaction with their 
corporation. For example, in a survey conducted in 2008, 67 percent of 
shareholder respondents for one corporation expressed positive 
"overall feelings toward" their corporation, and 62 percent of the 
respondents said the corporation did a good job of telling 
shareholders what the company was doing. We also noted, however, that 
in many instances survey response rates were fairly low, ranging from 
6 to 46 percent. A few corporate officials we spoke with acknowledged 
the participation challenge and said they typically offer incentives, 
such as prize drawings, to improve the response rate. We also spoke to 
several shareholders, who said they were generally satisfied with 
their regional corporation and stayed abreast of corporate activities 
by regularly reading corporate reports. On the other hand, we also 
heard concerns from several other shareholders that access to 
meaningful corporate information was lacking or that some shareholders 
do not participate in surveys or other corporate activities because 
they were frustrated or disappointed with the corporation. 

In addition to participating in meetings and surveys, shareholders may 
submit resolutions for inclusion in a board proxy solicitation 
regarding corporate matters for a shareholder vote. Many corporations 
have specific requirements for including proposed resolutions, such as 
setting time frames for submission or limiting the number of 
resolutions that can be submitted during any one year, and shareholder 
resolutions have often been advisory. We found that from 2001 through 
2011, shareholders from five corporations submitted 1 or more 
resolutions during any one year (for a total of 14 resolutions across 
the five corporations during this period).[Footnote 42] Examples of 
submitted shareholder resolutions included limiting terms for the 
board of directors to two consecutive terms, designating a specific 
location for the corporation's next annual meeting, and establishing a 
settlement trust. 

Another option available to shareholders if they are dissatisfied with 
corporate policies or activities is to file a lawsuit against the 
corporation. During our review, we identified several lawsuits that 
shareholders brought against regional corporations, including 
challenges to the corporation's denial of shareholder access to 
corporate books and records,[Footnote 43] the settlement agreement 
governing the 7(i) distribution,[Footnote 44] and payments to elders 
made through a settlement trust or elder benefits program.[Footnote 
45] Shareholders lost the lawsuits we identified except one case that 
settled out of court and two cases that, as of this report, were still 
pending. Nevertheless, in a few of these cases, neither federal nor 
state law authorized shareholders to bring lawsuits challenging the 
corporation's action, and under state law, successfully challenging a 
corporate board's business judgment is difficult. A few shareholders 
we heard from expressed frustration that filing a lawsuit was their 
only recourse, which can be very costly. 

The Corporations Are Subject to Some Federal and State Financial 
Reporting Requirements and Limited State Oversight: 

The regional corporations are subject to some financial reporting 
requirements under federal and state law, although oversight of the 
reporting is limited. The Settlement Act generally exempts the 
corporations from complying with federal securities laws while 
requiring them to annually transmit a report to their shareholders 
that contains "substantially all the information" required to be 
included in an SEC registrant's annual report to shareholders. 
[Footnote 46] The act does not provide a federal role for monitoring 
the corporations' compliance with this requirement, and the state's 
oversight is generally limited to enforcement of state securities laws 
and proxy regulations. 

Federal and State Financial Reporting Requirements for Alaska Native 
Corporations: 

Under federal law and state securities laws and regulations, the 
regional corporations are subject to some financial reporting 
requirements. At the federal level, the Settlement Act generally 
exempts the corporations from complying with federal securities laws. 
As explained in a House committee report accompanying an amendment to 
the Settlement Act, this exemption was based on the understanding that 
federal regulation of the corporations was not necessary to protect 
Alaska Native shareholders or the public during the period when Alaska 
Native-owned stock could not be sold.[Footnote 47] The report also 
noted, however, that if this assumption proved invalid in light of 
experience, the committee was prepared to reimpose provisions of 
federal securities laws as necessary and that the 20-year exemption 
should be viewed by the Alaska Natives as an experiment which would be 
stopped if abused. In 1988, the act was amended to extend the 
exemption from securities law until after a corporation issued shares 
of its stock to the public, shareholders voted to terminate the 
restriction on sales, or the corporation registered with the SEC. As 
of this report, none of these events had occurred, and the 13 regional 
corporations therefore continue to be exempt from federal securities 
laws. 

In discussing the federal securities exemption, the House committee 
report recognized that the Securities Exchange Act of 1934 was 
designed to inform the investing public about securities and also 
provided useful information to shareholders.[Footnote 48] Accordingly, 
the Settlement Act was amended to require Alaska Native corporations 
to annually transmit a report to their shareholders that contains 
"substantially all the information" required to be included in an SEC 
registrant's annual report to shareholders. In addition, the 
Settlement Act required that the accounts of the regional corporations 
be audited annually in accordance with generally accepted auditing 
standards and that the corporations provide shareholders with a copy, 
or a fair and reasonably detailed summary, of the audit report. 
[Footnote 49] 

The SEC has characterized an annual report to shareholders as the 
"principal document used by most public companies to disclose 
corporate information to their shareholders."[Footnote 50] Regulations 
promulgated under the Securities Exchange Act of 1934 prescribe the 
information that SEC registrants must provide in their annual reports 
to shareholders.[Footnote 51] These annual reports are to include, 
among other things, detailed information about the financial 
performance of the corporation, audited consolidated financial 
statements for the corporation and its subsidiaries, and a 
presentation of selected financial data highlighting certain 
significant trends in the company's financial condition and results of 
operations for each of the last 5 fiscal years. A management 
discussion and analysis of the corporation's financial condition and 
results of operations are also required. The SEC describes the 
management discussion and analysis as an opportunity for management to 
help shareholders see the corporation's financial performance through 
the eyes of management; to provide context within which the financial 
statements should be analyzed; and to provide information about the 
quality of, and potential variability of, a company's earnings and 
cash flow, so that investors can ascertain the likelihood that past 
performance is indicative of future performance. 

At the state level, regional corporations are subject to financial 
reporting requirements included in the Alaska Securities Act and its 
implementing regulations. This act requires that copies of all 
materials related to a proxy solicitation must be filed concurrently 
with the state's Division of Banking and Securities if the 
solicitation has been made available to at least 30 Alaska resident 
shareholders of an Alaska Native corporation with 500 or more 
shareholders and total assets exceeding $1 million.[Footnote 52] 
Documents related to a proxy solicitation that must be filed with the 
state include annual reports to shareholders, proxy statements, 
proxies that are mailed to shareholders, as well as materials 
distributed by other means such as e-mail or websites. Proxy 
solicitation materials filed with the state are available for public 
review, although the state maintains only printed and not online 
copies.[Footnote 53] 

Alaska Native corporations that meet the threshold requirement for 
filing proxy solicitation materials are also subject to specific state 
regulations governing the content of and process for proxy 
solicitation.[Footnote 54] State documentation describes these 
regulations as intended to protect both the corporations and 
shareholders from "unscrupulous individuals," by promoting 
transparency in the solicitation process and the fairness of 
elections. The regulations prohibit proxy solicitations from 
containing material misrepresentations--generally defined as a 
statement that is false or misleading with respect to a material fact 
or that omits a material fact necessary to make a statement not false 
or misleading--and also provide guidance and examples of what might 
constitute false or misleading statements. In addition, the 
regulations require proxy solicitations to be preceded or accompanied 
by a written proxy statement including certain information. What 
information is required depends on whether the solicitation comes from 
the boards of the regional corporations or someone else, such as an 
independent candidate running for a seat on the board, although the 
requirements overlap considerably. For example, both types of proxy 
solicitations must be preceded or accompanied by background 
information on board of director nominees, such as involvement in any 
adverse legal proceedings with the corporation, along with certain 
financial transactions between the corporation and any entity in which 
the nominee, a board director, or a member of the nominee's or 
director's family is employed or has an ownership interest. Proxy 
solicitations from a regional corporation's board of directors must 
also contain detailed information about the corporation's current 
directors and committees, among other information. 

Federal and State Oversight of Alaska Native Corporations' Financial 
Reporting: 

The Settlement Act does not provide a federal role in ensuring that 
the regional corporations comply with the act's reporting 
requirements; there is limited oversight of the regional corporations' 
financial reporting carried out at the state level. Although the 
Settlement Act requires the regional corporations to annually provide 
their shareholders with a report that contains "substantially all the 
information" required to be included in an SEC registrant's annual 
report to shareholders, the act does not define what "substantially 
all" means. In addition, the act does not authorize any federal entity 
to monitor whether corporations are complying with this reporting 
requirement.[Footnote 55] Although annual reports to shareholders are 
not required to be filed with or reviewed by the SEC, a House 
committee report indicated that Alaska Native leadership would comply 
fully with the intent of this provision and submit annual reports to 
their shareholders which are as effective in disclosing corporate 
activities as those prepared by SEC registrants, and that Alaska law 
would provide protection for Native shareholders from any corporate 
mismanagement and misrepresentations or omissions in connection with 
sales of securities.[Footnote 56] 

Because regional corporations are required to provide "substantially 
all" the information required of SEC registrants in their annual 
shareholder reports, we asked staff of the SEC to provide observations 
on the extent to which the corporations' 2010 annual shareholder 
reports include the information required to be disclosed by SEC 
registrants. The SEC staff's observations were subject to a number of 
limitations, as follows: 

* SEC staff did not evaluate the merits of any of the regional 
corporations' investments or determine whether an investment was 
appropriate for any investor, consistent with the scope of its 
disclosure review program of publicly reporting companies. 

* SEC staff did not interpret the Settlement Act's requirement that 
regional corporations' annual shareholder reports contain 
"substantially all the information" found in an SEC registrant's 
annual report. Instead, in providing its observations, SEC staff 
assumed that the regional corporations were required to include all of 
the information required to be provided in an SEC registrant's annual 
report to shareholders. 

* SEC staff did not consider any information outside of what was 
contained in the annual reports or engage in a dialogue with corporate 
officials about any of their observations, as they normally would in 
their regular disclosure review program. According to SEC staff, this 
additional information would have further informed their observations. 
Accordingly, SEC staff noted that they were unable to determine 
whether certain observations did in fact represent deficiencies or 
noncompliant accounting or disclosures or whether they were able to 
identify all material issues in providing us with their observations. 

Nevertheless, SEC staff made a number of observations and raised 
several questions where the information contained in the regional 
corporations' annual shareholder reports differed from what they would 
have expected to see in an SEC registrant's annual report. For 
example, SEC staff noted that the management discussion and analysis 
disclosures in most of the corporations' annual reports did not fully 
explain material uncertainties reasonably likely to affect future 
trends and prospects, as they would have expected to see in an SEC 
registrant's report. SEC staff also noted that it was not clear to 
what extent certain generally accepted accounting principles applied 
to the regional corporations' preparation of their financial 
statements. SEC registrants are generally considered "public" and must 
follow accounting standards for public corporations, whereas nonpublic 
corporations may not have to follow certain accounting standards 
required for public companies. Since the regional corporations are 
exempt from SEC regulation but are required to produce annual 
shareholder reports containing "substantially all the information" 
found in a report prepared by an SEC registrant, SEC staff noted that 
it is unclear in some circumstances which accounting standards and 
disclosures the corporations should follow. 

Under state securities law, the state has the authority to regulate 
various issues related to the regional corporations, primarily 
oversight of proxy solicitations. According to state officials, the 
state has received a number of inquiries about proxy solicitations 
from both shareholders and regional corporations over the years. For 
instance, according to state officials, the state received 59 
inquiries about regional corporations--questions relating to proxy 
materials filed with the state--from July 2011 through June 2012. The 
inquiries covered a range of topics, including questions from 
shareholders on how to file proxy materials or what materials, 
including communications via social media, are considered to be proxy 
solicitations, as well as questions from corporate officials seeking 
clarification of the proxy solicitation regulations' requirements. The 
state also received inquiries about areas outside its jurisdiction, 
such as a shareholder contesting the results of an election, in which 
case the state advised the individual to seek legal counsel. According 
to state officials, they were able to respond to and resolve all the 
inquiries within their jurisdiction during this time period, and no 
further action was necessary. 

The state has the authority to review all proxy solicitations but 
largely reviews only those solicitations for which a corporation or a 
corporation's shareholder has filed a complaint (i.e., a written 
request for the state to investigate). Specifically, the state does 
not investigate to determine whether all Alaska Native corporations 
meeting the threshold requirements for filing proxy solicitations with 
the state actually do so, but, rather, the state relies on self-
reporting by the corporations. In addition, state officials we spoke 
with said they do not automatically review the proxy materials 
submitted by the regional corporations or their shareholders because 
they do not have the resources to routinely review proxy filings to 
assess compliance with the requirements.[Footnote 57] Instead, the 
state mostly relies on the corporations or their shareholders to 
monitor filed proxy materials and to submit complaints if concerns of 
violations surface, such as proxy materials containing materially 
false and misleading statements. 

According to information provided by state officials, from January 
2010 through June 2012, the state received nine complaints involving 
four regional corporations. Of these, one was filed against a 
shareholder of a regional corporation by a corporate officer, seven 
were complaints filed against a regional corporation by a shareholder, 
and the other was an investigation initiated by the state into a 
regional corporation's use of social media. The state determined that 
four complaints involved matters outside the state's jurisdiction, and 
the state declined to open an investigation into two others because 
the complaints included allegations that were part of ongoing 
litigation between the parties; state officials told us that to the 
extent that litigation may occur over an issue for which they have 
also received a complaint, the state generally does not pursue its own 
investigation but instead defers to the courts. The state opened an 
investigation for the three other complaints but closed them without 
taking further action. 

