Development and cops: Live blogging City Council, Nov. 5, 2015
Under scrutiny, Durham Co-op withdrawing referendum on worker shares, governance

Controversy erupts over Durham Co-op referendum that would strip workers of own class of shares, governance

Update: Nov. 9:This story has been corrected to reflect that Michael Bacon is a former co-op board member, not a current one; also, voting on the board candidates ends Nov. 13.

Since it opened in March, the Durham Co-op has come to symbolize the ideals of democracy, egalitarianism and fair trade. Owned by its members—people who buy shares— the co-op, for many, is a rebuke to Whole Foods, which pretends to be progressive but is actually a large corporation run by a libertarian, anti-union CEO.

However, the co-op’s patina could be tarnished by a controversy involving a vote on its articles of incorporation. If the members pass a referendum on Sunday, it could eliminate from governing documents the ability of workers to buy a separate class of shares from consumers. It also would prevent worker-owners from electing up to two representatives to the board of directors. Ten people currently sit on the board.

The disempowerment of rank-and-file co-op workers runs afoul of the very values the store espouses, says David Roswell, an owner and investor. He also sells his pottery at the co-op. “The workers don’t want to lose this right,” Roswell says. “The co-op is taking away the tool for democracy, wealth building and control. That’s what distinguishes the co-op from Whole Foods.”

Consumer-owners have been voting for nearly two weeks on both the bylaw changes and on candidates to the board. Voting ends Sunday at the co-ops’s annual meeting. [Update: voting ends Nov. 13 on board candidates.] Critics of the change want the store to delay the referendum to allow for more discussion among the membership.

As the co-op ends its first year in business, traditionally a financially tenuous time for any start-up, employees who are not in management still do not earn a living wage. Last spring, workers were earning a little more than $9 an hour. (Bull City Rising tried to contact workers through intermediaries, but so far has been unsuccessful.)

Currently, the bylaws allow an employee who works at the co-op for six months can buy a worker share in the store. If workers were able to buy a separate class of shares, they could be enrolled in profit-sharing, which could supplement their wages.

“The line is that it’s not best practice to allow this,” Roswell says. “Just because it’s uncommon doesn’t mean that it isn’t a best practice.”

The best practice “line,” as Roswell puts it, comes from CDS Consulting Co-op. Based in Vermont, the consulting group advises co-ops nationwide on governance, marketing, finances and other operational basics.

Bull City Rising contacted CDS Friday at 1, but has yet to receive a response.

There is at least one other co-op that has a hybrid model, one that allows workers to buy a separate class of shares and have board seats: Weaver Street Market in Carrboro. In fact, during its inception, the Durham Co-op essentially copied the market’s bylaws. Chatham Marketplace did the same, and created a similar model.

“We looked at the incredible success of Weaver Street, then and now I believe the largest co-op grocery in North Carolina, and certainly one of the largest in the Southeast, particularly in its phenomenal employee retention, and felt that our mission as a co-op dedicated to serving central Durham included being good employer,” says former Durham co-op board member Michael Bacon. “Based on that work, we decided that we wanted to adopt the employee ownership plan, because despite the misgivings that some co-operative consultants had, we believed that this newer model that Weaver Street had developed had proven itself successful and wanted to emulate that.”

After the Durham Co-op opened, though, the board began honing and reviewing governing documents, including grievance policies. It was after conferring with CDS and Weaver Street general manager Ruffin Slater, that Durham board suggested striking the language about worker shares, subject to a vote of the membership. “They [CDS] said ‘Nobody does this,’” says Frank Stasio, board president.

Stasio says that Slater also advised against a worker-owner component because “it’s very difficult, especially for a start-up.”

Such a model could give worker-owners an outsized influence on the board, Stasio says. They would represent not all workers, but only those who purchased shares. About 25 of 37 employees are eligible to do so, says Stasio, which would allow them to have two seats on the board to represent just two-dozen people. In contrast, eight consumer-owners on the board would represent 2,000 members.

“Why is having employee owners detrimental to the mission of the co-op and its members?' They haven't answered that question at all. They say 'it isn't considered a best practice' to have employee owners, but their full argument basically boils down to 'it isn't common practice.'"Sam Hummel, a member of the former People's Intergalactic Food Conspiracy—aka the Durham Food Co-op, which closed nearly seven years ago. “It's intellectually lazy and logically mistaken to say that just because something is uncommon it is bad. There are hundreds of food co-ops that would love to be as uncommonly successful as the Weaver Street Co-op has been with its hybrid consumer-owner and worker-owner model. And, the Durham Food Co-op certainly wasn't an uncommon failure with its exclusively consumer-owned model.”

CDS also consults with Weaver Street. “They aren’t interested in worker democracy,” Geoff Gilson, a worker-owner at Weaver Street, says. “You wouldn't get a recommendation from Weaver Street workers about consultants.”

“It’s not that consumer-owned co-ops don’t care about workers,” Gilson, who has worked at Weaver Street for nine years, goes on. “It’s that workers have a different agenda. The purpose of a co-op is to be a bulwark against capitalism. It’s about the democracy of all stakeholders. You can’t leave out on important class.”

The criticisms center not only on the substance of the changes but also on the lack of transparency and potentially misleading language used to explain those changes. For example, the link to the bylaws on the co-op website is broken. (We're provided them. Download DurhamCtrlMkt-DCM_Bylaws_090109 )

Update, Sunday at 2:02 p.m. Here is a more recent version of the bylaws:  Download 5 DCM bylaws 20130226 Approved

And a message from the board, available at the co-op near the ballot box, states that “issuing employee stock is not considered a best practice among co-op grocery stores.” It adds that “as consumer owners, employees would enjoy all the same rights and privileges as any other consumer-owners.”

