STOCK, CORPORATIONS, & THE NATIVE
LAND CLAIMS SETTLEMENT
One of a Series of Articles on
THE NATIVE LAND CLAIMS
Associate Professor of Law
ISEGR, University of Alaska
COMPILED & PRODUCED
ALASKA DEPARTMENT OF EDUCATION
CENTER FOR NORTHERN EDUCATIONAL RESEARCH
UNIVERSITY OF ALASKA- FAIRBANKS
Dr. Marshall L. Lind
Commissioner of Education
Director, Center for Northern Educational Research
ARTWORK: CANDACE OWERS
TO THE READER
This booklet is one of a collection of articles written by people
who are interested in Native land claims. As you will see, all of the
people do not agree. They present their ideas for you to read and
discuss. You may be excited about some of their ideas because you
think they are absolutely right, or very wrong. When you have
finished reading the articles, you will probably have done a lot of
thinking about Native land claims and Alaskan politics.
Politics is not an easy field to understand. And yet politics is
what the Native land claims are all about. Most of the articles were
written by people who have spent a lot of time working in the world
of politics. These people have a whole vocabulary which most students
have not yet learned. So, to help students understand the reading,
there is at the beginning of each article a list of definitions of
terms. Any words in italics are explained for you at the beginning of
that article, or an earlier one.
At the end of some articles are questions which you can ask
yourself. In the margin, next to the question are numbers. If you go
back to paragraphs in the article with the same numbers, and reread,
you can increase your understanding. We cannot say you will always
have definite answers but you may form your point of view.
ARTICLES AND AUTHORS
STOCK, CORPORATIONS, AND THE NATIVE LAND CLAIMS
The Alaska Native Land Claims Settlement Act gave every Alaskan
Native the right to be a shareholder in at least two corporations.
What are Corporations?
Why did this important law give people shares of stock in
corporations instead of just dividing up all of the land and money
Think about the store where you and your parents purchase food and
clothing. You probably know the name of the man who runs it. It may
be his personal business. The money he makes and the money he owes go
in and out of his pocket. If that is true, the law says that the
store and the owner are the same. More likely, however, he keeps the
store money separate from his own money and family expenses. If that
is true, the store may be a corporation with its own separate and
special legal identity and legal name. This is hard to understand but
is something we will discuss again and again. It is one of the most
important points about a corporation. A corporation is an independent
legal person, just like you or me. It is given life not by birth but
by a charter issued by the state government. Its organizers must file
papers, called the Articles of Incorporation, with the state. These
Articles of Incorporation give the name of the organization (its
legal name, such as Alaska Airlines, Incorporated) and tell the state
what its purposes will be, what businesses it plans to pursue.
The main place of business is listed. This is the company's legal
headquarters. Also listed are the names of the organizers (the
incorporators) and the managers of the business (called the
There is another important legal paper that the state receives. It
is called the bylaws. The details of how the corporation's officers
and directors will be chosen are included in the bylaws. Also how the
corporation will give shares of stock to people who have investments
in the corporation. The bylaws tell how many shares of stock will be
issued. Sometimes they place a dollar value on each share.
What does it mean to be independent under the law from the people
who invest money or property in you. What does it mean to be a
shareholder in a corporation as you and other members of your family
The Corporation can buy and sell things. It can borrow money or
lend it just as you or I can as adults under the law. It pay taxes.
It can get rich. It can go broke.
In a small village store one man may be the only stockholder and
the manager because only he invested money in it. In the regional and
village corporations, the government has invested money and land that
belongs to Natives into corporations and made the Natives
shareholders. Some of these same shareholders will help to run the
How Your Money and Land Will Be Used
You and each member of your family are shareholders in a regional
corporation and possibly in a village corporation as well. This means
that you are a part owner in each of these. It does not mean that you
have lent money to somebody else. You start off as owner.
Forty million acres of land owned by Alaskan Natives and $962.5
million dollars will go to the corporations. The corporations will
manage the land and the money for the owners of these corporations
this is for you and other shareholders.
You still receive some of the money from the corporations. They
will pass it on to you to spend, save, and enjoy. Each corporation
will also hold some of the money and most of the land and work with
it to make profits. These profits, called dividends will be divided
up among shareholders. Dividends can be money or part-ownership in
other corporations - other shares of stock that have money value.
So far we have talked in general about many important things. Let
us step back a little and consider the real reasons for corporations,
investments, stockholders, etc.
To understand what a corporation is and why corporations got the
land and money to manage, first think about the way people cooperate
to get things done and to provide the things they want or need to
live happy lives.
For example, to hunt a whale for a village, can a single man do it
alone? No, in a boat there are many different jobs to be done. Also,
it costs a great deal to outfit a crew. There must be a number of
people, each doing different and important jobs. Also, there must be
one man who is rich or several men with money and gear who are ready
to furnish a boat and gear.
