Alaska's natives are bringing off the biggest corporate takeover

by Michael Parfit

Originally appeared in Smithsonian 1981, v.12 (Aug. 1981).

"Alaska's natives are bringing off the biggest corporate takeover," Michael Parfit, Smithsonian (August 1981), pp. 30-39. Used with permission of the author, for educational purposes only.


Regional corporations set up by Congress to settle land claims are now running everything from fishing to high finance

On a rainy day at Mirror Lake, just outside Anchorage, a small group of Alaska natives—Indians, Aleuts, and Eskimos—gathered to launch a symbolic boat. They celebrated with hamburgers and sun-dried salmon, smoked moose and chocolate cake. They drank Hawaiian Punch. Standing in the rain, they cheered as a crew of brawny young natives pushed the boat into the water. The elderly Eskimo who built it, Paul Tiulana, knelt in the prow, his face set toward the water. The boat was an umiak, the Eskimo whaler. It was 28 feet long; its ribs were steam-bent wood; its translucent skin was walrus hide stitched with caribou sinew and tied to the frame with nylon rope.

As the new boat rode on the water like a fresh-blown leaf, Tiulana laid his cane on the ribs and plunged his paddle deep, driving the umiak toward some memory, the gasp of the whale and the boom of the pack ice sounding in his ears.

But the lake was still, reflecting the vacation cabins on its far shore, and soon the natives who watched would be on their way back to the city from this salute to their past, returning to the offices of the corporations that control their future. In other places in Alaska many natives still depend on boats, nets, and harpoons for survival, but as compelling as their ancient culture may be, for some the boardroom makes more insistent demands.

One of the remarkable things about this upheaval is simply that so few people in the rest of the United States know it is happening. Fascinated as the American public usually is with Indians, it does not seem to have noticed that in Alaska about 78,000 natives are trying out a new system of self-determination, which has been called by various authorities a great social experiment, land reform on an unprecedented scale, or an enormous social disaster.

This huge change, brought about by the Native Claims Settlement Act passed by Congress in 1971, ought to be famous. Not only does the experiment involve 44 million acres of what used to be federal land and a billion dollars of tax money, but it also has married the natives, for better or worse, to the most cherished modern American institution, the corporation. Out of this shotgun union leaps an important question: have the American people at last found a way to treat natives with justice, or are we still trying to mash a unique people into a mold that won't fit, while we steal their land and destroy them forever?

The answer is far from clear. Its dominant characteristic, in fact, is contradiction.

"The Settlement Act was a continuation of America's attempt to obliterate the native," said Willie Hensley, the most prominent Alaskan native leader. "But it depends on how you use the doggone thing. We now have something no other minority group has in this country—we have land, capital, and we have identity in culture. I mean, we have a leg up!"

The Settlement Act was born, like most Indian legislation, out of a desire by American corporations for lands claimed by natives. In this case a group of oil companies wanted a corridor down the center of the state in which to build the controversial Alaska pipeline. But the natives, with perfect timing, had claimed most of the state, and because they had never signed their land away by treaty, the claims had power. So in 1971, pushed by both the oil companies and the natives, Congress passed an act—praised by nonnatives for its generosity—which promised the natives clear title to 44 million of the acres they had claimed and paid them the $1 billion for the rest. Among the conditions of the settlement, spelled out in ambiguous complexity in a 27-section act, was a requirement that the natives organize into corporations "to conduct business for profit."

The Act was no subterfuge; natives had lobbied hard to get it passed, and there is still a sense among them that their timing was perfect. "If it had been ten years earlier, we couldn't have gotten the money," one native remembered. "If it had been ten years later, we couldn't have gotten the land." So there was a surge of pride when the Act was signed. "l swear," said Perry Eaton, a native banker whose zest for the Act is matched only by his enthusiasm for eloquent commentary, "even the drunks staggered with more dignity."

But from the native point of view, the first real changes made by the Act were negative. "We sat down and went through it for three days," said John Schaeffer, an Eskimo National Guard officer, who is now a corporation president. "Our general reaction was that it was written by people who wanted to end up with our money and our land." What better way for American corporations to loosen up access to those 44 million acres (the fear ran, and still runs today) than to guide natives into unfamiliar business enterprises and tell them they have to make profits from land that had previously made only browse for caribou? If the companies weren't invited in immediately, they'd just have to wait a few years for default. Thus the first of many contradictions: the Act hailed by some as the most generous settlement in history could turn out to be the biggest theft.

Typically, however, the very dangers in the Act have been, in retrospect, a source of encouragement to native leaders.

"When we read the Act we thought we were doomed to failure," Schaeffer continued one afternoon, sitting in his office in Kotzebue, on the northwest coast of Alaska. "That's how I maintain my optimism. We've tried to make it less doomed, and we've been quite successful."