For investigations where the state determines that a violation has 
occurred, it has the authority to issue an administrative order to 
parties found to be in violation.[Footnote 58] According to 
information provided to us by the state, from 1978 through 2011, the 
state issued administrative orders in at least 29 investigations of a 
regional corporation's or a regional corporation shareholder's 
compliance with the state's proxy regulations.[Footnote 59] Six of the 
investigations involved a regional corporation's board solicitation, 
and 22 were related to shareholder solicitations.[Footnote 60] 
Administrative orders issued have generally found one or more of the 
following violations: 

* Failure to file with the state proxy material that meets the 
requirements for filing. 

* Failure to include in proxy material information required by the 
proxy regulations, the omission of which might also be materially 
false and misleading. 

* Inclusion in proxy material of materially false and misleading 
statements. For example, the state found a solicitation to be false 
and misleading because it stated that the proxy holder was engaged in 
a lawsuit against the corporation involving the corporation's failure 
to provide a shareholder list in a timely fashion, even though at the 
time the solicitation was disseminated, the court had already ruled 
that the corporation had timely provided the list. 

In almost all orders, the state ordered the violator to cease the 
violation; in many instances, the state ordered that any future proxy 
solicitations, either indefinitely or for a specified time period, be 
filed with the state before distribution to shareholders, and in some 
instances, the state imposed a fine on the violator, with most fines 
set at $500. 

In addition, corporations or shareholders may file a lawsuit over 
their concerns about a proxy solicitation. During our review, we 
identified a few lawsuits brought by shareholders alleging that proxy 
solicitations distributed by their regional corporations violated the 
law or regulations. We also identified a number of lawsuits brought by 
regional corporations alleging that shareholder solicitations 
contained false and misleading statements. In the cases we identified 
brought by shareholders--who alleged that the corporations' proxy 
solicitation did not include required information, contained false and 
misleading statements, or both--the courts ruled in favor of the 
corporations, that is, that the corporations' solicitations were not 
false or misleading, although two cases were still pending as of this 
report, and one settled out of court.[Footnote 61] In contrast, in the 
cases we identified brought by regional corporations, the courts ruled 
that the shareholder solicitations contained false and misleading 
statements, although one case was still pending in an appellate court 
as of this report, and one settled out of court. For example, in one 
case, the court ruled that a shareholder's solicitation, which claimed 
that board directors appointed themselves to top executive positions 
regardless of qualifications, was false and misleading.[Footnote 62] 

The Corporations Provide Diverse Monetary and Nonmonetary Benefits to 
Their Shareholders and Other Alaska Natives: 

The regional corporations provide a wide variety of benefits to their 
shareholders and other Alaska Natives. Under the Settlement Act, the 
corporations are authorized to provide benefits to promote the health, 
education, or welfare of shareholders and other Alaska Natives, but 
they are not required to do so.[Footnote 63] As diverse as they are 
themselves, the corporations provide an equally diverse array of 
benefits depending in part on their financial means and on priorities 
related to shareholder needs.[Footnote 64] The articles of 
incorporation and mission statements of the regional corporations 
establish their intent to provide economic, cultural, social, or all 
three types of benefits, which the corporations have chosen to do in 
both monetary and nonmonetary forms; benefits go to shareholders, 
shareholders' descendants, and others. We do not include the 13th 
Regional Corporation in our discussion because, without operating 
revenues, it has not provided tangible benefits to its shareholders 
for many years. 

Monetary Benefits: 

The 12 regional corporations provide a variety of monetary benefits to 
their shareholders and others, including dividends, elder benefits, 
scholarships, memorial benefits, shareholders' equity, and charitable 
donations, as follows: 

* Dividends. The most broadly dispersed monetary benefit consists of 
cash dividends paid per share to shareholders. Shareholders and 
officials from several regional corporations told us that dividends 
are often considered the most important benefit shareholders receive 
from the corporations. We heard from several corporations that 
dividend payments to shareholders provide a critical source of income 
to help defray living expenses, such as high heating costs during the 
winter. The total dividends per share paid by each of the 12 regional 
corporations during the 2010 reporting period varied considerably, 
ranging from $2.35 per share at one corporation to $64.26 at another 
(see table 6). The regional corporations' boards annually determine 
and approve dividend amounts on the basis of factors including the 
corporations' financial performance, and some have established 
formulas, such as a targeted percentage of net income, or a permanent 
fund out of which dividends are to be paid. 

Table 6: Financial and Dividend Information as Reported by the 
Regional Alaska Native Corporations, 2010: 

Corporation: Ahtna, Incorporated; 
Gross revenue: $243,430,000; 
Net income: $1,739,000; 
Declared dividends per share (dollars)[A]: $4.00[C]; 
Actual dividends and distributions paid in total[B]: $880,000; 
Actual dividends and distributions as a percentage of net income: 51%. 

Corporation: The Aleut Corporation; 
Gross revenue: $143,046,000; 
Net income: $8,381,000; 
Declared dividends per share (dollars)[A]: $21.00; 
Actual dividends and distributions paid in total[B]: $7,670,000[D]; 
Actual dividends and distributions as a percentage of net income: 92%. 

Corporation: Arctic Slope Regional Corporation; 
Gross revenue: $2,331,681,000; 
Net income: $164,433,000; 
Declared dividends per share (dollars)[A]: $64.26; 
Actual dividends and distributions paid in total[B]: $73,667,000; 
Actual dividends and distributions as a percentage of net income: 45%. 

Corporation: Bering Straits Native Corporation; 
Gross revenue: $197,706,000; 
Net income: $8,848,000; 
Declared dividends per share (dollars)[A]: $2.35; 
Actual dividends and distributions paid in total[B]: $1,488,000; 
Actual dividends and distributions as a percentage of net income: 17%. 

Corporation: Bristol Bay Native Corporation; 
Gross revenue: $1,667,200,000; 
Net income: $43,017,000; 
Declared dividends per share (dollars)[A]: $13.80; 
Actual dividends and distributions paid in total[B]: $7,307,000; 
Actual dividends and distributions as a percentage of net income: 17%. 

Corporation: Calista Corporation; 
Gross revenue: $234,866,000; 
Net income: $18,301,000; 
Declared dividends per share (dollars)[A]: $2.75[C]; 
Actual dividends and distributions paid in total[B]: $4,161,000[D]; 
Actual dividends and distributions as a percentage of net income: 23%. 

Corporation: Chugach Alaska Corporation; 
Gross revenue: $936,975,000; 
Net income: $26,492,000; 
Declared dividends per share (dollars)[A]: $41.92[C]; 
Actual dividends and distributions paid in total[B]: $9,270,000; 
Actual dividends and distributions as a percentage of net income: 35%. 

Corporation: Cook Inlet Region, Inc.; 
Gross revenue: $188,357,000; 
Net income: $16,535,000; 
Declared dividends per share (dollars)[A]: $35.42; 
Actual dividends and distributions paid in total[B]: $22,236,000; 
Actual dividends and distributions as a percentage of net income: 
135%[E]. 

Corporation: Doyon, Limited; 
Gross revenue: $280,268,000; 
Net income: $15,678,000; 
Declared dividends per share (dollars)[A]: $4.21; 
Actual dividends and distributions paid in total[B]: $7,253,000[D]; 
Actual dividends and distributions as a percentage of net income: 46%. 

Corporation: Koniag, Incorporated; 
Gross revenue: $131,052,000; 
Net income: $8,654,000; 
Declared dividends per share (dollars)[A]: $10.50; 
Actual dividends and distributions paid in total[B]: $3,903,000; 
Actual dividends and distributions as a percentage of net income: 45%. 

Corporation: NANA Regional Corporation; 
Gross revenue: $1,592,826,000; 
Net income: $41,173,000; 
Declared dividends per share (dollars)[A]: $14.00; 
Actual dividends and distributions paid in total[B]: $21,714,000[D]; 
Actual dividends and distributions as a percentage of net income: 53%. 

Corporation: Sealaska Corporation; 
Gross revenue: $223,823,000; 
Net income: $15,154,000; 
Declared dividends per share (dollars)[A]: $3.56[C]; 
Actual dividends and distributions paid in total[B]: $7,690,000; 
Actual dividends and distributions as a percentage of net income: 51%. 

Source: GAO analysis of data from the regional Alaska Native 
corporations. 

Note: The regional corporations' financial information presented in 
this table reflects a single-year snapshot and may not be 
representative of past or future financial performance or dividends 
and distributions paid to shareholders. Unless otherwise noted, the 
numbers in this table represent amounts reported by the corporations 
in their audited consolidated financial statements and accompanying 
notes, both of which were contained within the corporations' annual 
reports to shareholders for the 2010 reporting period. 

[A] Amounts in this column represent the corporations' declared 
dividends per share during the 2010 reporting period, which are 
amounts authorized by the board of directors to be paid to 
shareholders. For corporations that issue more than one class of 
shares, these declared dividend amounts may or may not correspond to 
declared dividends for each class of shares. 

[B] Amounts in this column represent the total dividends paid by the 
corporations during the 2010 reporting period, including, for some 
corporations, distributions to elder shareholders. 

[C] Declared dividend amounts for this corporation were contained in 
the corporation's annual report to shareholders but outside of its 
audited consolidated financial statements. 

[D] These amounts were declared in the 2010 reporting period but were 
paid the following year. 

[E] Cook Inlet Region, Inc., does not base its dividend payments on 
its net income but, rather, pays a dividend equal to 3.5 percent of 
shareholders' equity, that is, the monetary value of the corporation's 
assets minus its liabilities. 

[End of table] 

In analyzing the corporations' financial data for the 10-year period 
from 2001 through the 2010 reporting period, we found that not all 
corporations provided dividends every year. Each of the 12 
corporations paid dividends in recent years, but a handful of 
corporations did not provide dividend payments in the early 2000s; 
some corporations struggled financially or declared bankruptcy in the 
past.[Footnote 65]Our analysis showed that for the 10-year period, the 
cumulative total in dividends per share ranged from $5.50 per share to 
over $600 per share; for half the corporations, the cumulative total 
amounted to approximately $34 to $100 per share over the period. Thus, 
a shareholder owning 100 shares could have received from $550 to as 
much as $60,000 over the period; typically, however, shareholders 
would have received about $3,400 to $10,000. 

* Elder benefits. In addition to dividends, almost all the regional 
corporations provide monetary payments to elder shareholders. 
Specifically, 11 corporations make cash payments, often quarterly or 
annually, to their elder shareholders, starting at age 60, 62, or 65, 
depending on the corporation. The regional corporations provide these 
payments--which ranged from $300 to $4,000 per individual during the 
2010 reporting period--through various mechanisms, including from 
designated trusts, as a separate class of shares, or in cash payments 
authorized by the corporations' boards.[Footnote 66] Several corporate 
officials we spoke with commented that these payments often constitute 
an important source of income for elder shareholders, who may not 
otherwise have a retirement income. 

* Scholarships. The 12 regional corporations support a variety of 
educational scholarships to their shareholders and, in some cases, to 
descendants of shareholders. In general, the corporations provide 
funding to closely affiliated nonprofit organizations, such as 
foundations endowed by the corporations, which then award scholarships 
to qualifying undergraduate, graduate, or vocational students. During 
the corporations' 2010 reporting period, each of the 12 corporations 
reported to us that they provided funding to support individual 
scholarship awards made by the nonprofit organizations, in amounts 
varying by corporation and by type of scholarship award (see table 7). 
In some cases, scholarships are competitive; in other cases, corporate 
officials said they try to provide funding to as many eligible 
applicants as possible. 

Table 7: Scholarship Information as Reported by the Regional Alaska 
Native Corporations, 2010: 

Corporation: Ahtna, Incorporated; 
Scholarship provider: Ahtna Heritage Foundation; 
Scholarship support: 
* Higher education scholarships to shareholders; 
* Students may receive $2,000 each per semester for full-time study, 
$1,000 each per semester for part-time study; 
* Total of $187,000 provided to foundation. 

Corporation: The Aleut Corporation; 
Scholarship provider: Aleut Foundation; 
Scholarship support: 
* Higher education and vocational scholarships to shareholders or 
shareholder descendants; 
* Total of $615,315 provided by foundation for almost 200 scholarships. 

Corporation: Arctic Slope Regional Corporation; 
Scholarship provider: Arctic Education Foundation; 
Scholarship support: 
* Higher education, training, and leadership scholarships to 
shareholders, shareholder descendants, or other Alaska Natives living 
in the region; 
* Total of $3.4 million provided to foundation, which awarded 425 
scholarships. 

Corporation: Bering Straits Native Corporation; 
Scholarship provider: Bering Straits Foundation; 
Scholarship support: 
* Higher education and vocational scholarships to shareholders or 
shareholder descendants; 
* Students may receive $400 to $1,000 per semester or quarter; 
* Total of $209,514 provided by foundation for 148 scholarships. 

Corporation: Bristol Bay Native Corporation; 
Scholarship provider: Bristol Bay Education Foundation; 
Scholarship support: 
* Higher education and vocational scholarships to shareholders; 
* Students may receive $1,500 to $5,500 per year; 
* Total of $400,000 provided to foundation for 156 scholarships. 

