Class-Action Lawsuit Focuses on Cooperative Board Compensation

Class-Action Lawsuit Focuses on Cooperative Board Compensation

A South Carolina electric cooperative, Tri-County Electric Cooperative, Inc., was recently named in a class-action lawsuit focusing on its board’s compensation.  The lawsuit was filed by member Roy C. Smith on behalf of all members, alleging the Cooperative broke state laws by paying “excessive compensation” to board members at the expense of the Cooperative’s members, which would be a violation of S.C. Code Ann. § 33-49-630.

The plaintiffs’ attorney Graham Newman states “board members are entitled to receive compensation from the co-op, but it has to be reasonable and the amount taken over the last 13 years has been quite unreasonable.” According to the Complaint, the board members have received over $6 million since 2004.  “[S]ince at least 2004, Tri-County Electric has been awarding its trustees compensation far in excess of the reasonable needs of the organization’s business. Compensation paid to the nine-member Board of Trustees in each of those years has been as follows:

  • a. 2004: $305,547
  • b. 2005: $306,715
  • c. 2006: $476,946
  • d. 2007: $459,670
  • e. 2008: $854,893
  • f. 2009: $287,206
  • g. 2010: $332,563
  • h. 2011: $349,077
  • i. 2012: $342,213
  • j. 2013: $400,698
  • k. 2014: $424,886
  • l. 2015: $466,413
  • m. 2016: $676,521”

Smith and others who joined the lawsuit are asking for an injunction against compensation to the board members.  The Lawsuit says: “As both a non-profit under federal law and an electric co-op under state law, Tri-County is prohibited from awarding its trustee’s excessive compensation.”

Tri-County CEO, Chad Lowder, issued a statement, stating they are committed to doing what is in the best interest of their members and are hoping to move forward in a manner that restores their confidence and trust.

Read more here.  Read more about cooperatives’ corporate governance and board issues.