The buildings of the town of Kotzebue are arranged along the edge of a spit of land like glittering teeth on a jawbone. When the ice is out and the day is clear, the sky and the bay are the same pale blue, amazingly clean. Along the shore, weighted oil drums hold back the tide, nets dry in the sun, dogsleds and caribou racks make bony silhouettes on the tops of houses, tethered skiffs drift back and forth like horses grazing on the current, and small flatfish lie dead on the stony beach, their entrails pecked out by gulls. The air is full of the sounds of dogs barking and of three-wheeled motorcycles with bulbous tires zooming around everywhere on the gravel roads like strange red steeds out of a space movie.

This village of about 2,000, where jet airliners stop four times a day, is capital city of the domain known as the NANA region, named after its corporation, of which John Schaeffer is president. (The acronym NANA came from an old association no longer in existence.)

Schaeffer is a quiet, practical Eskimo. He has a striking, pale brown face; his ears are swept back against his head, giving him the look of a large, wary cat. He seems to pad softly through the world of business he has entered as president of NANA. Schaeffer flies to Asia one week to negotiate the sale of reindeer horns to the health tonic market and the carving of jade mined on NANA land, and to Houston the next to talk about oil drilling, with a few days in between to work in his small office overlooking the pale blue bay.

NANA is one of the most successful of 13 regional corporations, the big guns of the Settlement Act. The Act also created about 200 small village corporations. NANA has 4,828 stockholders, about 2.3 million acres, assets of about $60 million, and earnings per share in 1980 of 28 cents. As required by the Act, each stockholder owns 100 shares of NANA stock and 100 shares of village corporation stock, neither of which can be sold or otherwise alienated until 1991.

The fact that each native born before the passage of the Act owns 100 shares is one of the things that sets native corporations apart from others. "There's no other corporation in America where if you have ten kids you've got more voting power than the president," one native said.

This unusual arrangement, which often makes corporation presidents behave more like mayors in search of votes than executives, plus the prominent decision-making role and financial weight of the corporations in their communities, makes them too political to be defined simply as private industry but too autonomous to be called government.

A visiting American executive, already stunned by the equality of share ownership and quasi-governmental position of the corporations, would be further shaken by the way the corporations backed into business. "Somewhere else a guy starts out with an idea, goes to a partnership and then a corporation, and is in a constant search for capital and leverage," said Perry Eaton. "These were formed with lots of capital, a lack of corporate leadership, and no product."

"It's a whole upside-down world," one Alaska Indian said. "The great men in the Indian culture were men who distributed wealth—they gave it away in potlatches. In the other world the big men are men who accumulate. That's a difference."

But many of the corporations have scrambled around and assumed profitable personalities. The Arctic Slope Regional Corporation, which owns 4.5 million acres near the oil fields of Prudhoe Bay, is becoming an aggressive construction and energy development firm; corporations on the coast in southeast Alaska whose lands are cloaked with Sitka spruce are focusing on timber operations and fishing; and NANA and Cook Inlet, Eaton observed, "have taken on the profiles of diversified conglomerates."

Although it is a profit-oriented company, NANA is not, like most other U.S. corporations, interested just in making money. In the words of an Alaska economist, NANA has "broadened its goal structure." In the words of a NANA board member: "We don't work in the holy name of the dollar."

NANA has five main aims, Schaeffer said: to achieve stockholder self-sufficiency, to achieve village self-sufficiency, to preserve and enhance the Eskimo culture, to protect the ability of the land to provide food—what Alaskans call the subsistence culture—and, finally, to make a profit. To reach these goals the corporation has invested in low-profit operations such as selling fuel in its villages, ranching reindeer for horn sales and meat, and operating a museum in Kotzebue, while concentrating its money-making efforts on things like a joint venture with a U.S. firm to build and operate huge oil-drilling rigs for the North Slope.

In pursuing these wider goals, Schaeffer and his other managers have involved the NANA stockholders, with interesting results. When choosing the land the corporation wished to claim under the Settlement Act, Schaeffer first asked the elders of each village to make their selections, then commissioned outside consultants to do a million-dollar study. Plotted on multicolored overlays two years later, the two outlines matched almost perfectly.

Schaeffer smiled. "The elders were experts," he said.

But broadened goals or not, even NANA cannot hide the contradictions woven through the pattern of the Settlement Act. Many natives expected the settlement either to make everyone a millionaire or to put everyone to work; instead, the Act has been more like getting a small stock inheritance from an uncle: you can read market reports in front of your friends, but you don't get to count much cash. NANA's 1980 dividend of 75 cents a share didn't amount to much in an area in which even those who live off the land buy outboard motors, snowmobiles, three-wheeled motorcycles, and gasoline. Alaska natives are just like the rest of us: the word "corporation" is magic—it conjures up images of Learjets and million-dollar snap decisions. No wonder a 75 cents per share dividend leads to discontent.