Corporation: Calista Corporation; 
Scholarship provider: Calista Scholarship Fund; 
Scholarship support: 
* Higher education scholarships to shareholders or shareholder 
descendants with ties to the Calista region; 
* Students may receive $500 to $1,000 per semester, depending on grade 
point average; 
* Total of $293,250 provided by fund for more than 200 scholarships. 

Corporation: Chugach Alaska Corporation; 
Scholarship provider: Chugach Heritage Foundation; 
Scholarship support: 
* Higher education scholarships to shareholders or shareholder 
descendants; 
* Students may receive $4,800 to $6,000 per academic year for 
undergraduate study to $12,000 per academic year for graduate study; 
* Total of $851,632 provided by foundation to more than 200 recipients. 

Corporation: Cook Inlet Region, Inc.; 
Scholarship provider: CIRI Foundation; 
Scholarship support: 
* Higher education and vocational scholarships to shareholders or 
shareholder descendants; 
* Students may receive up to $5,000 per academic year for full-time 
study and up to $4,500 per academic year for part-time study; 
* Total of $292,592 provided to the foundation for 431 recipients. 

Corporation: Doyon, Limited; 
Scholarship provider: Doyon Foundation; 
Scholarship support: 
* Higher education and vocational scholarships to shareholders or 
shareholder descendants; 
* Students may receive $400 per semester to $7,000 per year; 
* Total of $482,771 provided by foundation to about 400 recipients. 

Corporation: Koniag, Incorporated; 
Scholarship provider: Koniag Education Foundation; 
Scholarship support: 
* Higher education scholarships to shareholders or shareholder 
descendants; 
* Students may receive up to $2,500 per year for general scholarships; 
* Total of $153,450 provided to the foundation. 

Corporation: NANA Regional Corporation; 
Scholarship provider: Aqqaluk Trust; 
Scholarship support: 
* Higher education and vocational scholarships to shareholders, 
shareholder descendants, or dependents of shareholders or their 
descendants; 
* Students may receive $2,000 per term for full-time study and $1,000 
per term for part-time study; 
* Total of $803,920 provided by trust to 275 recipients. 

Corporation: Sealaska Corporation; 
Scholarship provider: Sealaska Heritage Institute; 
Scholarship support: 
* Higher education scholarships to shareholders or shareholder 
descendants; 
* Total of $298,000 provided by the institute for roughly 400 
scholarships. 

Source: GAO analysis of information from the regional Alaska Native 
corporations. 

[End of table] 

* Memorial benefits. Most regional corporations provide financial 
assistance to their shareholders and, in some cases, to shareholder 
descendants or other family members to help with funeral-related 
expenses related to the death of a shareholder, spouse, or descendant. 
[Footnote 67] Financial assistance can be used for burial or funeral-
related expenses, including travel by family members, which may allow 
shareholders to maintain Alaska Native burial traditions and help 
offset the high costs of travel in Alaska. Most corporations reported 
that they set a cap on the amount of financial assistance available 
per individual or family, ranging from $500 to $3,000, depending on 
the corporation. 

* Shareholders' equity. Shareholders' equity has been described by 
some of the regional corporations as a benefit, but because 
shareholders cannot currently sell their shares for a monetary return, 
they may not view such equity as a benefit. Shareholders' equity is 
the net assets of the company, that is, the value of a company's 
assets minus its liabilities. According to a Department of the 
Interior study on Alaska Native corporations, the values of the 
regional corporations are difficult to estimate in the absence of a 
market for their shares.[Footnote 68] Moreover, absent a market value, 
shareholders cannot in effect express confidence or lack of confidence 
in the corporation's management of the shareholders' assets by buying 
or selling their shares. Nevertheless, in their 2010 reporting period, 
the 12 regional corporations reported total shareholders' equity 
values ranging from $15 million to about $1.1 billion (6 regional 
corporations reported equity per share, which ranged from about $83 to 
nearly $1,000 per share). In contrast to the corporations' view, a 
number of shareholders we heard from said that shareholders' equity 
has little real value to them since they cannot sell shares for a 
tangible monetary benefit. 

* Charitable donations. The regional corporations each make a variety 
of charitable monetary and in-kind donations to regional nonprofit 
organizations and other entities that offer services to corporation 
shareholders and others in the communities. For instance, most of the 
corporations reported that they provide funding or other support to 
housing authorities, health organizations, or vocational schools 
located in their regions. One corporation, for example, provides 
funding to a flight school that trains private and commercial pilots, 
a particularly useful skill given that many Alaska Native villages are 
accessible only by plane (see fig. 2). Flight school officials told us 
that a local airline hires nearly all of the school's graduates. 
Another corporation provides funding to a vocational facility in the 
region, which offers junior and high school students varied training, 
such as driver's education, metal welding, and small-engine repair. 
Representatives at some of the nonprofit organizations we visited 
stressed the importance of the regional corporations' support in 
maintaining their operations and programs. The corporations also make 
in-kind donations, such as firewood for winter heating, including 
delivery to elders and others unable to haul it themselves, or gravel 
for village infrastructure from corporation-owned gravel pits. 

Figure 2: Examples of Benefits Supported by the Regional Alaska Native 
Corporations: 

[Refer to PDF for image: 5 photographs] 

A village wind turbine; 
Firewood ready for distribution; 
Flight school training aircraft; 
Harvesting willow leaves on corporate-owned land; 
Protected historical mission site. 

Source: GAO. 

[End of figure] 

Nonmonetary Benefits: 

Nonmonetary benefits offered by the regional corporations--often in 
partnership with village corporations, tribal organizations, and 
nonprofit organizations within the region--include employment 
opportunities; cultural preservation; land management; economic 
development; and advocacy on behalf of Alaska Natives and their 
communities. Specific benefits may include, but are not limited to, 
the following: 

* Employment and related opportunities. The 12 regional corporations 
or their subsidiaries may employ Alaska Native shareholders in 
preference over others (see table 8).[Footnote 69] They may also offer 
internships and other employment support. Some regional corporation 
officials told us that employing shareholders is an important priority 
to them, and they actively train and employ shareholders in their 
businesses. For example, according to one regional corporation, 55 
percent of the employees at its zinc-lead mine are shareholders. 
According to corporation officials, employment opportunities for 
shareholders living within the region were an important consideration 
in initially determining whether to develop the mine. Officials from a 
few other regional corporations, in contrast, told us that their 
corporations have not emphasized creating employment opportunities 
because it has not been a high priority for their shareholder base or 
that business and employment opportunities may not be readily 
available where shareholders reside. In addition to hiring 
shareholders and other Alaska Natives directly, the corporations have 
internship programs for shareholders and, in some cases, for 
shareholder descendants or spouses. Internships vary from 6-to 12-week 
summer internships to longer internships or apprenticeships that can 
lead to a permanent position with a regional corporation. Several 
corporations also offer other employment support to their 
shareholders, such as providing career counseling, job fairs, and 
leadership training to retain shareholders as managers and leaders 
within the corporation. 

Table 8: Employment of Alaska Natives by the Regional Corporations and 
Their Subsidiaries, as Reported by the Corporations: 

Corporation: Ahtna, Incorporated; 
Number of employees: 
Corporation: 
Total employees: 29; 
Shareholder employees[A]: 11 (38%); 
Subsidiaries: 
Total employees: 1,780; 
Shareholder employees[A]: 68 (4%). 

Corporation: The Aleut Corporation; 
Number of employees: 
Corporation: 
Total employees: 14; 
Shareholder employees[A]: 9 (64%); 
Subsidiaries: 
Total employees: 523; 
Shareholder employees[A]: 33 (6%). 

Corporation: Arctic Slope Regional Corporation; 
Number of employees: 
Corporation: 
Total employees: [B]; 
Shareholder employees[A]: [B]; 
Subsidiaries: 
Total employees: [B]; 
Shareholder employees[A]: [B]. 

Corporation: Bering Straits Native Corporation; 
Number of employees: 
Corporation: 
Total employees: 63; 
Shareholder employees[A]: 22 (35%); 
Subsidiaries: 
Total employees: 1,031; 
Shareholder employees[A]: 46 (4%). 

Corporation: Bristol Bay Native Corporation[C]; 
Number of employees: 
Corporation: 
Total employees: 34; 
Shareholder employees[A]: 22 (65%); 
Subsidiaries: 
Total employees: 3,486; 
Shareholder employees[A]: 88 (3%). 

Corporation: Calista Corporation[C]; 
Number of employees: 
Corporation: 
Total employees: 53; 
Shareholder employees[A]: 30 (57%); 
Subsidiaries: 
Total employees: 1,351; 
Shareholder employees[A]: 52 (4%). 

Corporation: Chugach Alaska Corporation; 
Number of employees: 
Corporation: 
Total employees: 307; 
Shareholder employees[A]: 51 (17%); 
Subsidiaries: 
Total employees: 5,086; 
Shareholder employees[A]: 56 (1%). 

Corporation: Cook Inlet Region, Inc.; 
Number of employees: 
Corporation: 
Total employees: 79; 
Shareholder employees[A]: 40 (51%); 
Subsidiaries: 
Total employees: 1,276; 
Shareholder employees[A]: 51 (4%). 

Corporation: Doyon, Limited[C]; 
Number of employees: 
Corporation: 
Total employees: 74; 
Shareholder employees[A]: 51 (69%); 
Subsidiaries: 
Total employees: 2,761; 
Shareholder employees[A]: 438 (16%). 

Corporation: Koniag, Incorporated; 
Number of employees: 
Corporation: 
Total employees: 57; 
Shareholder employees[A]: 23 (40%); 
Subsidiaries: 
Total employees: 695; 
Shareholder employees[A]: 12 (2%). 

Corporation: NANA Regional Corporation; 
Number of employees: 
Corporation: 
Total employees: 102; 
Shareholder employees[A]: 97 (95%); 
Subsidiaries: 
Total employees: 10,846; 
Shareholder employees[A]: 1,147 (11%). 

Corporation: Sealaska Corporation; 
Number of employees: 
Corporation: 
Total employees: 71; 
Shareholder employees[A]: 56 (79%); 
Subsidiaries: 
Total employees: 1,309; 
Shareholder employees[A]: 67 (5%). 

Source: GAO analysis of data from the regional Alaska Native 
corporations. 

Note: These data represent the regional corporations' employment 
numbers as reported by the corporations as of dates occurring from 
March to October 2012. 

[A] Unless otherwise noted, numbers of employees in this column 
include the regional corporation's own shareholders plus descendants 
of those shareholders; in some cases, these numbers may also include 
shareholders or descendants of shareholders of other regional 
corporations. Numbers in parentheses represent employees who are 
shareholders or descendants of shareholders as a percentage of all 
employees of the corporation or of its subsidiaries. 

[B] Data not provided. 

[C] This corporation does not track the number of employees who are 
descendants of shareholders. 

[End of table] 

* Cultural preservation. The regional corporations have supported 
numerous cultural activities focused on preserving and maintaining 
Alaska Native traditions and heritage. Nearly all of the corporations 
have established nonprofit organizations or heritage centers, many 
with the express purpose of administering cultural and educational 
programs to preserve and honor unique Native cultures. Cultural 
activities supported by regional corporations include programs for 
youth and elders, Alaska Native community events, and language and 
artifact preservation. For example, several corporations sponsor youth-
elder camps, featuring activities such as language learning and 
gathering and preparing subsistence foods that help transmit Native 
traditions from one generation to the next. Other corporations support 
groups or events centered on traditional art forms and languages, such 
as crafts, Native songs and dances, and the development of a compact 
disc teaching an Alaska Native language. Still other corporations have 
focused on protecting sacred and historical sites and Native 
artifacts. For example, one corporation helps protect more than 80 
sacred historical sites located throughout the region on behalf of 
tribal entities that are the traditional owners of the sites, which 
include historical burial grounds, forts, petroglyphs, and villages. 

* Land management. The regional corporations actively manage their 
surface lands for subsistence and recreation by their shareholders and 
other Alaska Natives, as well as for natural resource use and 
protection. Many corporations indicated that subsistence--which plays 
a key role in Alaska Natives' livelihoods and traditional culture--is 
often a primary or highest-priority use of their lands; subsistence 
activities include hunting, trapping, fishing, and food gathering and 
camps associated with these activities. Natural resource use and 
protection include a wide variety of activities such as working with 
research partners to study topics related to sustainable management of 
corporate natural resources, including timber, wildlife, and renewable 
energy potential; harvesting and marketing of corporate natural 
resources; managing property leases, and easements; developing 
strategies to promote outdoor tourism; and patrolling corporate lands 
against trespassing, particularly for those corporations with road 
systems in the regions. 

* Economic development. With their size and relative profitability, 
the regional corporations take actions to foster economic development 
in their regions, typically working in partnership with other regional 
or community organizations. For example, one corporation is working 
with a regional Native health association to build a 33,000-square-
foot multidisciplinary health facility on corporation-owned land 
(which is leased to the association for 50 years at $1 per year). The 
facility is to house dental and health clinics, as well as behavioral 
health, tribal community, and environmental health services. Another 
corporation has established a joint business venture with a village 
corporation to bring an out-of-use seafood plant back into production. 
The regional corporations are also involved in various ways--such as 
seeking funding or procuring physical resources--in infrastructure or 
energy development. Several regional corporation officials told us 
that energy development is a high priority for them, to help reduce 
the high costs of energy in Alaska Native villages. These 
corporations, for example, are exploring renewable energy development 
opportunities, including wind power generation on varying scales, and 
others are exploring or investing in other alternative heating 
sources, such as solar power, geothermal heat, or wood pellet heating. 