But even where one man (as is the case of an umealik in Northern
Eskimo villages) provides the gear and the boat and gets the men
together for a crew, is that enough? Usually not. A village needs
several crews to hunt the whale to help get it in, cut it up and
divide it for people in the village. Several crews also mean that
there is a better chance to get a whale and to do the necessary work
- to win the fight against time and weather - and to guarantee that
whale meat will be divided and stored for the enjoyment of the entire
The problem for people who need whales is not that there is not
enough whale meat to feed a large number of people. The main reason
that Eskimo people have worked together to hunt whales is that it was
necessary to combine the work and property of many people in just the
One of your classmates might ask, "Suppose that twenty of us go up
to the Arctic next spring and pool our money, can we get ourselves a
The answer is, "Of course not." Now there is a law to protect
whales against non-Native hunting. But even without the law people
who work on a whaling crew don't just get together in Fairbanks and
go up there to hunt one. They have not learned how to do specific
jobs. Having money in your pocket will not get you anywhere. You need
special skills and special equipment for the hunt.
Finally, and most important, you need to know how to work together
to get a whale. You need to know the rules. Crew members look to
their whaling captain to organize them and their work. And there are
rules that these people know for dividing up a catch. Once again, it
isn't just any group of people and their money, but trained people
and special equipment used in the right way that gets a whale.
Suppose that in days gone by you lived in Seattle. You had never
hunted whales. You knew other people who wanted to buy whale oil,
baleen, and whale meat in Seattle. You also knew experienced whalers
in Seattle; but these men did not have money for the food and
equipment necessary to make the long trip. What would be the best way
to handle your problem?
1. You could give up.
2. You could quit your job, sell your house and move to an Eskimo
village. But maybe the local people in the village would not like
that. And maybe your family would object.
3. You could send the other people whaling because they knew how
to do it.
If your idea were to hunt whales in order to sell the oil, baleen
and make money from this to live better in Seattle, you would be
smarter to invest your money in people and in equipment and let them
get the whale
Money to Spend and Money to Invest
We all know what we can do with money in our pockets. We can buy
food and things for our family to enjoy when we cannot make them
ourselves. But how will the large amount of money and land that
Alaska's Natives receive be used to give us money we need now and to
make money for our children and for their children? This was the
question that lawmakers and Native people asked themselves. How can
land and money that belongs to many different people in many villages
and cities work for the benefit of all of these people? How can these
large groups of Eskimos and Indians organize their property to "hunt
the whale" (or buy businesses) without doing all of the work as
Can all people who are owners, women, men and even little
children, share the work of drilling for oil or mining on their land?
Of course not. Do they want to do this work. Of course not.
The answer is to hire people, Natives and non-Natives, to do
things with this land and money to make more money so that this
wealth will last for generation after generation.
A corporation is the way the law provides to:
1. Bring together the property of different people who may be
widely scattered, young and old, and who have different skills and
ideas about how to spend their time.
2. Put men and women who have been specially trained in charge of
that property to manage it for the owners.
3. Have managers do what is necessary to make money for the
Investment- Familiar Ways
There are different ways that people invest their money, their
property, and even their own labor in order to get things for
themselves or their families. Let us look at a few examples.
Do you know a man in your village who runs a trapline to catch fox
or some other animal? He buys some of his food and equipment when he
sells or trades furs. Nobody pays him. He dosen't get a paycheck
unless he has another job. He does get money and other things for the
products of his work, his furs.
This man is investing in himself. The time, money, and equipment
that he puts into his job are his investment. It could be called his
working capital. The cost of his traps and gear, feed for his dogs,
or his snowmobile and its fuel, are all expenses paid out of his
investment. What he makes after getting money for his furs and
subtracting costs (paying his bills) are his earnings or profits. He
may take all of his profits and buy things for his family to enjoy
for example, a radio or cassette player or an oil stove. He may
decide to keep some of his earnings in a bank or at home to buy new
traps or a new snowmobile for next winter. The money he holds back
for his work is called retained earnings. He holds that money back to
have working money (capital) for next year.
This man's business is not a corporation. It is a sole
proprietorship, big words that mean that the law sees that he works
for himself. He is his own boss. His business is not separate.
Can you think of other examples of people who work for themselves
in your village (e.g., an ivory carver or a man who makes baleen
boats)? What do they need to buy? What do they do with the money they
Let's suppose that our friend the trapper did not have enough
money to buy new traps or to buy a snowmobile. However, he met Ted,
an Eskimo who lived in Fairbanks and went to the University. Ted had
some savings and agreed to pay for half of the payments on the
snowmobile and to split the cost of the traps. So, Ted was investing
money in our friend's work.