On the same day that Schaeffer talked about his broadened goals, a young Eskimo stood outside his tiny plywood-and-tarpaper home discussing the Settlement Act while, nearby, a friend, who had just returned from hunting, peeled dried blood from his hands. The Eskimo's sardonic smile showed missing teeth and pessimism.

"They ought to give us more money," he said. "I think they're keeping it all for themselves."

Money. NANA's broadened approach to profits is not shared by all the regional corporations. Others, particularly those whose population is already more in tune with the cash economy than are northwest Alaska natives, have chosen a more American route, perhaps with the goal of eventually satisfying that young Eskimo's complaint. But there is contradiction in this, too: in seeking profits many of the native corporations have decided to hire nonnative presidents or managers who will be free from goal-broadening pressures. Koniag, Inc., the corporation that covers the island of Kodiak and surrounding territory, is one such firm; after several years as rocky as its coastline, it hired an executive from International Paper who swiftly set the corporation on that narrow path.

"He asked us what the corporation's primary responsibilities were," said Karl Armstrong, who is, among other roles, a Koniag board member. "We said: 'To the stockholder.' He said 'No. The first responsibility is to produce a profit.' "

Karl Armstrong's father was both the only U.S. Marshal on Kodiak Island and the region's biggest bootlegger, so it is not surprising that Armstrong should have become a Washington lobbyist. He is a large, friendly man, not unlike a genial old Kodiak bear that has spent a lifetime abundantly satisfying a taste for pink salmon. He is pleased with the new man. "We do not interfere with him," he said. This arrangement, Perry Eaton said, saves the corporations from internal political disruption. The outside executive is hired to do a job; he has no family or racial ties to complicate his decisions, and if he fails he can be booted out without setting off a feud. "He gets the opportunity of a lifetime," Eaton said. "And we get administrative stability."

Armstrong has spent the past several years commuting to Washington to use his guile to help add sections to the recent Alaska Lands Act amending the Settlement Act. Among the provisions in the new Act, signed by President Carter at the end of his administration, was a section setting up a protective land bank, so corporations would not be forced to develop or sell land to pay taxes.

The Act also contained a controversial amendment to the Settlement Act that, if it is not found unconstitutional, would forbid nonnative purchasers of shares from voting in corporate elections. The amendment is intended to ward off outside takeover after the stock is freed in 1991, but it points out another contradiction: if the stock becomes valuable to outside buyers, some individual natives may sell, thus diffusing overall native power; but if it becomes worthless to others, it will mean, in nonnative terms at least, that the corporations are failing. There's further confusion: the amendment calculated to preserve native control of the corporations could lower the value of shares by making them less interesting to outsiders.

These intricacies probably will be addressed by future Congresses at the prodding of people like Armstrong, who could hardly get any busier. In the nine years before the Lands Act's passage, Armstrong logged 80 separate flights between Washington and Kodiak.

That kind of travel isn't cheap. Neither is the hourly rate for legal firms such as Duncan, Weinberg and Miller of Washington, D.C. But Koniag retains Edward Weinberg, a former Interior Department solicitor who is now a member of that firm, and pays the bill. Lawyers and lobbyists have consumed a healthy portion of the $1 billion settlement as the natives tried to amend the Act into working shape and fight out its legal ambiguities. "Koniag has spent at least $1 million on lawyers," Armstrong said. "The most expensive thing we could have done was hire cheap attorneys."

But Emil Notti, a small, quiet, statesmanlike native who was an architect of the Settlement Act, said softly, and a little sadly, "Just an enormous amount of money is being spent for advice." Unfortunately, some of that advice is on how one corporation can fight another.

At 47, Emil Notti still looks like a boy, the kind of unassuming, brilliant boy who could hold a neighboring gang together without ever raising his voice or flaunting his intelligence. He's a Central Alaska Athabascan, who trapped along the Yukon with his father when he was a child, and who became, in his 30s, a unifying force behind the Alaska native resurgence.

"Emil was the magic man," Eaton said. "He could put all these Inupiats and Aleuts and Tlingits and Athabascans and Koniagmuits at a table and get order out of it. It was like the French, Germans, Poles, Czechs and Ukrainians coming out with a common market in two years."

It is, again, an ironic contradiction that the unity Notti and others welded among themselves to pass the Settlement Act is attacked by the Act itself. In the Act the natives were divided into competing groups; then, by requiring vaguely that each region must share 70 percent "of all revenues" from mining or logging with the other regions, the Act set off a chain reaction of suspicion and litigation among groups, which led to more legal fees.

Although the native leaders so far have resisted the dividing forces and saved much of that unity, it may be significant that Notti himself no longer seems to be an active leader. He is now a management recruiting consultant, and has diminished his native leadership role into doing such things as lending his ideas and his voice to a film about land management designed to be shown in villages. In the film his unemotional narration murmurs along behind scenes of tundra sunsets and caribou herds, carrying the news gently to his people: "The days of unrestricted lands are gone."

