BRAINERD, Minn. – With news of secret insider payments and an attorney general’s inquiry hanging over Crow Wing Power, the co-op’s annual meeting Saturday featured a lot more than the usual pancake breakfast, horse rides for kids and reassuring speeches from executives.
By its end, Crow Wing Power’s member-owners — who are also its customers — were calling for the company’s longtime CEO to be fired on the spot.
They were angry and vocal over a series of public revelations in recent months, with the biggest bombshell dropping just a day before the annual meeting. The co-op disclosed that CEO Bruce Kraemer had received a $1.9 million bonus in connection with the long-completed sale of Hunt Technologies, a for-profit affiliate of the nonprofit electricity provider.
Kraemer stood before about 200 members Saturday and acknowledged that the company “should have tried harder to disclose” details of the Hunt deal. He also said he knew the $1.9 million figure was “shocking.” But Kraemer added that he deserved the bonus because under his leadership, the financially ailing Hunt was revived and eventually provided a $42 million profit for Crow Wing.
“It was six years of blood, sweat and tears,” he said of the Hunt turnaround. “And nobody received compensation for those six years.”
But a number of people in the crowd of about 200 weren’t buying it.
“You did a good job [with Hunt], but should you get $1.9 million?” Judy Deming, a co-op member from Brainerd asked during question-and-answer time. “You make a good wage.” (At the time of the 2006 sale, Kraemer was paid about $200,000 a year).
Bob Jones, another member from Brainerd in attendance, was more blunt, calling Kraemer’s explanation “just a bunch of baloney.”
The revelation of Kraemer’s $1.9 million payday came about six weeks after the head of Crow Wing Power’s board of directors, Bob Kangas, publicly disclosed that seven directors — including himself — got $70,000 payments each for their work on the Hunt deal, which was finalized 13 years ago. Two Crow Wing directors at the time declined to take the $70,000 bonus.
Crow Wing Power provides electricity to about 38,000 mostly residential customers in Crow Wing, Cass and Morrison counties — the heart of Minnesota’s lake country.
Crow Wing Power’s ownership of for-profit companies is legal, and it has brought benefits to the co-op’s members over the years. But corporate governance experts frown on payments to executives and directors that aren’t disclosed to a company’s owners, whether they are shareholders or co-op members.
A raft of federal laws require certain disclosures for public-traded companies. It’s not clear what sort of disclosure laws apply to co-ops in Minnesota. As is true in many other states, Minnesota co-ops are largely unregulated.
Last month, Crow Wing Power disclosed that the Minnesota Attorney General’s Office was “gathering information” from the company. The inquiry is focused on the sale of Hunt Technologies.
A tangle of ventures
In 2000, Crow Wing took a stake in Hunt, a Pequot Lakes maker of electricity metering equipment. Under Kraemer, Crow Wing played a major role in Hunt’s turnaround. The co-op profited nicely when Hunt was sold, distributing $12 million directly to its members and investing another $5.2 million into its operations.
But the biggest chunk of the Hunt proceeds, nearly $25 million, was used in the late 2000s to buy and develop a manganese mine in nearby Emily, Minn. The mine is still on the drawing board. Crow Wing Power last week announced a partnership with a startup mining company to get the project going, though it’s not the first of such ventures.
The manganese mine deal called for Kraemer and other top Crow Wing executives to get royalty payments should the mine start operating. The royalty agreement was never disclosed to Crow Wing’s members and wasn’t generally known until the Star Tribune published a report about the manganese mine last August.
Criticisms of the royalty agreement, the direction of the mine project and the co-op’s secrecy — pushed by Crow Wing Power director Bryan McCulloch — sparked a series of rancorous board meetings earlier this year.
Rumors that Kraemer — Crow Wing Power’s CEO for more than 20 years — had gotten a bonus for the Hunt deal have been swirling for some time, just as they had about undisclosed payments to Crow Wing Power’s directors before the board acknowledged them.
On Friday, Crow Wing Power published a full-page ad in the Brainerd Dispatch explaining, among other things, that Kraemer had received the $1.9 million Hunt bonus, which was based on a percentage of Hunt’s gross sale price of $129 million.
“It’s just too big; it really is too much money,” Kraemer said at one point during Saturday’s annual meeting, but he also noted that the bonus was set by a formula based on the sale price.
Members tried to submit a motion to fire Kraemer at the meeting, but they were told that would be impossible because the CEO is hired by the board of directors. Then, McCulloch, a director since 2012, made a motion to allow the co-op’s members to hold an “advisory” vote on Kraemer’s future.
The vote was 65 in favor of termination, and 44 to 48 against. (The exact “nay” vote wasn’t clear, and the crowd had shrunk by the end of three-hour meeting when resolutions were passed.) The Crow Wing board can consider the resolution to fire Kraemer, though it’s not bound to act.
Crow Wing Power’s owners made themselves heard, though.
“It has become very evident that things need to change,” Kraemer told the crowd.