You probably know of many examples of family members who help one
another in situtations such as this. But family members who help each
other (or neighbors in the village who hunt together) are a different
sort of thing. Hunting partners who are neighbors, or family members,
understand how they will share the work and rewards of work. They see
each other in the village and can talk about their work together as
they do it. They can invest money or sweat or gear in other people's
work because they understand how they will split up what they get to
"pay back." Even if one person does not pay back another, he knows
that he will do a favor for the other person when the other person
But the story we are discussing is a little different. Ted is not
from the village and doesn't ,know how things work there. He puts
money into our friend's business because he wants to share the
profits or earnings from the furs. He does not want to wait for a
favor when he needs one.
Ted and our friend are partners. They are in business together but
they do not own a corporation. The business, again, is not separate
from them. Why does this matter? We will see several reasons later.
Let us return to our story about the man from Seattle who wanted to
go whaling to get products from whales.
Corporations Protect People
Suppose the man in Seattle did not organize a corporation. Instead
he put up money and other men put up their time and went whaling.
They also hired other men to go. The one man stayed in Seattle. But
he was a partner.
Now suppose that the ship the whaler took was rotten and sunk on
the way to the whaling grounds. The man in Seattle and his partners
owned the ship. The widows and children of all the men on the ship
could go to the court and sue the man left in Seattle. They could ask
the judge to make him pay for the loss of their husbands. The man in
Seattle would be in a lot of trouble. He had been willing to take a
chance with some of his money by buying a ship, and hiring men to run
it. But now because he owned the ship, the court might ask for 811 of
his money to pay the widows and children-including money that he had
saved for his own family.
This trouble would not happen if the man and his partners had
invested in a corporation. The corporation would have hired the men
and bought the ship and things needed to hunt the whale. If he and
the others had invested their money in a corporation, the equipment
would have belonged to the corporation. The men would have worked for
the corporation. If anything happened, the corporation would be
responsible. The man from Seattle and his associates would each be
part-owners of the corporation. If a tragedy occured, they would only
lose money that they had invested. They would not lose their own
You may say, "You talk about a corporation just as if it were a
person like you or me." In a way you are right.
Do you have a social security number? A corporation has a number
too, to use on its tax returns. It pays taxes too. It has to obey the
law. The people who own a corporation ,called the stockholders, and
the people who work for the corporation, employees, are seen by the
law as different from the corporation. But sometimes they can do
things that the corporation can be blamed for, and made to pay for.
For example, Joe Kootook works for Arctic Snowshoe company and is
out delivering snowshoes to stores in Fairbanks. He hits your uncle's
car. Both Joe as driver and Arctic Snowshoe Company, as a
corporation, can be ordered to pay for the damage. Joe is called an
agent of the Arctic Snowshoe Company because he was driving the truck
when he was doing his job for the company.
But he is not the agent of William James. Who is William James? He
is part owner of Arctic Snowshoe. He bought ten shares of stock for
ten dollars each. Does this mean that he is completely safe? As a
person, yes, he is safe. His stock may be worth less if Arctic has to
pay your uncle a great deal of money. But other wise, no policemen
will come to see him. He will not go to court.
Is there ever a time when people who own stock in a corporation is
engaged in illegal activities which they know about. Sometimes
crooked individuals create a dummy corporation that has all the legal
papers but is not real. They don't put enough money or property into
it so that it can do its job. These people never expect the
corporation to offer the services that people pay for. They are
trying to cheat people. Sometimes they want to sell their shares of
stock and lie about its true value.
In cases such as these, a court of law can look behind the
corporation and make the owners pay the damages. Sometimes lawyers
call this "piercing the corporate veil" because the corporation is
not really an organization with money and property. It is just a
flimsy curtain of words and paper that crooks are trying to hide
Important: The regional and village corporations are not like
these dummy corporations because they will begin business with enough
land and money to do many things.
Working for the Corporations
"What happens," someone may ask you, "if I go to work for my
regional corporation?" Suppose the corporation needs someone to post
the land around the village to keep hunters from trespassing on
private property? It seems confusing because I am an owner. I am also
an employee. Am I working for myself like when I go trapping? The
answer is "No." You work for the corporation.
The law keeps all of this separate. It says:
1. You are a part owner of the corporation and will receive
dividends if the corporation makes profits and the directors decide
to divide some of the profits up. You will not pay taxes on special
land claims money given you, for twenty years. But you will pay taxes
on dividends that are profits.
2. You are an employee of the regional corporation. You will pay
taxes on your wages just as if you were working for a company you did
3. The corporation will pay its share of social security and taxes
for you just as every boss does, just as if you did not own part of
the corporation. This is an expense of the corporation. The
corporation subtracts expenses from its working money and from its
profits (the money that it can divide up for you and other owners).
