Beef Checkoff Corral: Part 8
Thursday, 20 May 2010 00:00 |
Beef Checkoff Corral: Part 8
An Interview with Leo McDonnell
By Leesa Zalesky
When it comes to advocating for the U.S. cattle industry, there are some who simply stand out. Leo McDonnell is one of those people. For most of his lifetime, he’s worked tirelessly to position ranchers at the table on issues that affect their business. He’s a known figure on Capitol Hill and within the halls of agencies that regulate the industry. His opinion is often sought, and it’s respected by his peers in every nook and cranny of the nation. This week Leo sat down with me to discuss the national mandatory beef checkoff and the proposed NCBA governance plan.
Q. On a scale of 1 to 10 with 10 being the best possible score, how do you think the beef checkoff is performing for the cattle industry?
McDonnell: On purely the functions of promotion and research, I would score it an 8 or 9. Certainly, there’s a need for such a collective effort to promote our product and to conduct the necessary scientific research as well as to connect with and educate the public about what, why, and how we produce cattle. These reasons are why I supported passage of the Beef Promotion & Research Act in the mid-1980s.
Whether these pluses outweigh the negatives of such government social programs depends on one’s own values and beliefs about government intervention. Also, there is an increasing concern, and rightfully so, about having contract agents who financially benefit from such relationships and then at times lobby against U.S. ranchers.
Q. You said you have concerns about the checkoff being used to financially benefit contractors that lobby against U.S. producers. Please explain that.
McDonnell: There is no doubt that NCBA has lobbied against U.S. producers on trade issues, country of origin labeling, etc. I’ve been witness to it. For the most part, NCBA has been very up front about it. There is also no doubt that NCBA has benefitted from the merger in 1996, and there have been some tremendous financial efficiency gains in the organization as a result. NCBA noted this in its 2001 June-July issue of the organization’s magazine. At the same time, NCBA reported nearly $12 million in efficiency savings with $500,000 being saved just on conventions every year.
Now, I would imagine that those gains flow both ways, to the checkoff and to NCBA, but there is certainly no doubt that considerable money was freed up within NCBA for other uses, and I’m sure one of those uses would be lobbying. It’s not rocket science, and I have always appreciated NCBA’s willingness to share these financial benefits of the merger.
Q. Do you believe it’s time to amend the Beef Promotion & Research Act?
McDonnell: The program has been in existence for over 20 years, with many changes occurring in how the checkoff is governed and how the government is involved in our business as well as demand changes within our industry both domestically and internationally.
The checkoff has hundreds of thousands of stakeholders who aren’t necessarily members of any national organization. It is an affront to those checkoff-paying producers to say that, if they want a voice in their checkoff, they should pay membership dues and join an outfit. It was Ronald Reagan, I believe, who said we need to pitch a big tent and make it inclusive.
No funds should be allowed to be directed to an entity that has this much influence on the Operating Committee or the Federation. I am not aware of any government program, which the U.S. Supreme Court has ruled the checkoff to be, where the primary contractor or any contractor is able to decide which entities receive the money. What is happening today and in the past is a conflict of interest that distorts the integrity of the program and the intent of the program, that compromises producer support, and that has lead to much of the fragmentation in this industry.
Certainly, some of the changes being discussed that have strong support by producers and many of the national organizations representing this industry:
1. Separate the Federation of State Beef Councils from any national contracting entities.
2. Amend the Act and Order to allow the use of checkoff funds to promote country of origin labeling.
3. Establish a periodic referendum. One of the foundations of this country and our values is not only the right to vote, but also the power and accountability that goes with a vote.
4. Expand the eligibility of nominating organizations to include new organizations that have formed.
5. Expand the eligibility of organizations to allow greater competition for checkoff-funded contracts.
Q. Do you believe at least a portion of the mandatory checkoff should be devoted to promoting exclusively U.S. beef?
McDonnell: I believe a recent USDA-industry poll shows that nearly 90% of U.S. producers want to use checkoff dollars to promote U.S. origin beef. This is actually more producers than supported the checkoff, so while they may not support such government mandated programs, they would at least want such funds to be used to promote their product.
This seems reasonable as most marketing experts will tell you that the more specific your promotional efforts, the greater the return on your investment. It also takes the U.S. producers out of an international commodity market and allows them to compete with what many industry and international experts say is a unique beef product… and that’s grain fed.