* Advocacy. Officials from several regional corporations said they 
serve as advocates for Alaska Natives and the communities they live 
in, partly because they have lobbying resources and legal expertise 
that local populations may not.[Footnote 70] The regional corporations 
may lobby state and federal legislatures directly on behalf of their 
shareholders, or they may work through other Alaska Native advocacy 
organizations. One corporation, for example, successfully lobbied the 
Alaska state legislature to pass a bill in support of a commercial 
oyster industry in its region, which established a loan program for 
entrepreneurs wishing to engage in this industry. Officials from 
another corporation routinely attend meetings with the Alaska 
Department of Fish and Game to represent village interests in 
subsistence fishing and hunting rights. In addition, each of the 
regional corporations is a member of the Alaska Federation of Natives, 
the largest statewide Native organization in Alaska. The 
organization's mission includes, among other goals, advocating for 
Alaska Native people, fostering and encouraging preservation of Alaska 
Native cultures, promoting understanding of Alaska Natives' economic 
needs, and encouraging development consistent with those needs. 

Questions to Consider for the Future: 

Over the last 40 years, the regional corporations have evolved along 
with the Alaska Native Claims Settlement Act, which has been amended 
several times. Given the evolution and growth of the regional 
corporations, we identified three questions that may warrant 
consideration and discussion by the federal government, the state, the 
regional corporations, shareholders, or a combination of these 
entities, as the corporations move into the future. We identified 
questions regarding the ambiguity of existing federal financial 
reporting requirements for the corporations, the role of the federal 
government in maintaining the corporations' solvency, and the 
implications of defining who is eligible to be a shareholder--this 
last question specifically for the corporations and their shareholders 
to consider. We pose these questions only for consideration and 
discussion and not to advocate a particular response or outcome. 

Should the "Substantially All" Federal Reporting Requirement Be 
Clarified and Overseen? 

Under the original Settlement Act, the corporations were to remain 
exclusively Native owned for a period of 20 years, and after a 1976 
amendment, they were to be exempt from federal securities laws while 
they were Native owned. The 1988 amendments extended the Settlement 
Act's prohibition on sales of stock and continued the corporations' 
exemption from federal securities laws until certain events occurred. 
Nevertheless, the corporations are required to annually transmit a 
report to their shareholders that contains "substantially all the 
information" required to be included in an SEC's registrant's annual 
report to shareholders. We were unable to determine whether the 
corporations are complying with this reporting requirement because the 
phrase "substantially all" is not defined. As a result, it is not 
clear which information is required or the extent to which any 
required information must be included in regional corporations' annual 
reports. Furthermore, the Settlement Act does not establish a 
mechanism for federal oversight of the corporations' reporting. 

Corporate officials we spoke with acknowledged that "substantially 
all" is not defined in the Settlement Act and that the phrase could be 
clarified. They also stated that they do not believe they should have 
to comply with all of the reporting requirements for SEC registrants 
because many of the requirements are not relevant to Alaska Native 
corporations. Specifically, corporate officials said, many SEC 
requirements are directed toward providing information to potential 
investors, which is not directly relevant to regional corporations as 
long as the corporations remain Native owned and closed to outside 
investors. However, in their observations about the corporations' 
annual shareholder reports, SEC staff noted that additional 
information in the annual reports could inform shareholder voting on 
directors and resolutions and allow shareholders to better understand 
the regional corporations' financial performance. 

What Is the Appropriate Role of the Federal Government in Maintaining 
the Solvency of Alaska Native Corporations? 

Over the past 40 years, some regional corporations have experienced 
periods of financial crisis, and legislation has been enacted to help 
ensure their continued financial solvency. For example, in the 1980s 
the corporations were authorized to sell their net operating losses, 
even though other corporations were generally prohibited from doing 
so,[Footnote 71] and more recently they were provided with special 
contracting advantages under the SBA's 8(a) program--advantages that 
have come under congressional scrutiny in recent years.[Footnote 72] 
At this time, the 12 regional corporations in Alaska are on relatively 
sound financial footing, and they also have both land holdings and 
natural resource revenue sharing through the 7(i) distribution to help 
contribute to their revenues. If, however, one of these 12 regional 
corporations became insolvent, it is not clear what would happen to 
its land holdings and shareholders. 

On the other hand, given the insolvency of the 13th Regional 
Corporation, its advocates have sought assistance from the Department 
of the Interior and the Congress. Specifically, the Alaska Federation 
of Natives on behalf of the 13th Regional Corporation requested 
accounting, legal, and administrative assistance from the Department 
of the Interior's Bureau of Indian Affairs, as well as funding to 
assist the corporation in its efforts to reorganize, prepare for new 
elections, and pursue land claims. In response to questions about 
Interior's responsibility to shareholders of the Alaska Native 
corporations and specifically to shareholders of the 13th Regional 
Corporation, Interior's Assistant Secretary for Indian Affairs stated 
that the Bureau of Indian Affairs currently has neither a statutory 
nor a regulatory responsibility to Alaska Native corporations. The 
Assistant Secretary further stated that the bureau has no 
responsibility to ensure that Alaska Native corporations are meeting 
their legal obligations and that it does not have the authority to 
assist the 13th Regional Corporation (or any other Alaska Native 
corporation) in any reorganization efforts. 

In addition, advocates for the 13th Regional Corporation have also 
sought assistance through Congress. Specifically, legislation was 
proposed in 2006 and 2008 that would have authorized the conveyance of 
over 1 million acres of land in Alaska to the 13th Regional 
Corporation for it to manage and required that it share a portion of 
natural resource revenue derived from the land with the other regional 
corporations.[Footnote 73] More recently, representatives from the 
13th Regional Corporation have promoted an alternative proposal they 
would like to see as a bill introduced in Congress. Under this 
proposal, the 13th Regional Corporation would receive over 1 million 
acres of land, which the other regional corporations would manage and 
share a larger portion of that land's associated natural resource 
revenue. As of this report, however, this proposal had not been acted 
upon. 

Also, several shareholders we spoke with suggested that the 13th 
Regional Corporation's shareholders be allowed to become shareholders 
of one of the other 12 regional corporations. Amendments to the 
Settlement Act, however, would be necessary to authorize such an 
action. The debate about the future of the 13th Regional Corporation 
raises the question as to what role, if any, the federal government is 
to play in addressing solvency issues for Alaska Native corporations. 

Who Should Be a Shareholder? 

A question specifically for the regional corporations and their 
shareholders to consider is who should be a shareholder in the future, 
particularly given the implications that shareholder ownership of the 
corporations has on the corporations' future operations, benefits, and 
direction. Shareholder eligibility criteria have changed since the 
corporations were established and may continue to change under the 
1988 and 1992 amendments to the Settlement Act. Under the original 
act, only those Alaska Natives with at least a 25 percent blood 
quantum who were alive on December 18, 1971, were eligible to become 
shareholders, and these restrictions were to end in 1991. The 1988 
amendments, however, extended these restrictions until and unless a 
majority of a corporation's shareholders voted to lift them and allow 
sales of stock to the public. As of this report, none of the 
corporations had voted to lift the restrictions on the sale of stock, 
and many of the corporate officials we spoke with expressed their 
strong desire to remain Alaska Native owned.[Footnote 74] 

In addition, amendments to the Settlement Act allowed the 
corporations' shareholders to vote to amend the articles of 
incorporation to authorize the issuance of shares to Alaska Natives 
born after December 18, 1971, or to descendants of Alaska Natives; to 
eligible Alaska Natives who missed enrollment; or to Alaska Native 
shareholders who are 65 years old or older. Shareholders of 6 of the 
13 corporations have voted to issue shares to some or all of these 
classes of shareholders, although who is eligible to receive the 
shares varies considerably among the corporations (see table 9). Some 
of the other corporations are still studying the issue of opening 
enrollment. For example, in 2011, Calista's shareholders approved a 
resolution calling on the corporation to "examine, formulate, and 
recommend for shareholders a program for approval of the issuance of a 
new class of stock to descendants of shareholders born after December 
18, 1971." As result, the corporation has embarked on a 20-to 26-month 
process to examine, formulate, and recommend such a program. If the 
proposed timetable is adhered to, the recommendation could be voted on 
in 2013. 

Table 9: New Classes of Shares Authorized by the Regional Alaska 
Native Corporations: 

Corporation: Ahtna, Incorporated; 
Natives born after Dec. 18, 1971, or descendants[A]: [Check][D]; 
Natives who missed the original enrollment[B]: [Empty]; 
Native shareholders who have attained the age of 65[C]: [Empty]; 
Number of shareholders in 1982: 1,074; 
Number of shareholders in 2011-2012: 1,751. 

Corporation: Arctic Slope Regional Corporation; 
Natives born after Dec. 18, 1971, or descendants[A]: [Check][E]; 
Natives who missed the original enrollment[B]: [Check]; 
Native shareholders who have attained the age of 65[C]: [Empty]; 
Number of shareholders in 1982: 3,738; 
Number of shareholders in 2011-2012: 11,090. 

Corporation: Doyon, Limited; 
Natives born after Dec. 18, 1971, or descendants[A]: [Check][F]; 
Natives who missed the original enrollment[B]: [Check]; 
Native shareholders who have attained the age of 65[C]: [Check]; 
Number of shareholders in 1982: 9,061; 
Number of shareholders in 2011-2012: 18,536. 

Corporation: Koniag, Incorporated; 
Natives born after Dec. 18, 1971, or descendants[A]: [Empty]; 
Natives who missed the original enrollment[B]: [Check][G]; 
Native shareholders who have attained the age of 65[C]: [Empty]; 
Number of shareholders in 1982: 3,342; 
Number of shareholders in 2011-2012: 3,696. 

Corporation: NANA Regional Corporation; 
Natives born after Dec. 18, 1971, or descendants[A]: [Check][H]; 
Natives who missed the original enrollment[B]: [Check][I]; 
Native shareholders who have attained the age of 65[C]: [Empty]; 
Number of shareholders in 1982: 4,828; 
Number of shareholders in 2011-2012: 12,923. 

Corporation: Sealaska Corporation; 
Natives born after Dec. 18, 1971, or descendants[A]: [Check][J]; 
Natives who missed the original enrollment[B]: [Check]; 
Native shareholders who have attained the age of 65[C]: [Check]; 
Number of shareholders in 1982: 15,787; 
Number of shareholders in 2011-2012: 21,263. 

Source: Regional Alaska Native corporations. 

[A] 43 U.S.C. § 1606(g)(1)(B)(i)(I). The eligibility requirements for 
these shares vary among the corporations. For example, most of the 
corporations have blood quantum requirements for these new shares, 
while one does not. In addition, all of the corporations issued these 
as life estate shares. The holders of life estate shares would receive 
the benefit of those shares during their lifetime, but the shares 
would revert back to the corporation upon their death because life 
estate shares cannot be passed to heirs through inheritance. 

[B] 43 U.S.C. § 1606(g)(1)(B)(i)(II). Only one regional corporation 
(Sealaska) has issued these shares as life estate shares. 

[C] 43 U.S.C. § 1606(g)(1)(B)(i)(III). These shares are issued as life 
estate shares. 

[D] Athna, Incorporated, has issued a class of shares to descendants 
of Natives who were original Ahtna shareholders and are one-fourth 
degree or more Alaska Native and born after December 18, 1971. 

[E] The Arctic Slope Regional Corporation issued Class C shares to 
Natives who (1) were born after December 18, 1971, to a parent who has 
been enrolled pursuant to the Settlement Act to the corporation or a 
parent who has received Class E shares from the corporation and (2) 
are, at the time of issuance, a resident of the United States. The 
Arctic Slope Regional Corporation has also issued Class D shares to 
descendants of an Arctic Slope Native (defined as someone who is not a 
Native but meets other qualifications) who (1) were born to or adopted 
by a parent who has been enrolled to the corporation pursuant to the 
Settlement Act and (2) are, at the time of issuance, citizens of the 
United States. 

[F] Doyon, Limited, has issued a class of shares to any Native or 
descendant of Native who is one-fourth degree or more blood quantum; 
who was born after December 18, 1971; who is the child of an original 
Class A, B, C, or D shareholder; and was neither issued nor holds 
stock in another regional corporation unless that stock was acquired 
through inheritance, inter vivos gift, or purchase. 

[G] Koniag, Incorporated, shareholders recently voted to amend the 
articles of incorporation to allow any Native who is not enrolled 
under the Settlement Act but who was eligible on December 18, 1971, 
for enrollment to the Koniag region; who is a citizen of the United 
States; and who submits or, if deceased, on whose behalf an 
application is submitted to the corporation prior to December 31, 
2013, to receive shares. 