The Building Blocks of a Corporation
We know a little bit about a corporation and how it is a special
way to organize people and people's property to get things done. Now
let us look at it another way - from the owners' point of view.
The owners, people who own part of the corporation, are
shareholders. Each receives a certificate, a legal paper, that
explains how many parts (shares) he or she owns. The certificate also
tells what his rights as a stockholder are.
Stock can usually be bought and sold by people called
stockholders. Remember that stock in regional and village
corporations cannot be sold for twenty years, according to the Alaska
Native Claims Settlement Act. But whether for sale or not, the value
of a share of stock depends upon how much the corporation is worth.
To figure the value of a share of stock, add the amount invested in
the company and the money that the company has made. Subtract the
money that the company has lost or owes from the first figure. Then
divide this by the number of shares to figure a price. Besides this,
the price that someone is willing to pay is also figured according to
the opinion of people about the company's future. Will it make money
or lose money? This depends on things that the employees of the
company do and on special problems or hopes of industries or business
in general. But to get a simple picture of this, let's look at an
Suppose the Acme Land Company has three equal owners. Each has a
share of stock. You are one of the owners. If Acme owned a piece of
land worth $100, your stock would be worth $33 (not looking at the
money Acme may owe or have to pay to its employees or to Uncle Sam in
taxes.) If someone made a deal with Acme to look for oil and paid
Acme $100 to do this with a promise to split the profits, your stock
would be worth the value of the land plus the money you made on
renting your land to look for oil, divided by three. If you could
sell your stock there would be two other things to consider. First, a
negative factor that the land could not be used for, say, hunting,
while oil is being looked for. Second, a positive factor, that there
is a possibility that if oil is found, the company will earn lots of
money in royalties. These are the things that people consider when
they put a value on stock.
Let's suppose that the company gets $500 as royalties (profits)
when oil is discovered. After Acme pays all of its expenses to the
people who work for it, the directors meet and declare a dividend.
This means that they vote go give shareholders a certain amount of
the profits. The amount you get depends on the shares you own. For
example, if you bought another share of stock you would get twice as
much as the man who owns only one share.
What about the money that the company made but does not
distribute? What will it do with the money?
The directors might take it and buy other land. They might buy,
stock in another company. Then your company would be a shareholder or
part owner in another corporation. The dividends it received would
become part of the profits of Acme.
A corporation takes money invested and made and:
1. Pays expenses with some of it.
2. Invests some of it to earn more money in business activities.
3. Pays some of it out to its owners (shareholders).
Stock in a company has a certain money value. The amount printed
on the stock may reflect the original value of money or other
property invested in the corporation. This par value is confusing to
many people since it is almost always much lower than the real value
of the shares of stock and not a good description of the stock's
money value. To figure out how much the stock a person gets is really
worth, you have to look at the money and things that the Company owns
(called its assets) and subtract from that the expenses of the
Company and the debts that it owes others. All of this information is
printed every year on a balance sheet. It is reported to the
stockholders who attend a meeting. Stockholders who cannot attend the
meeting send representatives (proxies) to vote and make decisions for
Differences Between Co-operatives and Corporations
You or some of your classmates may have heard about cooperatives.
In some villages, people have cooperatives to run the local store. In
other places, cooperatives manage the fishing activities or provide
Cooperatives are a special kind of corporation. They are similar
to other corporations in many ways. However the law about a
cooperatives is different in some ways from the law about
corporations. The main reason cooperatives are organized is to
provide some kind of service to the people who own them.
The people who own shares in the cooperative probably have people
working for them (the store manager, for example). But when important
decisions are made about the cooperative, the law requires that most
of the owners meet and agree upon them.
The things a cooperative can do are more limited by state law than
the things -8 corporation can do. With cooperatives, making a profit
for the owners (dividends for them) is not an important
consideration. Most important is providing some service such as
selling them the food and clothing that they cannot make or buying
electricity from a state agency to provide the village.
Cooperatives usually don't have much money or property to work
with, just enough to get their job done.
In the case of a big corporation such as the regional corporation,
we have seen that it starts off managing land and money that belongs
to people who live all over one part of Alaska. People can't get
together as well to make all the dicisions necessary to make the
regional corporation function. Some of the investments that the
corporation will want to make and business that it will want to do
will take place far from the homes of the owners. For example, there
are some people who think that a corporation should buy a hotel in
Anchorage. Other people say that they should invest in a bank in
Fairbanks or Anchorage.
When the goal is making profits in all kinds of businesses, very
detailed studies of those businesses are necessary. The corporation
will have to depend on highly skilled persons, both Natives and
non-Natives, to make important decisions based on those studies. The
owners, you and your family, also must depend on these people. The
law about corporations allows the managers to make many decisions
without asking the owners for their approval. It is fair to say that
the control of the corporation (and the way its employees carry out
the activities of the corporation) is in the hands of the managers.