It's certainly interesting and frustrating for many to see trade groups who promote the checkoff, who have benefitted financially from the checkoff and who have been advocates, to move out of commodity mentality to oppose efforts by U.S. producers to not only differentiate their product but also to then capitalize on the opportunity to promote their product.
Q. If a referendum were held today to increase the per head assessment of $1, do you believe it would pass?
McDonnell: No, I don’t believe it would pass under today’s structure and direction. This is unfortunate because the issues supporting demand have increased, and I believe there is a need for an increase. I believe most people, including myself, are tired of the nonsense that has overtaken the checkoff program. The whole program is being held hostage.
At the end of the day, it is not important whether NCBA is there or not because the checkoff will be and so will the cattle producer, and if we are going to continue to expand on what has been started, it’s going to take producer trust and support.
Q. Do you support NCBA’s proposed governance structure as it pertains to the checkoff?
McDonnell: No. I think it is very inappropriate for the primary contractor for checkoff funds or any business entity to control or have this kind of influence on how such funds are spent. It’s just poor business. I also have concerns that an organization that has had the financial problems NCBA has had will now have such control over how checkoff funds are spent. It just doesn’t make sense to me - from a business standpoint - to put this much control of checkoff revenues with a group that has had serious problems budgeting their own organizational dollars.
Q. Do you believe there should be a clearer separation between the Federation of State Beef Councils and NCBA?
McDonnell: Yes. As stated before, I think it is a clear conflict of interest as well as unethical to allow the primary contractor for checkoff funds this much influence on who receives contracts. I also have concerns about how NCBA even bids for these contracts.
Q. Did you support passage of the Beef Act in the 1980s?
McDonnell: Yes.
Q. NCBA leadership defends the proposed governance model, saying it does not give more control to NCBA over the checkoff. Do you have a response to that?
McDonnell: Well, I always like to measure people by their actions and not their words. I think it's interesting to look at what NCBA was trying to do when it introduced this model. I would say their actions were all about getting more control over the checkoff. They asked for an "oath of loyalty to NCBA" from Federation representatives. They insisted on a majority of votes in the House of Delegates.
Q. NCBA argues that separating the Federation from the Policy Division will result in inefficiencies because of the costs involved with separate meetings.
McDonnell: I would disagree. What we're doing today is extremely inefficient. If states want to send more money to the national program, they should be allowed to ear tag it and send it directly to the Cattlemen's Beef Board and the national program. Under the current structure, we're duplicating processes, adding layers of bureaucracy, and expanding expenses by flying more and more people around, renting motel rooms, and so forth. Why not put that money to work for the industry?
Q. Do you believe the Operating Committee should be overhauled or eliminated completely?
McDonnell: Obviously, there is a need for some type of structure to put the final stamp of approval on how funds are spent. However, to have the primary contractor for checkoff funds holding undue influence over decisions is unethical and poor business. The Operating Committee is a very powerful entity, and I think the structure and functions of the Operating Committee need a thorough review.
As I understand it, the Operating Committee is comprised of 10 CBB appointees and 10 Federation appointees, and this committee has final say over how the national dollars are spent. Now, remember that the Federation is comprised of NCBA members and state beef councils and that many of those state beef councils are influenced by NCBA as 17 of them share offices with state policy organizations that are affiliates of NCBA. So with the Federation having NCBA members on it and a fair percentage of the CBB appointees being members, you have a situation where the primary contractor of beef checkoff dollars has members voting on who gets these "government program dollars."
Now imagine what the public would say if a large Defense contractor was found to have had the ability to decide or influence who got the Defense spending dollars and contracts. Imagine how the public and any government ethical oversight committees would react to these kind of findings.
Q. If you could send one message to the CBB what would it be?
McDonnell: To remember that the checkoff was formed to benefit producers and to improve demand for our product. It was NOT formed to benefit any individual organization. Not only have considerable producer dollars been spent on this program, but also hundreds of thousands of volunteer hours have gone into it to achieve many of the successes we have seen. We need to make sure the industry participants are fairly represented if we truly want to build a network of producers who are unified in producing the greatest beef in the world - U.S. beef.
Western Ag Reporter