[H] NANA Regional Corporation issued a class of shares to any Native, 
as defined in the Settlement Act, who is a citizen of the United 
States; who was born after December 18, 1971; and is a child of a 
parent who was enrolled pursuant to the Settlement Act to the 
Northwest Alaska region, or which parent, if not originally enrolled 
under the Settlement Act, was issued Class C Settlement Common Stock, 
or is the child of a parent who was issued Class D Settlement Common 
Stock. 

[I] NANA Regional Corporation has issued a class of shares to any 
Native, as defined in the Settlement Act, who is not enrolled under 
the Settlement Act; who was eligible on December 18, 1971, for 
enrollment to the northwest region; who is a citizen of the United 
States; and who submits or, if deceased, on whose behalf an 
application to receive shares was submitted to the corporation prior 
to December 31, 1995. 

[J] The Sealaska Corporation issued a class of shares to Natives who 
were born after December 18, 1971; are 18 or older beginning June 23, 
2007; are lineal descendants of an original shareholder (meaning a 
direct descendant such as a child or grandchild); are one-fourth 
degree or more Alaska Indian (including Tsimshian Indians not enrolled 
in the Metlakatla Indian Community), Eskimo, or Aleut blood or 
combination thereof; are U.S. citizens; and are not shareholders of 
another regional Alaska Native corporation (except by gifting or 
inheritance). 

[End of table] 

In evaluating the decision whether to offer new shares in the 
corporation to more people, the corporations and their shareholders 
face a number of considerations and potential future challenges, 
including the following: 

* Reduced dividends. Executives with several corporations told us that 
their shareholders have been reluctant to issue shares to new 
shareholders partly of out of concern that, with more shareholders in 
total, each shareholder's dividend amount would be smaller. 

* Disenfranchising those born after December 18, 1971. Some 
shareholders are concerned about disenfranchising the younger 
population by excluding those born after December 18, 1971. Others 
counter that issuing new shares is unnecessary because existing shares 
can already be passed through gifts or inheritance to those born after 
this date. 

* Decline in overall number of shareholders in each corporation. Other 
shareholders we spoke with expressed concern that if shares were not 
issued to new shareholders, then over time fewer people would qualify 
as voting shareholders, and participation and engagement in the 
corporation might suffer. 

Deciding whether to make changes to shareholder eligibility criteria 
will have implications for each corporation's future operations and 
direction. 

Agency and Third-Party Comments and Our Evaluation: 

We provided the Department of the Interior, SBA, SEC, the state of 
Alaska, the ANCSA Regional Association, and volunteers for the 13th 
Regional Corporation a draft of this report for review and comment. 
The federal agencies and the state of Alaska responded that they had 
no comments. The ANCSA Regional Association provided written comments 
(reproduced in appendix II) on behalf of the 12 regional corporations 
in Alaska. Volunteers for the 13th Regional Corporation also provided 
written comments, which are reproduced in appendix III. The ANCSA 
Regional Association also provided technical comments, which we 
incorporated into the report as appropriate. In addition, the Cook 
Inlet Region, Inc., provided separate technical comments, which we 
also incorporated into the report as appropriate. 

In its written comments, the ANCSA Regional Association made a number 
of points, including that our report gives "some voice to the 
suggestion to end the exemption from SEC oversight" and stating that 
the corporations do not feel an end to the exemption is warranted. We 
did not, however, review any advantages or disadvantages of the 
corporations' SEC exemption from federal securities laws, and as the 
association noted, we are not making any recommendations in our report. 

The ANCSA Regional Association went on to say that the corporations 
believe they are meeting "not only the 'substantially all' 
requirement," but also the "spirit and intent of [the Settlement 
Act]." In particular, the association states, the corporations have 
chosen to adopt accounting policies and disclosures that "generally 
are the same" as those required of publicly traded companies (i.e., 
SEC registrants) by SEC regulations. The association also states that 
the corporations determined that they would provide the most relevant 
information that they have, given the nature of their shareholders. 
Our report notes, however, that because the "substantially all" 
reporting requirement in the Settlement Act, as amended, is not 
defined or overseen, it is not clear what information must be included 
in the regional corporations' annual reports to shareholders. As a 
result, we could not determine whether the corporations are complying 
with the Settlement Act's reporting requirement. 

In addition, the association wrote that, under section 1606(o) of the 
Settlement Act, the corporations' financial statements are audited and 
certified by independent public accountants.[Footnote 75] Section 
1606(o) of the Settlement Act requires the regional corporations' 
accounts to be audited in accordance with generally accepted auditing 
standards. Under the Sarbanes-Oxley Act, however, SEC registrants are 
required to be audited in accordance with other standards, which 
differ, and may continue to differ, from the generally accepted 
auditing standards that previously applied to SEC registrants and that 
section 1606(o) requires the corporations to use. According to SEC 
staff, at present, the generally accepted auditing standards and the 
standards SEC registrants are required to use are not contradictory 
but the standards for SEC registrants have some additional or 
supplemental requirements. These standards may continue to diverge 
more in the future, and, if so, the corporations' practices may also 
diverge more from what is required for SEC registrants. 

The ANCSA Regional Association also raised concerns with the scope of 
the report, stating that three of our "questions to consider for the 
future" were beyond what we were asked to review. In our report, we 
state that we were asked to describe various corporate practices of 
the regional Alaska Native corporations. We added our questions to 
consider on the basis of the work we did during our review and believe 
the discussion provides information to Congress and the public about 
issues that may warrant consideration and discussion by the federal 
government, the state, the regional corporations, shareholders, or a 
combination of these entities. We chose to include a wide breadth of 
issues to be as comprehensive and informative as possible. 

Written comments from volunteers for the 13th Regional Corporation 
focused on the question posed in our report regarding the appropriate 
role of the federal government in maintaining the solvency of Alaska 
Native corporations. They stated that the 13th Regional Corporation 
did not receive a fair and just settlement under the Alaska Native 
Claims Settlement Act and requested that Congress take action to 
address the issue. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies to the 
Secretary of the Interior, the Administrator of the Small Business 
Administration, the Chairman of the U.S. Securities and Exchange 
Commission, the Governor of the state of Alaska, the ANCSA Regional 
Association, volunteers for the 13th Regional Corporation, the 
appropriate congressional committees, and other interested parties. In 
addition, the report will be available at no charge on the GAO website 
at [hyperlink, http://www.gao.gov]. 

If you or your staff members have any questions about this report, 
please contact me at (202) 512-3841 or fennella@gao.gov. Contact 
points for our Offices of Congressional Relations and Public Affairs 
may be found on the last page of this report. Key contributors to this 
report are listed in appendix IV. 

Signed by: 

Anne-Marie Fennell: 
Director, Natural Resources and Environment: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

This report examines (1) governance practices of the regional Alaska 
Native corporations, (2) requirements for and oversight of the 
corporations' financial reporting practices, (3) benefits provided by 
the corporations to their shareholders and other Alaska Natives, and 
(4) questions to consider for the future.[Footnote 76] 

To conduct our work, we interviewed officials from all 13 regional 
corporations by phone and in person. We also visited multiple 
communities, villages, and cultural or historical sites across seven 
of the regions (see table 10). We selected these locations on the 
basis of various factors, including the size of the regional 
corporation shareholder base; geographic location and number of 
villages in the region; characteristics of the regional corporations 
such as gross revenue, net income, and whether they have opened 
enrollment to those born after December 18, 1971; and regional 
corporations' availability. During our site visits, we met with 
corporate officials and board directors, shareholders, tribal 
officials, representatives from regional and community nongovernmental 
organizations, and others to obtain information about the regional 
corporations. We also visited a number of villages and cultural sites 
to identify the type of work undertaken by the corporation for the 
benefit of shareholders and others in the communities and to gain 
shareholder perspectives. In addition, we attended a shareholder 
information meeting held by one corporation in the Pacific Northwest. 
We assessed the reliability of the information provided to us by the 
corporations by interviewing corporate officials and cross-checking 
information across various sources; we determined that the information 
was sufficiently reliable for the purposes of our report. We report 
all dollar amounts as they were reported to us by the corporations for 
the period in question; none have been adjusted for inflation. We also 
researched and analyzed issues raised in private litigation between 
the regional corporations and their shareholders that we identified 
during the course of our review. 

Table 10: Regional Alaska Native Corporations and Communities Visited: 

Corporation: Ahtna, Incorporated; 
Community: Gakona, Glennallen. 

Corporation: Bering Straits Native Corporation; 
Community: Nome. 

Corporation: Bristol Bay Native Corporation; 
Community: Dillingham, Kokhanok. 

Corporation: Calista Corporation; 
Community: Akiachak, Akiak, Bethel, Kwethluk. 

Corporation: Cook Inlet Region, Inc.; 
Community: Anchorage. 

Corporation: Doyon, Limited; 
Community: Fairbanks, Minto. 

Corporation: Sealaska Corporation; 
Community: Hoonah, Juneau, Kake. 

Source: GAO. 

[End of table] 

We interviewed officials from the Department of the Interior's Bureau 
of Indian Affairs and from the Small Business Administration. We also 
interviewed representatives from various organizations with interests 
in Alaska Natives, including the Alaska Federation of Natives, ANCSA 
Regional Association, First Alaskans Institute, Native American Rights 
Fund, and attended the October 2011 conference of the National 
Congress of American Indians. To obtain shareholder perspectives 
beyond those obtained through our site visits, we conducted phone 
interviews with shareholders who contacted us or whom we contacted on 
the basis of referrals, set up an e-mail "Alaska Native corporation 
feedback mailbox," and reviewed corporate or shareholder social media 
websites and other news sources. The views we received from 
shareholders are anecdotal and not generalizable to all shareholders. 

Throughout this report, we refer to the corporations' 2010 reporting 
period, which was the most recent year for which consistent 
information was available across the corporations. Because the 
corporations' fiscal years do not all begin or end on the same dates, 
we refer to the corporations' 2010 reporting period as each 
corporation's fiscal year corresponding most closely to calendar year 
2010 (see table 11). 

Table 11: Regional Alaska Native Corporations' Fiscal Years 
Corresponding to the 2010 Reporting Period: 

Corporation: Ahtna, Incorporated; 
Beginning date: January 1, 2010; 
End date: December 31, 2010. 

Corporation: The Aleut Corporation; 
Beginning date: April 1, 2010; 
End date: March 31, 2011. 

Corporation: Arctic Slope Regional Corporation; 
Beginning date: January 1, 2010; 
End date: December 31, 2010. 

Corporation: Bering Straits Native Corporation; 
Beginning date: April 1, 2010; 
End date: March 31, 2011. 

Corporation: Bristol Bay Native Corporation; 
Beginning date: April 1, 2010; 
End date: March 31, 2011. 

Corporation: Calista Corporation; 
Beginning date: January 1, 2010; 
End date: December 31, 2010. 

Corporation: Chugach Alaska Corporation; 
Beginning date: January 1, 2010; 
End date: December 31, 2010. 

Corporation: Cook Inlet Region, Inc.; 
Beginning date: January 1, 2010; 
End date: December 31, 2010. 

Corporation: Doyon, Limited; 
Beginning date: October 1, 2009; 
End date: September 30, 2010. 

Corporation: Koniag, Incorporated; 
Beginning date: April 1, 2010; 
End date: March 31, 2011. 

Corporation: NANA Regional Corporation; 
Beginning date: October 1, 2009; 
End date: September 30, 2010. 

Corporation: Sealaska Corporation; 
Beginning date: January 1, 2010; 
End date: December 31, 2010. 

Source: Regional Alaska Native corporations. 

[End of table] 

To examine the governance practices of the regional Alaska Native 
corporations, we reviewed the Alaska Native Claims Settlement Act, as 
amended; the Alaska Corporations Code; other relevant federal and 
state laws and regulations; the regional corporations' articles of 
incorporation, bylaws, and corporate proxy statements provided to 
shareholders during 2011 (the most recent year for which consistent 
information was available across the corporations); and other 
documentation from the corporations on their board composition and 
operations, executive and board compensation, board elections, and 
methods for involving shareholders. To further examine and describe 
board of director elections and shareholder resolutions, we analyzed 
corporate proxy statements provided to shareholders from 2001 through 
2011. 

To examine the requirements for and oversight of the regional 
corporations' financial reporting practices, we reviewed relevant 
federal and state laws and regulations, focusing primarily on the 
Alaska Native Claims Settlement Act and federal and state securities 
laws. Because of the "substantially all" federal financial reporting 
requirement, we asked staff from the U.S. Securities and Exchange 
Commission's (SEC) Division of Corporation Finance to provide 
observations on the extent to which the corporations' 2010 annual 
shareholder reports included information expected from a corporation 
subject to the Securities Exchange Act of 1934 (we refer to such 
corporations as SEC registrants). We interviewed SEC staff about their 
work and analyzed the written observations they provided for each 
corporation, as well as a summary of recurring themes. 

We also interviewed officials from the Division of Banking and 
Securities within Alaska's Department of Commerce, Community, and 
Economic Development to determine any actions they take to monitor and 
enforce state financial reporting requirements. We obtained from the 
state of Alaska summary information on inquiries and complaints 
relating to proxy materials received by the state from the regional 
corporations from July 2011 through June 2012 and January 2010 through 
June 2012, respectively. In addition, the state provided 
administrative orders issued by the state from 1978 through 2011. We 
assessed the reliability of the inquiry, complaint, and administrative 
order information by interviewing state officials about their record-
tracking system and determined that this information was sufficiently 
reliable for the purposes of our report. 