A stockholder has special ways to check the work of the managers
of the corporation. The law protects the owner to make up for his
loss of control over his land and money when both are handled by the
managers of a corporation. In the next section are some of the steps
a stockholder may take to protect his money in the corporations.
Three Students Discuss a Corporation
There were three Native students at the University: Ronald from
Barrow, Mark from Bethel, and Jim from Tanacross. They all thought it
would be a good idea to set up a business that could sell snowmobile
parts to people in the villages. They understood that they could buy
the parts in Seattle from the Ajax Company at lower than sale price
(wholesale). The Ajax Company would send the parts by truck to
Fairbanks. Ajax said that it wanted a written agreement, called a
contract, with the buyers. This agreement would state that the buyer
would pay the whole price of parts sixty days after it received the
parts. Ajax said that it wanted as a downpayment (money ahead of
time) half the price of the parts.
Ronald, Mark and Jim sat down to discuss the matter over coffee at
the Espresso Bar in the University's Wood Center. They made a list of
1. None of them had much money, only $50 each to
invest. But Jim had a fine stereo that he would pawn to get the rest
of the money they needed. The cost of borrowing money in a pawn shop
(interest on a loan) is higher than the cost (interest) on a loan
from a bank. But the boys did not have a reputation for borrowing
money or buying things on time so they could not go to the bank.
Was it right for Jim to put in three times as much as Ronald and
Mark, they asked themselves How could they see to it that he had a
chance to get more of the profits? Someone mentioned shares of stock.
How many shares of stock would Jim get if he put in three times as
Ronald said that he knew people in the village who would like to
invest in a business like this, but none of them wanted to leave the
village. How could they do this?
Mark was good at keeping records. He could send out price lists to
the villages and ask for deposits. But suppose something happened.
Would the people think Mark had to pay?
Mark said he could borrow a truck to take parts up to the villages
on the highway. But suppose the truck had an accident? Who would pay
for insurance to make sure that the damages could be paid?
What the students realized was that they needed some way to sort
out the different rights and duties so that people shared the risk
and the profit according to the amount of money they invested. Also,
they saw that some of them should be paid for the skills that helped
others. Finally, they saw expenses in this business and serious legal
responsibility for the one who signed the agreement with Ajax.
They agreed that things like these could be handled fairly easily
when they took place in the village. There people knew what to expect
when one person used the property of another. But now they saw that
in business there were some serious risks that no single individual
They visited a lawyer, a man or woman who goes to college and then
to law school and takes a special test to practice law in the state.
The lawyer's name was Miss Claire. She listened and then suggested
that they form a corporation (incorporate).
"I am not worried about you boys trusting one another," Miss
Claire explained. "But your problems are not about trust. How would
the law help or hurt you with these problems if you organize with a
handshake or a corporation? First, from what you have said I see you
are going to need money to meet the expenses of your business You
need working money (investment capital)."
"Well," said Ronald, "I didn't think of it before but what about
selling our stock in the regional corporations? Or pawn it, perhaps?"
"No dice," said the attorney. "That can't be sold or traded or put
up as security for a loan for a long time. Federal law says so."
"What about people we know in the village who might like to
invest?" asked Mark.
"Maybe people in the villages will invest," said the lawyer.
"Maybe they like your idea and know that the three of you are
hardworking. But I doubt that they will want to be partners because
they do not have time to come to Fairbanks and join in the business.
They may want to be stockholders. This would protect their other
money if Ajax or someone else says that the business owes it money."
"If they bought stock in a corporation, would that be like money
borrowed from a bank?" asked Ronald.
"No," said the lawyer. "A loan and an investment are not the same
thing even when they are both with a corporation. A corporation can
go to the bank or to other persons and borrow money. It agrees to pay
that amount (called the principal) back in such-and-such a time. The
lender gets his money back and also gets interest. Interest is the
cost of borrowing money. Borrowing money is not free."
"Is that like getting credit at the village, when you do not have
money to pay right then?" asks Jim.
"Yes," said the lawyer. 'Credit in the store is also not free. You
pay a higher price for food, or there is a special charge added on
"Why will people lend a corporation money?" asks Ronald.
"They will lend it money because they think that there is a good
chance that it will be repaid," answers Miss Claire.
"Why will people invest in a corporation instead of just lending
it money?" asked Ronald.
"Because they decide that the corporation can make more money for
them in profits than they can get by putting their money into the
bank and getting interest on it."
"Will banks lend the regional corporations money?" asks Mark.
"Yes" says Miss Claire, " if they feel that the people who run the
corporation will make money with the land and other assets that will
"It sounds like the more money you have, the more you can borrow,"
"Yes," said the lawyer, "sometimes that is true. Anyone who lends
money wants to be sure that he will be repaid. Another important
thing is that a corporation with property of its own can usually
borrow money for less than you or I. Also they are in a position to
make money with that borrowed cash."
