STRATEGIC ISSUE #3: USE OF PROFITS

“We are going to start a store and then use its profits to meet other community needs?” How often have you heard that formula? It sounds good. Profits are spent helping people with funerals and emergencies, or starting a new program. In the short term, people are pleased. In the long term, the community gets no closer to self-relianceSelf-Reliance: the capacity of a community to plan and build an economic future that suits the values, priorities, and needs of its members., despite a profitable, community-owned business.

The problem is that the profit is not being used as capitalCapital: cash, property, equipment, services, and contracts or leases. - as something the community can reinvest to build more assets. Instead, the profit is being treated as incomeIncome: money one earns by working or by capitalizing from other people's work. - as something to spend on immediate necessities.

For Aboriginal communities that use profits in this way, self reliance will remain a fantasy. Why? Because profits are a precious resource. Unlike grants or transfer payments, the community can dispose of profits without someone else’s approval. When used as capital, profits can bring together the resources needed (loans, equipment, infrastructureInfrastructure: the basic facilities, equipment, roads, transmission lines, sewage, water, and other installations needed to support the functioning of a mine., expertise, for example) to build more businesses. Those businesses will create more jobs and more profits. Those profits then can be reinvested. Profit, when used as capital, is vital to the building of community capacity.

It is sometimes argued that profits must be distributed, if that’s what community members want. When a profit is made by a community business, after all, the members are the ultimate owners of the business. Shouldn’t they get to decide what happens to the profit?

But it is wiser to think of the community’s economy as a bus owned by all the residents and their descendants. To give members unrestricted access to profits will bring the bus to a standstill. Profits are the benefit upon which all the other benefits depend. Community members may be entitled to a ride on the bus, but they are not entitled to strip it of its tires and fuel. The bus is owned by everyone, not just by a group of individuals.

To help make this distinction clear, most aboriginal communities nowadays have established a development corporationCorporation: the most common form of business organization. It pursues set objectives and is empowered with legal rights usually only reserved for individuals, such as to sue and be sued, own property, hire employees, or loan and borrow money.. The community owns it. This ownership is usually represented by shares held in trustTrust: a legal arrangement in which an individual (the trustor) gives fiduciary control of property to a person or institution (the trustee) for the benefit of beneficiaries. by the community’s government or the development corporations’ board. Individual community members are entitled to get certain rewards out of the development corporation, depending on what each of them put into it. If, as employees, they contribute brainpower and muscle power, they are entitled to a wage or salary, and training. Once they have enough knowledge and skills, they are also entitled to a shot at management.

But unless individual members have invested capital in the development corporation, they are not entitled to capital rewards. That is, as individuals, they are not entitled to a share of its profits. As the *Raglan Mine case study (p. Intro-21) shows, an arrangement like this has enabled Makivik Corporation to become part owner of another mine.