The Restructuring of the Saskatchewan Wheat Pool: Overconfidence and Agency
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This paper examines how agency problems combined with overconfidence and
hubris by coop management lead to financial failure in the Saskatchewan Wheat
Pool. As a consequence of both of these problems, the Pool made poor investment
decisions and ended up in severe financial difficulties. These problems were exacerbated
by three additional factors: (1) ownership and control were separated via
an A-B share structure, leading to a situation where neither farmer members nor
investors had an incentive to monitor management activities; (2) the sheer volume
of investment activity undertaken made it virtually impossible for the board to stay
on top of what was happening; and (3) as a result of the change financial structure,
senior management had available a large amount of debt capital that it could spend.