"If the people in the village invest, then they are part owners.
They will share in the profits of the organization. And they will
share in some of the risks."
"Well, suppose someone wants his money back, what must we do?"
"He can sell his stock to a person who will buy it for what he
thinks that share of your organization is worth. He may have to offer
it to one of you first. This will depend upon the rules that you
write down about how you want your organization to work. These rules
are called the bylaws. They are the rules of your company that will
state how important decisions will be made and who will run the
"Do you mean," said Jim, "that all of the owners will not run the
"That is right," said the lawyer. "You can elect directors and
they will run the corporation. A director can be an owner too. Or, if
you decide, he can be someone who does not own any stock. In your
case, it seems that at least the three of you will be the owners.
"The board of directors is chosen by the stockholders. Then the
directors choose employees to do certain things. All of the
stockholders elect the board of directors, but all of the
stockholders let the directors make decisions on who can best serve
"So," said Ronald, "it seems that a person could be a stockholder,
a director, and an employee of the corporation. But the law divides
"Yes," said the lawyer, "and there are good reasons for this.
Suppose that one of you wants to stop the business. Suppose that one
of you die. If you had a partnership, it would end and you would have
to organize all over again. With a corporation, the stock would go to
your relatives according to the law, or by a will.
The corporation has a life of its own unless the stockholders (or
the law, in certain cases) take away that I if e by voting to
liquidate the corporation. This means that the corporation pays its
debts and what is left goes back to the stockholders.
"Can we vote to liquidate the Regional Corporations?" Ronald
"Not for twenty years," said the lawyer, "but the stock will go by
will or by law to your heirs (the people who can get property from
you when you die)."
Lessons Ronald, Jim, and Mark Learned.
1. The boys can get capital (money) for investment by making other
people pan owners in a corporation. This will also protect these
investors from risk larger than the amount that they invest.
2. If the boys own a majority (more than half) of the shares in
the corporation, they can elect the directors. The directors will
make the basic decisions about how the business will be operated.
3. Any of the investors can sell their stock without ending the
business. Also, if one of the investors dies, the investor's family
will get his share in the business.
They also learned that for twenty years they cannot sell the stock
in the regional corporation or use it to get loans for twenty years.
That stock will also go to heirs if one of them dies. The regional
corporation will also have directors who are elected by stockholders
and who will hire employees to do different things.
A corporation has a name of its own. What are the names of
corporations that you know about?
McDonald's is one. General Motors, the car company, is another.
How about your regional corporation, what is it called?
Does it matter if the corporation has the name of the man who owns
all of its stock? The Smith Moose Hide Company, for example? No, it
How does a corporation get a name? The people who decide on
organizing it send the name to the Commerce Department of the Alaska
State government. It checks to make sure that the name isn't being
used by another corporation in Alaska Then, it reserves the name for
a few months for a small fee until the incorporators can organize
their business according to the law. How is the corporation name
used? Just as your name or mine would be used if we carried on
A Legal Contract
You recall that the boys wanted to make a contract with the Ajax
company. Let's suppose that they decided to call their company, the
North Alaska Snowmobile Service Inc. But what is a contract?
A legal contract is usually a written agreement between "persons"
that describes the rights and the duties that each will have.
Companies can have rights and duties - remember that they are legal.
Ajax offers to sell snowmobile parts for, say, $100. North Alaska
Snowmobile accepts the offer and agrees to pay $100. If one company
or the other does not do what it has promised, the other company can
go to court because the contract has been broken. The contract gives
legal rights and legal duties to each company, not to Jim, Mark, or
Ronald or to the owners of the Ajax Company, but to the companies.
Remember, the law says that companies can go to court, just like
people and bring a legal action called a suit with the help of a
lawyer who is licensed by the state.
If one company breaks the contract, will the judge fine the
company? No, the contract is a private agreement. The corporation
that sues proves that there was a contract. The judge may order the
company to pay money damages or to do what the contract says
This kind of legal hearing in front of a judge is not the same as
one where a person is arrested. it is between two "persons" I! is
called a civil action. The other kind of hearing is a criminal action
where lawyers for a city and state try to convict a person they say
has broken a law.
Can companies break the law? Yes, there are laws about the way
that companies act. Companies and the directors of companies can be
fined if they cheat people who deal with them. These people can also
go to court and get money damages awarded to them. So, there can be
civil and criminal actions
Ronald asks this important question. "Suppose that I am a
stockholder and I know that Ajax has this contract. Ajax breaks the
contract and this hurts our company. However, the directors are lazy
and do not want to get a lawyer to sue Ajax. What can I do?"