This news, of course, is at the heart of the Settlement Act, and is the part most burdened by contradiction. Hailed as a victory, the Act was more the acknowledgement of a loss, a picking up of broken pieces. In attempting to give the natives a chance to preserve something of their way of life, the Act had to destroy a fundamental part of the culture by making the land legal property and carving it up into chunks. "In our village the land was your home: you used it, and it would be forever yours," said a native who is part of the government's ten-year-long effort to transfer title to the 44 million acres. "As far as we were concerned, title to lands meant nothing."

Most important, the Act took a conflict over the land and culture that had been flickering along for some time and blew it into a formal blaze. The issue is subsistence: living off the land. By setting up profit-making corporations, and giving them control over many of the resources on and under the land, the Act took the battle about the future of the land that had been fought generally between native and outside developers and shoved it like a knife into the native community itself. Although a firm like NANA, with its broadened goals, could legitimately decide to forbid mining in a caribou-breeding ground even at the cost of revenue, a more strictly profit-oriented corporation could not. This clash is made a little more vicious by the provision in the Act that village corporations, which own much of the land, only control surface rights, and the regional corporations control minerals.

"We have a culture based on a rapport with nature," John Schaeffer said. "A respect that is not in the Western culture. That's a major conflict for some of us who run a business that has to develop profits. It makes it very difficult for a resource developer like me to get along. So we make compromises."

All the compromise, conflict and contradiction lead to the one striking consistency about the Settlement Act—how well it fits history. America's past arrangements to deal with the menace or misery of the continent's aborigines have followed an apparently erratic route, as policies zigzagged from elimination to self-determination to accommodation to termination. But there's a pattern. First, the policies always sought to open native lands to Western forms of development. The Alaska Settlement Act is no exception: although natives here are more involved in the decisions than in the past, the Act encourages that development.

The second parallel is developed in an enthralling theory described by a UCLA law professor, Monroe E. Price, in an essay on the Alaska Settlement Act. To Price the thread that ties it all together—from the Dawes Act of 1887, which put Indians on farms, to the Claims Act of 1971, which puts them in corporations—is that what the American people decided to do to natives reflects our own image of the perfect society, "the ideal for all within the community." The reality of native life is mostly invisible to us, Price writes, so we invent a romantic ideal native, and give him our ideal way of life. Thus when the small farm was America's utopia, we passed the Dawes Act; when socialism looked promising in the days of the New Deal, we put Indians back on collective reservations; when demands for racial equality attacked ethnic uniqueness, we moved toward "termination" of cultural segregation. Again, the Settlement Act seems to fit. Today, in a modern corporate society that is underlaid by a yearning for the simple life, for living off the land, we once again pass on our ideal, contradictory world.

So far, the Alaska native leaders have successfully thumbed their noses at the confusion in the letter and the application of the Settlement Act: none of the corporations has actually gone bankrupt, and some are already profitable—an excellent record for new companies anywhere. Some, like NANA, may even be showing other U.S. corporations that broadened goal structures, such as social and environmental responsibility, can be corporate wisdom, not folly.

As a mechanism for dealing with changes that were coming to Alaska anyway, the corporations may be perfect. It's always useful to have the tools and the language of the invading force, whether it's an army or a culture. One corporation, Sealaska, is number 951 on Fortune magazine's list of 1,000 largest U.S. firms. "They're turning into tough competitors," says a consultant for Sohio who was a key executive in the pipeline project. Perry Eaton is buoyant: "The native leaders are scavengers, sorting through the debris of merging cultures, picking up shining gems." Emil Notti is quietly hopeful: "In time the inheritance will come back to the people."

But except for the leaders, who would have been successful anyway, although in less exciting roles, the Settlement Act so far has brought just a few more dollars and more complexity to the difficult world of the Eskimo, the Aleut, and the Indian. So far the Alaska Land Claims Settlement Act, for all its money and titled land, has not ended the long lament of the North American native.

The words echo. On Kodiak Island a 35-year-old Aleut leader named Allen Panamaroff came to visit Karl Armstrong arid stayed for steak and tea. He is from a town on the island's west coast, where subsistence and cash economics mingle. He is president of the town's corporation. This evening his eyes flashed with some kind of anger he was afraid that he could not express.

"I've got a little liquor in my system," he said. "I don't know if I can really say it." He tried. "Corporations were forced upon my people—they didn't understand it when it was passed. They still don't understand it. They don't understand people telling them they have certain boundaries. My people didn't need the money. They didn't need the value of being important. All they needed was a duck or two, or to get a deer, so two or three families could share. The most valuable thing they knew was a seal liver. My people were the richest people in the world."

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