To determine the benefits provided by the regional corporations to 
their shareholders and other Alaska Natives, we reviewed the 
corporations' articles of incorporation, mission statements, annual 
shareholder reports for the 2010 reporting period, and newsletters and 
other documentation from the corporations describing monetary and 
nonmonetary benefits. Specifically, to obtain financial information--
including the corporations' gross revenues, net income, and dividends-
-we reviewed the regional corporations' audited financial statements 
from their annual reports for 2001 through the 2010 reporting period. 
In addition, we analyzed documentation from the corporations on other 
benefits, including benefits provided through trusts or permanent 
funds, and we identified other benefits through our interviews and 
site visits with the regional corporations, shareholders, tribal 
officials, and representatives from nongovernmental organizations. 

Finally, on the basis of our analysis of federal and state laws and 
regulations; interviews with federal and state officials, regional 
corporation officials, and shareholders; and past congressional 
actions and bills addressing Alaska Native corporation issues, we 
developed questions that may warrant consideration and discussion by 
the federal government, the state, the regional corporations, 
shareholders, or a combination of these entities. 

We conducted this performance audit from October 2011 to December 2012 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments on Behalf of the 12 Regional Alaska Native 
Corporations: 

ANCSA Regional Association: 
Bringing Together Regional Corporation Presidents and CEOs: 

December 5, 2012: 

Ms. Anne-Marie Fennell: 
Director, Natural Resources and Environment: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548: 

Re: Comments on GAO Report, GAO-13-121: 

Dear Ms. Fennell: 

On behalf of the twelve Alaska Native Regional Corporations created 
under the Alaska Native Claims Settlement Act ("ANCSA") I am 
submitting their collective response to the draft of the GAO's 
Regional Alaska Native Corporations, Status 4o Years After 
Establishment and Future Considerations report. This letter will 
provide some general observations as well as a few specific issues the 
GAO may find appropriate to restate in light of information provided 
herein. 

I also enclose an attachment providing clarifications and corrections 
to specific errors or omissions in the draft. 

We appreciate the countless hours GAO spent with representatives of 
the Regional Corporations, familiarizing the agency, once again, with 
ANCSA and the integral role Alaska Native Corporations have in our 
remote communities and within the lives of our shareholders. Your 
Report highlights that the passage of ANCSA has provided many benefits 
to Alaska Native people. Further, it acknowledges the diversity of 
each region and corporation, and of our governance structures, 
shareholder programs and benefits and shareholder bases. For example, 
your Report details that each region has adopted a governance 
structure that is fit for that respective region. We applaud that 
distinction, and feel that the Federal government is recognizing that 
a "one-size fits all" approach to Alaska Native Corporations does not 
work. 

In addition to recognizing the unique nature of each region, we were 
pleased to see the Federal government acknowledge the challenges 
facing our communities and just how remote our people actually are as 
compared to the rest of the country. On page 16, the GAO acknowledges 
that over zoo of our communities are isolated, and that 82 percent of 
our communities are inaccessible by road, whereby reasonable access to 
these remote communities is available only by small planes (year 
round), boats (summer or ice-free months) and/or snowmachines 
(winter). The remoteness of our communities poses significant daily 
challenges, like affordable energy and health care and modern 
amenities like running water and flush toilets, which many outside the 
state of Alaska take for granted. It is important to note that despite 
these challenges, Regional Corporations continue to provide meaningful 
benefits to their shareholders. It is also important to note that the 
success of Regional Corporations should not usurp the Federal, State 
and Local governments' responsibility for providing basic services to 
its Alaska Native constituents. 

We applaud the GAO for further recognizing that while Alaska Native 
Corporations are not subject to the 5arbanes-Oxley Act, many standard 
practices of SEC-regulated companies, such as use of an audit 
committee, are employed by most Regional Corporations. This 
distinction of high ethical standards, as clearly referenced on page 
18, is important to our membership because despite regional 
boundaries, integrity is a traditional value that is a common thread 
throughout all of our regions. This Report underscores the intent of 
Alaska Native Corporations to disclose information and adhere to 
ethical standards to preserve transparency with shareholders and the 
business veracity of our organizations. 

Congress reaffirmed this approach in the enactment of PL 100-241 (the 
"1987 Amendments"). This major revision to ANCSA addressed the issues 
of greatest concern to Alaska Natives — the continuation of the 
prohibition on the sale of the stock and the determination of who 
could be shareholders. Section 2 of the 1987 Amendments reiterates the 
principles of self-determination set out in ANCSA. In Section 2(5), 
Congress acknowledges that ANCSA is being amended "to enable the 
shareholders of each Native Corporation to structure the further 
implementation of the settlement in light of their particular 
circumstances and needs." Section 2(6) directs that the shareholders 
of each Native Corporation must be permitted to decide when the 
restrictions on alienation of the stock is terminated and whether 
Natives born after December 18, 1971 should become shareholders. 

Nonetheless, the Report does raise a few issues that we would urge GAO 
to supplement or reconsider before publication. First and foremost, 
while no conclusions were reached or recommendations offered, the 
Report does give some voice to the suggestion to end the exemption 
from SEC oversight. We, of course, do not feel that is warranted. But 
to the extent it is being considered at all, the GAO should also 
evaluate the likely substantial cost of such a change as a diversion 
of substantial resources of the Corporations (as well as the federal 
government), oversight of which would ultimately reduce corporate net 
income otherwise available to provide shareholder benefits. 

For example, the draft raises concerns regarding the financial 
statements of the Regional Corporations and in particular the extent 
to which generally accepted accounting principles ("GAAP") were 
followed in the preparation of the statements. On page 27, the draft 
Report makes the important point that, pursuant to 43 USC 1606(0), the 
accounts of the Corporations shall be audited annually in accordance 
with GAAP. However, the Report leaves out the remaining portion of 
1606(o), which is that these GAAP-based audits must be conducted "by 
independent certified public accountants or independent licensed 
public accountants, certified or licensed by a regulatory authority of 
the State or the United States." The omitted language is significant, 
because it bears directly on the question of whether the Regional 
Corporations need additional oversight. The Report should make clear 
that, as mandated by federal law, not only are the Regional 
Corporation financial statements audited per GAAP, but that the audits 
are conducted by an independent certified public accountant or 
independent licensed public accountants, who certify that the 
statements are fairly presented in accordance with GAAP. Certified 
financials assist Regional Corporations seeking to demonstrate maximal 
transparency with respect to the Corporations' financial and 
operational reporting to their shareholders. 

With respect to the financial statements themselves (which would be 
subject to Regulation 5-X, which governs the issuance of financial 
reports for companies subject to the Security laws), the Regional 
Corporations have adopted accounting policies and provide disclosures 
which generally are the same as those required by public companies 
(e.g., two-year balance sheets and three years of operating 
statements). The provisions of the regulations that are not strictly 
followed by the corporations primarily relate to standards, the 
application of which are to public companies or organizations that 
have equity or debt securities that are traded on an exchange, or that 
are required to file with the SEC, neither of which is applicable to 
the Regional Corporations. 

Following the passage of ANCSA, the Regional Corporations as a group, 
in reviewing the requirements of Regulation S-K (which applies to the 
filing requirements under the Security laws) determined that in order 
to comply with the requirements of the regulations, they would provide 
as part the Management Discussion and Analysis in their annual reports 
the most relevant information that they have, given the nature of 
their shareholders and that the provision of such information should 
satisfy not only the "substantially all" requirement, but would also 
meet the spirit and the intent of ANCSA. 

Since the adoption of ANCSA, Regulation S-K has been modified to 
include additional disclosure items. However, the most substantial 
changes have been the result of high profile and significant financial 
reporting fraud and contingent exposure items that significantly 
impacted the trading value of specific companies and the market value 
of the exchanges as a whole. In light of the purpose of the 
regulation, the Regional Corporations are unique because their 
shareholders received their stock through Indian legislation and the 
transfer of that stock is restricted solely to inheritance and to 
inter vivos gifts of stock to certain family members. Thus, there is 
no ability to "sell" the stock — even to other shareholders. Likewise, 
the management of the Regional Corporations is not incentivized based 
on "market value of the stock" through equity awards or other 
ownership. 

As the Report recognizes, the Regional Corporations devote 
considerable resources to educating shareholders with respect to 
corporate operations through various meetings, publications and 
personal contact, which the Corporations believe are the most 
effective methods of reaching their shareholders. The results of the 
operations and other activities are disclosed in the financial 
statements provided to shareholders in the annual reports. 

The Report also infers that there should be more uniformity in the 
governance of the Corporations and the approaches to adding new 
shareholders. The Report should be revised to recognize the mandate 
for self-determination that Congress adopted. 

One other issue we feel should be mentioned concerns the scope of the 
Report. The Report indicates that its call is to examine four 
questions: (i) governance practices of the ANCs, (2) requirements for 
and oversight of the Corporations' financial reporting practices, (3) 
benefits provided by the Corporations to their shareholders and other 
Alaska Natives, and (4) questions to consider for the future. The GAO 
charge came directly from Rep. Markey's June 22, 2011, letter: 

"In order to better understand how ANCs are complying with the 
reporting requirements of ANCSA and whether such disclosures are 
fulfilling the needs of the Alaska Natives who are shareholders in 
these Corporations, I request that GAO examine: (1) how and to whom 
the ANCs are required to report information regarding their financial 
and operating condition; (2) what federal or state laws and 
regulations are applicable to ANC disclosure and financial reporting, 
how compliance with such laws and regulations are monitored, and 
compliance is enforced; (3) whether GAO believes ANCs are providing 
full and complete disclosure of all material information to their 
shareholders regarding their ongoing activities, including profits, 
losses, spending, and affiliate transactions, and whether such 
disclosures are consistent with ANCSA and any other applicable laws 
and regulations; and (4) the integrity of the financial reporting 
system applicable to ANC spending and distribution of profits to 
shareholders compared to non-ANC Corporations that are subject to 
federal securities laws." 

Notwithstanding, the GAO examines three additional "Questions to 
Consider for the future, including "What is the appropriate role of 
the federal government in maintaining the solvency of the Alaska 
Native Corporations?" and "Who should be a shareholder?" These two 
inquiries do not appear responsive to Rep. Markey. Tellingly, the 
Report contains statements about how "the Corporations and their 
shareholders face a number of considerations and potential future 
challenges, including..." (see p. 48). Respectfully, the issues that 
are for the Regional Corporations and their shareholders to decide 
ought not be the purview of federal and general public inquiry. 

Please feel free to contact me should you have any questions regarding 
the comments. 

Sincerely, 

Signed by: 

Kim Reitmeier: 
President: 

cc: 
The Honorable Don Young: 
The Honorable Lisa Murkowski: 
The Honorable Mark Begich: 
The Honorable Sean Parnell: 
Alyssa Hundrup, GAO: 
Michelle Anderson, Ahtna: 
Thomas Mack, The Aleut Corporation: 
Rex Allen Rock, Sr., Arctic Slope Regional Corporation: 
Gail R. Schubert, Bering Straits Native Corporation: 
Jason Metrokin, Bristol Bay Native Corporation: 
Andrew Guy, Calista Corporation: 
Sheri Buretta, Chugach Alaska Corporation: 
Margaret Brown, CIRI: 
Aaron Schutt, Doyon, Limited: 
William Anderson, Jr., Koniag, Inc. 
Marie N. Greene, NANA Regional Corporation: 
Chris E. McNeil, Jr., Sealaska Corporation: 
Julie Kitka, Alaska Federation of Natives: 

[End of section] 

Appendix III: Comments from Volunteers for the 13th Regional 
Corporation: 

13th Regional Corporation Volunteers: 
P.O. Box 110057:
Anchorage, AK 49511-0057:
Phone: (907) 227-2744: 
Fax: (907) 345-6300: 

December 5, 2012: 

Ms. Anne-Marie Fennell: 
Director, Natural Resources and Environment: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548: 

Dear Ms. Fennell: 

The 13th Regional Corporation (hereafter known as the 13th) Volunteers 
appreciates the opportunity to review and comment on the draft 
document "Regional Alaska Native Corporations: Status 40 Years after 
Establishment, and Future Considerations" (GAO-13121), The goal of 
this document is to provide a response to the question posed by this 
report, "What is the appropriate role of the federal government in 
maintaining the solvency of Alaska Native corporations?" This document 
represents the comments of those who have volunteered for the 13th 
over the past 6 years, to keep the intent of Congress alive as stated 
in the first sentence of the Congressional findings and declaration of 
policy of the Alaska Native Claims Settlement Act, 

Congress finds and declares that: 

(a) there is an immediate need for a fair and just settlement of all 
claims by Natives and Native Groups of Alaska, based on aboriginal 
land claims (43 USC Sec. 1601,Sec. 1601.) 

In this report "GAO-13-121", Congress will find ample evidence that "a 
fair and just settlement of all claims" did not in fact occur, despite 
the intent of Congress, a U.S. District Court Ruling, or the alleged 
vote of more than half of the 4,426 Alaska Natives, who initially 
voted to join other regions and are now trapped as shareholders of the 
13th. The alleged vote on the creation of the 13th as conducted by the 
U.S, Department of Interior was characterized by the U.S. District 
court as "bureaucratic inconsistency" and "lassitude" (Page 4, Note 6 
GAO-13-121). Eye-witness reports indicate that the overwhelming 
majority did not understand what they were being asked to vote on, by 
federal agents who did not understand either. 