As a stockholder, Ronald first should ask the directors to sue
Ajax, Inc. He may also have to get the other stockholders to agree
with him. (This depends on the state law and the rules of the
corporation, the bylaws.) If the directors refuse to sue the other
company, he can hire a lawyer to go to court for the corporation. The
17w expects the company (and its directors) to protect itself (and
Ronald's investment). But when it does not do this, a shareholder can
act for the corporation. Does that mean the judge would give a money
award to Ronald? No, Ronald is suing for the company. The company
gets the money that the judge says should be paid. But Ronald will
get all of his expenses paid (lawyer costs, etc.) if he wins for the
Suppose one of the directors that we stockholders elect makes a
mistake that costs us money. Can we sue him too?"
"Only when his mistake is based on something other than poor
business judgment. For example, the director thinks that people will
need new snowmobile helmets because he hears that the safety law is
going to change. So he orders a case of helmets. But then the law
doesn't change and the company loses money. This is just poor
business judgment. The stockholders can vote him out of office. The
bylaws give them that right. But he probably should not be sued in
court by the company."
"But how about if a director takes money that belongs to the
corporation and buys a new car with it for himself? Can I or the
corporation get the money back?" asks Mark.
"Yes, the corporation can sue him or you can sue him for the
corporation (if the board of directors refuses to do so). Again, the
money will go back to the treasury of the corporation but you will
get your expenses."
"Is all of this about going to court the same with my regional
corporation? Can I make them protect my money and land against people
who don't live by their agreements, or directors or employees who
cheat the company?"
"Yes, although the bylaws, the internal rules of the corporation
will be different. The law of Alaska allows you to protect you r
rights in this way."
"But," said Ronald, "nobody in our village has money enough to
hire a lawyer. Only the corporation can do this"
"That is not necessarily tnue," answers the attomey. "There are
legal services attomeys for people with small incomes. Also, there
are private attorneys who will take your case. The Alaska State Bar
Association will help you find an attorney."
The directors of a corporation are usually elected by the
stockholder. The directors then elect officers of the corporation
(except where the bylaws let the stockholders do this). Directors sit
as a group called a board. They work together to direct the way that
the corporation will conduct its business The law holds them
responsible as individuals if they work against the corporation for
How is an officer of the corporation, a president, vice-president,
treasurer, etc. different from a director? (Even if an individual is
an officer and director at the same time, the law and the courts look
at the two jobs separately.) In general, the officer acts for (is an
agent) of the corporation. He acts according to directions of the
This is the same as when a village council president directs a man
in the village to supervise the spring clean up. The council members
give him a general idea of what they want to do. The man that the
council selects then decides how best to get people to work together
to clean up the village. The council also gives the man the power to
do this. It may post a sign in the store and say, "Harold K. is in
charge of Spring Clean Up - Listen to Him." Or the council may
promise to fine people whom Harold reports are not taking part.
What is the job of a director then? The director's job, in a
corporation is so special that some law teachers say that there is
nothing like it. He is not an agent like an officer. He is more like
a person who takes care of the property of other people and does what
is necessary to protect and improve it.
Law professors do not know as much about hunting caribou or whale
as you may know. They do not know about an umealik. But an umealik
who organizes a hunt to feed a village is something like a corporate
director. He is picked because he is already skillful at this job.
But his main job is not to tell everybody how to hunt. It is to
organize the boat, gear and men so that the village gets a whale. The
umealik has a feeling of responsibility for the village and people in
it who cannot hunt. This is why he provides whale meat or caribou
from h is extra share to people in the village. I n a corporation the
law gives the directors this same responsibility, to be concerned
about the whole company and all its stockholders.
Compare the Old Days With the Future
Compare the ideas about a corporation's owning things with the way
things were owned ;n days gone by. Let us make a list of things that
were owned: An individual owned his kayak, clothing, tools, weapons,
charms, and songs. A family owned a umiak, sled or house. They all
owned it together.
This is different from a corporation that many people own because
the stock gives each person a specific part of ownership. Everyone
does not own the whole thing. It can be divided up.
You cannot divide up a sled unless you want a stack of wood. But
people did share things they hunted. Things that were hunted together
were divided up. People got shares of the game.
In the old days there were trading partners among Eskimos and
Indians A man from the sea coast traded seal and whale oil for
caribou hides and wolf and fox pelts. And just as people hunted
together they went to trade together. A person from one band would
trade with a person from another band again and again. They had a
personal relationship that was as good as .the contracts that people
use today because both partners understood what the other wanted, If
a man did not give what he had promised, the trading would end.
The corporations and their employees will trade with other people.
But the contracts will describe the deals made and the courts and the
law will protect both sides. A man who breaks a contract can be taken
to court. The judge may make him pay damages.
