Cobb EMC returning to court over governing issues

A legal fight that began with alleged asset siphoning and insider dealing at Marietta-based Cobb EMC goes back to court Friday, this time over issues of corporate governance.

Abstract as they may be, those issues are important because they will help determine who runs the customer-owned electric co-op and how — or if — its settlement agreement with customers will be enforced.

Cobb EMC is the monopoly power provider for more than 190,000 customers in five metro Atlanta counties — Cobb, Bartow, Cherokee, Fulton and Paulding. It settled with suing customers in December and was ruled in violation of that deal the next month.

The co-op is appealing the ruling, which told management to keep its hands off of a court-ordered special membership election.

The election will decide whether co-op members want to allow mail-in voting for board members, and it sets the stage for two board elections this year in which the lawsuit plaintiffs hope to replace most of Cobb EMC’s board.

The settlement said plaintiffs would draft the ballot language. But the co-op drafted its own and made other bylaw changes that affect the co-op’s governance. That’s what it was told to stop.

Plaintiffs say Cobb EMC is trying to protect its board. Cobb EMC say plaintiffs are meddling in its business.

The Journal-Constitution ran key sections of the proposals by four experts: Georgia State law professor Jack Williams; Charles Elson of the University of Delaware’s John L. Weinberg Center for Corporate Governance; Walter Scott, of Northwestern University’s Kellogg School of Management; and Steve Harmon, manager of Pioneer Electric, an Alabama co-op whose members replaced seven of nine board members since a customer lawsuit was settled several years ago.

Mail-in voting

Co-op customers elect co-op boards. Most co-ops, including Cobb, hold votes at annual meetings.

The plaintiffs’ language says the co-op can allow mail-in voting.

The co-op’s mandates it, getting rid of in-person voting.

The governance experts said mail-in voting could open up the board elections. They said most companies allow mail-in and in-person voting.

Harmon said that co-op began using both methods after settling a customer lawsuit in 2005: Voter turnout is way up, he said.

Co-op neutrality

The plaintiffs want to ban the use of co-op resources to back or oppose candidates.

The co-op doesn’t agree.

Corporate governance experts said most companies do not require neutrality. They said reformers have pushed that idea with minimal traction. “The idea is to alleviate concern that management has rigged the game,” Williams said.

Harmon said Pioneer does not take sides in board member elections, since he took over as general manager after the lawsuit settlement. He said the policy helped heal the co-op. It is not in the co-op’s bylaws, “but I would have no objection to that.”

Proxy voting

A week after the settlement, the co-op amended its bylaws to allow mail-in proxy voting on unspecified special issues, at the board’s discretion.

Proxy voting empowers management, the experts said, because management has the resources — mailing lists, customer-funded mailings — to control the result.

“Proxies are excellent management entrenchment tools,” Williams said.

Elson also said proxies helped management, although most companies use them.