As is already welt known and restated in this report, Congress allowed 
for the creation of the 13th, separate and apart from the other 12, by 
withholding a land entitlement and hence withholding participation in 
the 7(i) provisions for 40 years. In spite of the fact that the 13th 
was tasked as the other 12 regions were, with the exact same mission 
of providing economic resources to our Alaska Natives members 
throughout the nation, ANCSA did not provide rhyme or reason why 
Congress denied Alaska Natives of the 13th these critical resources of 
land and 7(i) necessary to complete the mission. 

What is clear is that for all intents and purposes ANCSA has served 
welt as a successful economic development model for all ANCSA. 
regions, with the sole exception of the 13th, the only one that was 
denied access to land and 7(i). The impact of this decision cannot be 
overstated. In the most explicit monetary terms, an analysis of all 12 
regional corporations audited annual reports will document that from 
1974 through to 2012, each region received a 7(i) economic benefit of 
$24,165 per shareholder. 

If the 13th were a full participant in ANCSA, it would have received 
$107 million during that same period and would have distributed $53.5 
million to its shareholders. The 7(i) provision for 2012 alone would 
have represented $13,428,000 in revenue to the Alaska Native 
shareholders of 13th, This is significant when compared to the $2 
million loss that terminated the I316's corporate operations in 2006. 

"What is the appropriate role of the federal Government in maintaining 
the solvency of Alaska Native corporations?" 

In respectful response to this question, we would offer that Congress 
consider allowing the Alaska Natives of the 13" to become full 
participants in ANCSA. The original argument that 4,426 Alaska Natives 
of the 13" lived ()inside of Alaska is now overshadowed by the fact 
that 29,801 Alaska Natives of the other 12 regions (27%), now also 
live outside of Alaska (Page 14, Table 4 GAO-13-121). Like the 12 
Tribes of Israel, the 12 Regions have received their inheritance of 
land and 7(i) to sustain them. The Tribe of Levi received no land 
however received a tithe "7(i)" inheritance from the other 12 tribes 
to sustain them. It seems the Alaska Natives of the 13th have become 
the Levites of ANCSA without land and worse, without the tithe of 7(i) 
to sustain them. it is a wonder that the 13th survived 30 years on 
just the initial capitalization from ANCSA, half of which was 
immediately distributed as dividends by order of Congress. The 7(i) 
provisions, on the other hand, have allowed all of the other 12 
regional corporations to effectively be recapitalized every year. 

We would respectfully request that Congress take action to correct 
what has been 40 years of wandering in the political/economic 
wilderness for the Alaska Native of the 13th. There are not less than 
two solutions available to Congress including: 1) Repatriate the 
Alaska Natives of the 13th back into their original regions within the 
other 12 regional corporations, or 2) Allow the 13th to participate as 
a full member of ANCSA with full participation in 7(i) and land on par 
with the other 12 regional corporations. 

We are what remain of the 13th Volunteers. Most of us are elders, who 
have seen too many of our relations pass on without resolution, Most 
recently we say farewell to our friend and colleague Mr. Mike Rowley, 
President of the 13th, who fought for the 13th and succumbed to cancer 
this past Sunday. For the record, it should be noted that we who send 
this to you are not original shareholders of the 13th. We're original 
shareholders of other regions who feel compelled to speak up for our 
relations and shareholders in the 13th. They are the lost 
grandchildren of our grandmothers, without the tribal access to health 
care, education and housing provided every member of the 12 regionals 
and we speak on their behalf. We can do no less. The 13th has become a 
lost tribe. 

We respectfully request that Congress hold hearings on the issue of 
whether or not the Alaska Natives of the 13th received a "fair and 
just settlement of all claims by Natives and Native Groups of Alaska, 
based on aboriginal land claims;" as called for in the opening 
statement of ANCSA. We ask that, after 40 years, this burden of having 
no land and no 7(i) be lifted from the Alaska Natives of 13th. Only 
Congress has the authority to end this wandering. On behalf of the now 
5,000 Alaska Native Shareholders of the 13th who live in every state 
in the nation, we ask for your kind consideration. 

Sincerely, 

Signed by: 

Chris Kiana: 
Secretary: 
kiana@gci.net: 

Signed by: 

Tom Harris: 
Vice President: 
atomharris@gmail.com: 

Cc: Julie Kitka, Alaska Federation of Natives: 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Anne-Marie Fennell, (202) 512-3841 or fennella@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, Jeffery D. Malcolm, 
Assistant Director; Ellen W. Chu; Clayton Clark; Emily Eischen; Cody 
Goebel; Ryan Guthrie;, Alyssa M. Hundrup; Michael Meleady; Anu K. 
Mittal; Danny Royer; Jeanette Soares; Andrew Stavisky; and Tatiana 
Winger made key contributions to this report. 

[End of section] 

Footnotes: 

[1] Pub. L. No. 92-203, 85 Stat. 688 (1971), codified as amended at 43 
U.S.C. §§ 1601-1629h. By settling aboriginal land claims in Alaska, 
the Settlement Act permitted the development of the vast energy 
potential of the state to aid in meeting the energy shortage the 
United States faced in the 1970s. 

[2] Under the Settlement Act, over 200 village, urban, or group Alaska 
Native corporations were also formed to participate in the settlement. 
This report discusses only the regional corporations. 

[3] 43 U.S.C. § 1601(b). 

[4] We were also asked to determine shareholders' level of 
satisfaction with the regional corporations. To answer this question, 
we proposed surveying regional corporations' shareholders on their 
perspectives of the regional corporations. We were unable to conduct a 
systematic and independent survey of shareholders, however, because 
the regional corporations declined to provide us with their 
shareholder lists. 

[5] H.R. Rep. No. 94-729 at 13 (1975). 

[6] Initially, the Department of the Interior determined that a 
majority of all eligible nonresidents had not elected to form a 13th 
regional corporation, but a federal court found that basic fairness 
and equity compelled the creation of the 13th Regional Corporation 
because Interior's handling of the election was marked by 
"bureaucratic inconsistency" and "lassitude." Alaska Native 
Association of Oregon v. Morton, 417 F.Supp. 459, 464-71 (D. D.C.1974). 

[7] If a shareholder dies without a will or heirs, the shares revert 
back to the corporation. Additionally, the 1988 amendments to the 
Settlement Act permitted shareholders to transfer their shares to 
Alaska Natives or their descendants during the shareholder's lifetime 
by giving the shares as a gift to specified family members. Under the 
1988 amendments, shares have voting rights if they are inherited, 
transferred, or gifted to an Alaska Native or descendant of an Alaska 
Native. 

[8] In addition to extinguishing all aboriginal claims of the Alaska 
Native people, including any aboriginal hunting and fishing rights, 
the Settlement Act revoked all existing Indian reservations or 
reserves in Alaska except one, the Annette Island Reserve of the 
Metlakatla Indian community. 

[9] In addition to regional and village corporations, the act allowed 
groups not qualifying to establish an Alaska Native village 
corporation to establish Alaska Native "group" corporations and Alaska 
Natives living in Sitka, Kenai, Juneau, and Kodiak to establish 
"urban" corporations. Both group and urban corporations were eligible 
to receive title to surface land. 

[10] The 7(i) distribution was the subject of much litigation in the 
1970s and is now governed by the "Section 7(i) Settlement Agreement" 
finalized in 1982 (and subsequently amended). Under this settlement 
agreement, the regional corporations share 70 percent of all net 
revenues received from timber and subsurface resources conveyed to 
them under the act. 

[11] 43 U.S.C. § 1606(j). Specifically, the amount distributed as 
dividends to shareholders who are not village residents bears the same 
ratio to the amount distributed among the village corporations that 
the number of shares of stock registered on the books of the regional 
corporations in the names of nonresidents of villages bears to the 
number of shares of stock registered in the names of village 
residents. 43 U.S.C. § 1606(m). 

[12] H.R. Rep. No. 92-523 at 5-6 (1971). 

[13] The 1988 amendment also authorized shareholders to vote on 
amending the articles of incorporation to authorize the issuance of 
additional shares to Alaska Native shareholders who are 65 years old 
or older. In addition, the amendment authorized shareholders to vote 
to amend the articles of incorporation to authorize the issuance of 
other classes and series of stock to permit the corporation to raise 
equity capital by selling stock in traditional capital markets. 

[14] S. Rep. No. 100-201 at 20 (1987). 

[15] Investment Company Act of 1940, 54 Stat. 789, codified as amended 
at 15 U.S.C. §§ 80a-1 to 80a-64. 

[16] Securities Act of 1933, 48 Stat. 74, codified as amended at 15 
U.S.C. §§ 77a-77bbbb. 

[17] Securities Exchange Act of 1934, 48 Stat. 881, codified as 
amended at 15 U.S.C. §§ 78a-78pp. 

[18] Pub. L. No. 111-203 (2010). The purpose of the act is to promote 
the financial stability of the United States by improving 
accountability and transparency in the financial system, among other 
aims. 

[19] Pub. L. No. 107-204 (2002). The act is intended to protect 
investors by improving the accuracy and reliability of corporate 
disclosures made under securities laws, among other purposes. 

[20] 43 U.S.C. § 1626(e). 

[21] GAO, Contract Management: Increased Use of Alaska Native 
Corporations' Special 8(a) Provisions Calls for Tailored Oversight, 
[hyperlink, http://www.gao.gov/products/GAO-06-399] (Washington, D.C.: 
Apr. 27, 2006), and GAO, Federal Contracting: Monitoring and Oversight 
of Tribal 8(a) Firms Need Attention, [hyperlink, 
http://www.gao.gov/products/GAO-12-84] (Washington, D.C.: Jan. 31, 
2012). Special advantages include the ability to receive sole-source 
8(a) contracts for any amount, whereas sole-source awards to other 
8(a) firms must generally fall under certain competitive dollar 
thresholds ($6.5 million for manufacturing or $4 million for all other 
acquisitions). Section 811 of the National Defense Authorization Act 
for Fiscal Year 2010--enacted in October 2009--mandated changes to the 
Federal Acquisition Regulation to require a written justification of 
sole-source 8(a) awards over $20 million. An interim rule amending the 
Federal Acquisition Regulation to implement section 811 was issued on 
March 16, 2011, and finalized on April 18, 2012. Previously, no 
justification was required for sole-source 8(a) awards of any amount. 

[22] The term recognize means the federal government acknowledges that 
a particular Native American group is a tribe by conferring specific 
legal status on that group, establishing a government-to-government 
relationship between the United States and the tribe, imposing on the 
government a fiduciary trust relationship to the tribe and its 
members, and imposing specific obligations on the federal government 
to provide benefits and services to the tribe and its members. See 
H.R. Rep. No. 103-781 at 2-3 (1994). 

[23] Corporations also have bylaws--which contain the details of the 
corporations' internal governance arrangements--but bylaws are not 
filed with the state. 

[24] As of this report, Alaska had never dissolved a regional 
corporation involuntarily, although in 2010 the state did issue the 
13th Regional Corporation a notice of potential involuntary 
dissolution. Before a final notice was issued by the state, however, a 
state official said that the corporation submitted necessary 
documentation and paid the required fees. Although not involuntarily 
dissolved by the state, the 13th Regional Corporation has largely been 
insolvent since 2007.The state has exercised its authority in the past 
to dissolve several village corporations involuntarily. However, 
Alaska state law contains provisions regarding reinstatement Alaska 
Native corporations. See Alaska Stat. § 10.06.960(i), (k). 

[25] H.R. Conf. Rep. No. 92-746 at 37 (1971). 

[26] Debbie Cutler, "2011 Top 49ers: Superheroes of Success," Alaska 
Business Monthly, October 2011. 

[27] The regional corporations reported that collectively they are 
also involved as partial owners of, or in joint ventures or 
partnerships with, approximately 150 subsidiaries. 

[28] In 1986, the 13th Regional Corporation filed for bankruptcy. 

[29] Regional corporations are subject to Alaska corporate law with 
the exception of certain provisions relating to capitalization, 
issuance of shares, and other topics identified in Alaska Stat. § 
10.06.960. 

[30] State regulation requires regional corporations to include 
certain information for board candidates and current board directors 
in their board proxy solicitations for director elections, such as 
name, age, and address; all positions and offices presently held with 
the corporation; and business experience during the past 5 years, 
including principal employment or occupation and employer. 3 Alaska 
Admin. Code § 08.345(b)(1)(A), (B), (F). In some of the proxy 
solicitations we reviewed, some of this information may not have been 
fully reported, in which case we referred the issue to the state. 

[31] The Sarbanes-Oxley Act of 2002 requires companies listed on 
national securities exchanges and with national securities 
associations to have an audit committee that is directly responsible 
for the appointment, compensation, and oversight of the work of any 
registered public accounting firm employed by that company for the 
purpose of preparing or issuing an audit report or related work. 
Because the regional corporations' shares are not listed on exchanges 
or with associations, they are not subject to this requirement. 

[32] State regulation requires regional corporations' board proxy 
solicitations to list any board committees that perform audit, 
nominating, and compensation functions; briefly describe the functions 
actually performed; and indicate the membership of each committee and 
number of meetings held during the last fiscal year. 3 Alaska Admin. 
Code § 08.345(b)(7). 