Review of Corporations
How many corporations are there in the United States? About a
million and a half. Some are small with only a few stockholders like
the ones we have talked about. Others are huge with millions of
stockholders. The telephone company is like that. How much business
do corporations do? At least 90 percent of American business is done
by corporations that provide people or other corporations with
services or things. In fact, only about 700 corporations do three
quarters of all the business in the country. These are the biggest
ones. Can you guess their names? General Motors is one. The steel
companies are others.
Each year, the business magazine named Fortune prints lists of the
500 corporations in the United States that earn most money for
owners, manage most money, etc. Did you know that the regional
corporations of Alaska native people will probably join these lists?
How does a business become a corporation? A corporation gets its
special and separate identity from the state, and not from the
individuals who decide to organize it. Although they will invest time
and money in the corporation, it is created by following the laws of
the state. By filing the correct papers, the incorporators ask for a
special grant from the state for a new business Every state has laws
that tell businesses how to become corporations Lawyers direct
ordinary people on the correct papers and legal fees that are
What kind of papers are filed? The articles of incorporation,
which describe to the state the legal name of the organization, its
general purposes and what it plans to do. The articles also list the
main place of business and the names of the incorporators and
directors. Along with these articles are more detailed rules of
operation called the bylaws.
The bylaws describe such things as this:
1. How many shares of stock are in the corporation.
2. What rights the stockholders have.
3. When the meetings will be held.
The articles of incorporation and by-laws do two important things:
1. They tell the state what business the corporation is going to
2. They tell the stockholders what the corporation can do and
Together they are the rules of life for the corporation.
Alaska Law and Native Claims Stock
You and other members of your family will receive shares of stock
in a corporation that was organized under the Alaska Native Claims
Settlement Act. You have learned something about stock and
corporations in general. How are the regional and village
Federal Law is made by Congress and signed by the President. State
law is made by the state legislature and signed by the Governor. The
Constitution says that federal law is superior to state law. This
means that where federal and state law say two different things about
the same topic, usually the state law will have to be changed (or
amended). This is what happened to some parts of the law about
corporations in Alaska after the Alaska Native Claims Settlement Act
The special things that the Native claims act said were these:
1. Native claims stock will only be given to people who prove that
they had at least one grandparent who was an Alaskan Native as of the
date when the bill was passed. Not everyone can receive this stock.
2. Native claims stock cannot be sold or transferred for twenty
years. But it can go to the people in your family if you die or if
you get a divorce. Some other kinds of stock can be sold whenever the
stockholder can find a buyer.
3. Native claim stock will not be taxed when you get it; other
stock is often taxed.
4. The land that is transferred to corporations will not be taxed
for about 20 years unless it is worked on or leased to other people.
Then it can be taxed. Usually all owners of land (real property) must
5. The money that the U.S. Government and Alaska give to the
corporations to pay directly to the Natives is not taxable as
dividends. Dividends are usually taxable under special rules
6. The Native claims corporations will have to pay taxes on land
rents, royalties (shares in profits from oil or mineral on its land)
or other profits. However, if the corporation is a non-profit
corporation special laws apply.
7. If a child owns stock, the decisions are made by someone else
who has responsibility for the affairs of the child, like his parents
or some other legal guardian.
8. The corporation will see that stock goes to the right person in
the family if someone dies. The superior court will handle arguments
between people if the corporation cannot, or if it makes a mistake.
What special problems do Native Land Claims stockholders have that
are different from problems of other stockholders?
1. Native claims stockholders cannot sell their stock for the
value of their share in the land and money held by the regional or
village corporation for twenty years. Other stockholders can sell if
they can find a buyer.
2. Native stockholders do not pay taxes on money they receive as
yearly Land Claims payments. They do pay taxes on profits of the
regional corporation which the directors divide up (dividends).
Many Native children know a great deal about some aspect of
hunting or fishing that their parents or relatives in the village
carry out. It might be caribou hunting, trapping for furs, fishing
for salmon, or hunting walrus. Pick one or any of these and discuss
along the following avenues:
1. Does your relative do this by himself? With other persons? Why
do these people work together?
2. What kind of gear does he need to carry out this work? Does he
make it himself? Does he buy some of it or trade for it? Where does
he get the money or goods to do this?
3. Suppose he spends his time trapping and wants some fish? What
does he do?
4. Does your family buy canned. goods at the store? Does the
storekeeper grow these things and put them in cans? Why do different
people do these things (e.g., grow vegetables, put them into cans,
ship them to Alaska, sell them to your mother at the store)? Can any
one person do all these things? Can the people in one village or town
do all these things? Does one person or even one village have the
time and money to grow things, produce metal and make cans, put the
vegetables into cans, build or buy the airplanes to send them to many
places, sell them to other people?.
Each of these jobs requires organization and men and women and
money. Corporations do each of these things.
Associate Professor of Law
University of Alaska