[33] Specifically, state regulations for Alaska Native corporations' 
board proxy solicitations for director elections require the 
disclosure of any family relationship between (1) board nominees for 
director or incumbent directors and (2) any director, nominee, or 
executive officer of the corporation and its subsidiaries. 3 Alaska 
Admin. Code § 08.345(b)(1)(E). In addition, the regulations require a 
brief description of financial transactions by the corporation with 
any entity since the beginning of the last fiscal year and any 
presently proposed transactions if (1) the transactions in the 
aggregate exceed $20,000 and (2) the nominee, director, executive 
officer, or a family member is employed by, is an officer or director 
of, or owns an interest in the entity. 3 Alaska Admin. Code § 
08.345(b)(1)(H), (b)(3). 

[34] The state regulation defines executive officer as the president, 
secretary, treasurer, a vice president in charge of a principal 
business function, such as sales, administration, or finance, or any 
other person who performs similar policymaking functions for the 
corporation. 3 Alaska Admin. Code § 08.365(6). 

[35] Throughout this report we cite shareholder views that we obtained 
through four primary means: (1) our site visits to communities and 
villages in Alaska, (2) phone interviews we held with shareholders who 
contacted us or whom we contacted on the basis of referrals, (3) a 
feedback e-mail mailbox we set up, and (4) social media websites and 
other news sources. Because we were unable to conduct a systematic and 
independent survey of shareholders, we were limited to using these 
views, which are anecdotal and not generalizable to all shareholders. 

[36] 3 Alaska Admin. Code § 08.345(b)(2)(A). 

[37] 3 Alaska Admin. Code § 08.345(b)(2)(B). 

[38] In their annual proxy statements and other reports, SEC 
registrants must provide a comprehensive discussion and analysis of 
executive compensation policies, including (1) the specific items of 
corporate performance taken into account in setting compensation 
policies and making compensation decisions and (2) how specific 
elements of compensation are structured and implemented to reflect the 
company's performance and the executive's individual performance. In 
addition, under the Dodd-Frank Act, SEC registrants generally must 
conduct a shareholder advisory vote to approve executive compensation 
at least once every 3 years. This requirement does not apply to the 
regional corporations. According to one corporation, advisory 
resolutions regarding executive compensation are put forth by 
shareholders at most of the corporation's annual meetings. 

[39] Alaska corporate law requires a corporation to make its record of 
shareholders and books and records of account reasonably available for 
inspection and copying by a shareholder of the corporation, upon a 
written demand stating with reasonable particularity the purpose of 
the inspection. In 2011, the Alaska Supreme Court ruled that this 
statute provides shareholders with a right only to inspect and copy 
and not a right to have books, records, or documents delivered 
electronically, by mail, or otherwise. The court also ruled that this 
statute does not require corporations to keep phone and e-mail 
addresses in its shareholder records, so the law does not require 
corporations to permit shareholder inspection of them. Henrichs v. 
Chugach Alaska Corp., 260 P.3d 1036, 1041-42 (Alaska 2011). A state 
trial court also ruled in 2011 that on the basis of the statute's 
language, case law, and statutory history, a regional corporation was 
not obligated to divulge information on individual executive 
compensation in response to a shareholder request. Pederson v. Arctic 
Slope Regional Corp., No. 3AN-09-10971 CI (Alaska Superior Ct. Feb. 4, 
2011) (order on reconsideration of motions for summary judgment). 

[40] According to the bylaws of the 13th Regional Corporation, its 
quorum is one-third of voting shares. 

[41] The Alaska Department of Commerce, Community, and Economic 
Development's Division of Banking and Securities' position is that 
prizes for shareholders returning proxies are allowable only when they 
are available to all voting shareholders regardless of the proxy 
chosen. In 2011, the Alaska Supreme Court ruled that a regional 
corporation's bylaws authorized the board to offer a prize as an 
incentive for shareholders to return their proxies by a specified 
deadline for any proxyholder or candidate and that the prizes were not 
illegal distributions or vote buying, since the incentive did not 
favor any candidate. Heinrichs v. Chugach Alaska Corp., 260 P.3d 1036, 
1044-45 (Alaska 2011). 

[42] The corporations' boards of directors may also include in the 
proxy board-sponsored resolutions for a shareholder vote. We found 
that from 2001 through 2011, 21 board-sponsored resolutions were put 
forward across eight corporations. 

[43] Heinrichs v. Chugach Alaska Corp. 260 P.3d 1036 (Alaska 2011); 
Pederson v. Arctic Slope Regional Corp., 3AN-09-10971 (Alaska Superior 
Ct.). (In a trial held in September 2012, a shareholder challenged the 
corporation's denial of access to corporate documents concerning a 
business transaction and executive compensation.) 

[44] Oliver v. Sealaska Corp., 192 F.3d 1220 (9th Cir. 1999). 

[45] Notti v. Cook Inlet Region, Inc., Nos. 01-35521, 01-35569. (9th 
Cir. 2002); Bodkin v. Cook Inlet Region, Inc., 182 P.3d 1072 (Alaska 
2008); Broad v. Sealaska Corp., 85 F.3d 433 (9th Cir. 1996). 

[46] 43 U.S.C. § 1625(c)(1). 

[47] H.R. Rep. No. 94-729 at 20 (1975). 

[48] H.R. Rep. No. 94-729 at 19 (1975). 

[49] 43 U.S.C. § 1606(o). 

[50] See [hyperlink, http://www.sec.gov/answers/annrep.htm]. 

[51] Specifically, Rule 14a-3(b) establishes requirements for the 
information that is to be included in annual reports to shareholders 
that must accompany or precede an SEC registrant's proxy solicitation 
for a shareholder meeting to elect directors. 17 C.F.R. § 240.14a-
3(b). This required annual report to shareholders differs from the 
more detailed annual report (Form 10-K) that SEC registrants must file 
with the SEC. 

[52] Alaska Stat. § 45.55.139. This provision applies only to Alaska 
Native corporations. Although other corporations incorporated in 
Alaska are not required to file their proxy solicitations with the 
state, state regulations govern their issuance of securities. 

[53] On September 27, 2012, the state proposed changes to the proxy 
solicitation regulations to allow for electronic filing of annual 
reports and proxy solicitation documents relating to certain Alaska 
Native corporations, among other things. 

[54] 3 Alaska Admin. Code §§ 08.300-08.365. 

[55] The Settlement Act originally required the corporations' audited 
financial statements, or a fair and reasonably detailed summary, to be 
transmitted to the Secretary of the Interior and to the Committees on 
Interior and Insular Affairs of the Senate and the House of 
Representatives. This requirement, however, did not authorize the 
Department of the Interior to take any action with respect to the 
financial statements and was repealed in 1988. See Pub. L. No. 100-
241, §12(a) (1988). 

[56] H.R. Rep. No. 94-729 at 20 (1975). 

[57] The proxy solicitation regulations expressly state that the 
filing of proxy materials does not constitute a finding by the state 
that the filings are accurate, complete, or not false or misleading or 
that the state has passed upon the merits of or approved any statement 
in the solicitation; see 3 Alaska Admin. Code § 08.315(b). 

[58] The state notifies in writing the person who filed the initial 
complaint, the alleged violator, and the corporation at issue of its 
decision whether to issue an order or take no action. Before issuing 
any final orders, the state must provide reasonable notice of and 
opportunity for a hearing. 

[59] Five of the investigations were resolved through consent 
agreements whereby the alleged violator agreed to the sanctions. 

[60] One investigation involved a village corporation's failure to 
comply with state proxy solicitation requirements when it placed ads 
in a local newspaper requesting that shareholders vote for two 
candidates seeking election to a regional corporation's board of 
directors. 

[61] See Henrichs v. Chugach Alaska Corp., 260 P.3d 1036 (Alaska 2011) 
(Appeal of 3AN-05-11014Cl), and Rude v. Cook Inlet Region, Inc., 3AN-
10-09493CI (2012). 

[62] Arctic Slope Regional Corporation v. Rodney S. Pederson, 3AN-11-
05733CI (AK Superior Court). 

[63] Amendments to the Settlement Act in 1998 confirmed the 
corporations' authority to provide benefits to promote the health, 
education, or welfare of shareholders and their family members and 
that such benefits may be provided on a basis other than pro rata 
based on share ownership. Pub. L. No. 105-333, § 12 (1998), codified 
as amended at 43 U.S.C. § 1606(r). 

[64] On February 11, 2011, SBA issued a final rule making changes to 
the regulations governing the 8(a) program, including a new 
requirement for Alaska Native corporations with subsidiaries 
participating in the program to annually submit information 
demonstrating how their participation has benefited Alaska Natives, 
the Native community, or both (76 Fed. Reg. 8222 (Feb. 11, 2011)). 
While the final rule took effect on March 14, 2011, SBA delayed 
implementation of the benefits reporting requirement until September 
9, 2011. However, as of this report, SBA had not yet finalized its 
method for collecting the benefits information. SBA reported that in 
the absence of a finalized format, subsidiaries have submitted the 
information using their own formats. 

[65] Regarding the 13th Regional Corporation, one shareholder we spoke 
with, who actively tracked and maintained documentation on the 
corporation's activities, said that since the corporation was 
established, it twice provided dividends to its shareholders: once in 
1989 at 11 cents per share and another in 2000 at 50 cents per share. 

[66] At least two corporations have established settlement trusts to 
provide cash distributions to elder shareholders. In 1988, the 
Settlement Act was amended to authorize Alaska Native corporations to 
establish a settlement trust under Alaska state law if shareholders 
approved a resolution to convey corporate assets, except subsurface 
estates, to the trust. The 1988 amendment also authorized shareholders 
to vote to issue additional shares to Alaska Natives who were 65 years 
old or older. Shareholders who voted to do so have voted to establish 
a separate class of shares known as elder shares. 

[67] Memorial benefits may be provided directly from the regional 
corporations or through corporation-affiliated nonprofit organizations. 

[68] Department of the Interior, Alaska Native Claims Settlement Act 
(ANCSA): ANCSA 1985 Study (Washington, D.C.: 1985). 

[69] To facilitate Alaska Native shareholder employment programs, the 
1988 amendments to the Settlement Act excluded Alaska Native 
corporations and some entities owned by the corporations from the 
provisions in civil rights laws prohibiting discrimination in 
employment. Pub. L. No. 100-241, § 15 (1988), codified at 43 U.S.C. § 
1626(g); S. Rep. No. 100-201 at 39 (1987). 

[70] Under Pub. L. No. 108-199 (2004), as amended, the Director of the 
Office of Management and Budget and all federal agencies are required 
to consult with Alaska Native corporations on the same basis as Indian 
tribes under Executive Order 13175. This order directs the heads of 
federal agencies, other than independent regulatory agencies, to 
consult with Indian tribes on policies that have tribal implications, 
such as regulations or rulemakings that may directly affect tribal 
treaty rights, lands, or governments. 

[71] In 1984, an amendment to the tax code prohibited corporations, 
except for Alaska Native corporations, from selling net operating 
losses, a tax-sheltering device whereby a profitable company buys the 
losses of an unprofitable company and sets off those losses against 
its own taxable income. For example, an Alaska Native corporation 
could sell for $10 timber valued for tax purposes at $110. The Alaska 
Native corporation could then sell the $100 loss to a profitable 
corporation, which could in turn apply the $100 loss against its 
taxable income and thus lower its own tax burden. According to the 
legislative history of the 1984 amendment, sales of net operating 
losses could bring an infusion of capital to help many Alaska Native 
corporations that were in poor financial shape and had large net 
operating losses. By some accounts, 11 regional corporations sold 
around $1.5 billion in net operating losses for $425 million in 
revenue before the exception authorizing Alaska Native corporations to 
do so was repealed in 1988. 

[72] [hyperlink, http://www.gao.gov/products/GAO-06-399] and 
[hyperlink, http://www.gao.gov/products/GAO-12-84]. 

[73] H.R. 5617, 109th Cong. (2006), and H.R. 5403, 110th Cong. (2008). 

[74] Critics of the stock-transfer restriction have suggested that the 
restriction prohibits shareholders from selling their shares in 
instances where they may not be satisfied with the corporation and 
that corporate management therefore has more leeway to pursue 
objectives that might not be in the best interest of the shareholders. 
See, e.g., Stephen Colt, Alaska Natives and the 'New Harpoon': 
Economic Performance of the ANCSA Regional Corporations, 25 J. of 
Land, Resources, and Envt'l Law 155 (2005). 

[75] The association wrote that "the draft report makes the important 
point that, pursuant to 43 USC 1606(o), the accounts of the 
Corporations shall be audited annually in accordance with GAAP 
[generally accepted accounting principles]." Our report correctly 
notes that 43 U.S.C. § 1606(o) requires the regional corporations' 
accounts to be audited annually in accordance with generally accepted 
auditing standards. 

[76] We were also asked to determine shareholders' level of 
satisfaction with the regional corporations. To answer this question, 
we proposed surveying regional corporations' shareholders on their 
perspectives of the regional corporations. We were unable to conduct a 
systematic and independent survey of shareholders, however, because 
the regional corporations declined to provide us with their 
shareholder lists. 

[End of section] 

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