However, by virtue of being employees, they have different concerns, and thus may require different rights and privileges, than the general consumer-owners.

“The Board implies in their statement accompanying the Amendment that worker and owner shares are virtually interchangeable, which is absolutely disingenuous,” Hummel says. “If workers are only able to buy consumer shares, there will only be workers on the Board if one of them is brave enough to run against consumer owners and wins.”

Stasio acknowledges that he “should have seen this [issue] coming. I began to realize this is a debatable issue.”

However Stasio says he still does not want to delay a vote. 

“We can then come back and say we didn’t take enough time on this. We didn’t allow enough input and then have a robust conversation about it. And if the members want it, we can put it back in.”

Yet, it’s unclear, even unlikely, that those rights would be reinstated, says Gilson. “Once you remove something it’s hard to get it back. You need to figure out a replacement before you take away what’s there.”

 

 

 

 

 

 

Comments

Rodney Derrick

My perspective is that the workers have a far better method for insuring their rights available under the law. All they have to do is get a majority of the workers to sign an authorization for an employee association to represent them in issues of wages, hours, and working conditions and then present it to management with a request for voluntary recognition. Considering the dynamics around the consumer owned co-op in Durham, pressure would be quite heavy here in Durham for management to recognize the association, or at least to agree to a quick election vote among the workers supervised by the National Labor Relations Act or even a mutually agreed upon local committee. If the majority of those voting vote yes, then they can negotiate a reasonable contract. Remember, as a non-profit, they are covered by the federal laws and not the state of NC's horrific restrictions for public sector. The do not need a big union or high priced dues to do any of this. Note that I am a consumer owner, live downtown, organized several food coops in the early 70s, and worked for AFSCME, AFL-CIO for 22 years all over the United States.

Will Wilson

My wife and I own quite a few shares..I don't recall being informed of any vote. Not by mail or by email.

Natalie

I was an owner/member/volunteer at the Intergalactic Food Conspiracy AKA Durham Food Co-op. I remember workers having representation on the board. Can you check to see if it was always the case that they did not?

Paul Deblinger

Mr. Derrick--I don't believe the Durham Co-op is non-profit. They pay dividends.

I worked at the Bethesda Co-op in the early 70s. It was not a stock-owned co-op and the workers were a collective that had representation on the board. if I remember correctly, the board was half volunteers and half workers.

Rodney Derrick

Whether or not it is profit or non-profit, the workers can organize as I described above.

Ross Grady

@Will Wilson: I got an email on 10/21, subject line "Annual Meeting and Voting for the Board!!" -- it contains the amendment and the board's explanation for why they support it.

Mary

Hi Will. I became a member so long ago (5 years?) they had a very outdated email for me. Check with the membership coordinator. That said, it might behoove the Co-op to ensure that they do have the correct contact info for everyone as I've a feeling there are many members in the same boat who may not be aware of the election.

Risa

Hi, Natalie! I was a former board member of the Durham Food Co-op. There was employee representation on the board, but more as a consultant. They were not permitted to vote on all issues. There were also board meetings to which they were not invited. I strongly advocated for more employee representation, but some other board members doubted employees' ability to act in the co-op's best interest rather than their own. It was a very divisive issue.

Weaverstreetgeoff.blogspot.com

I am the 'Geoff Gilson' quoted in the article. Although no description is given of me.

I am a worker-owner advocate with Weaver Street Market Co-op. I was approached for my thoughts. And the comments I make are made in a personal capacity only.

It's a difficult thing. I believe that co-op's work best as a bulwark against speculative and corporate capitalism if they are truly democratic, and remain under the control of their community, free from outside interference.

By definition, not being a member of the Durham Market Co-op, and living one town over (in Carrboro), I am 'outside interference.' So, I commented with care.

That said, my experience has given me a universal interest in worker rights. And I felt compelled to say something, however carefully.

Natalie

@geoff Wow. Your blog is amazing and helped me firmly make up my mind. I hope Ruffin is able to laugh when receiving the emails you document sending there.

The coop has been open a little more than six months. When I'm there (at least 3 days a week) there are more staff than customers. I think "keeping the doors open" is the biggest concern.

@Risa racecar!!! Thank you for history

John Mackey

In the co op movement there seemed little room for entrepreneurial creativity; virtually every decision was politicized. The most politically active members controlled the co-op with the own personal agendas, and much more energy was focused on deciding which companies to boycott than on how to improve the quality of products and services for customers. I thought I could create a better store than any of the co-ops I belonged to, and decided to become an entrepreneur to prove it.

Barry Yeoman

Lisa, thanks for this post. For most of my 14 years at the Indy, we had a separate class of shares for employee-owners, who elected half the board. It was an important model of workplace democracy, empowering employees who worked for below-market wages while also providing a critical policy voice. I was proud to be part of that model (which I suspect was atypical for the industry) and hope the co-op does not eliminate this mechanism for empowering its excellent staff.

Will Wilson

Ahem...I've been informed that others in my family we're aware of the vote and meeting.

Erik

Just sent out via email:

As you probably know, the board of directors of the Durham Coop Market asked you to vote on a proposed amendment to market’s articles of incorporation (AOI). In talking with many of you over the past couple of weeks, we’ve realized that we erred in offering such and important choice with so little time for consideration and discussion. Therefore the board has decided to withdraw the referendum.

Moving forward we will create opportunities for our owners to hear from experts on all sides of this issue and engage in dialog. This full and robust conversation should make a sound foundation to decide whether you would like to re-consider the issue and put forth another referendum.

Please know that the board acted in good faith. We have very worked hard for many years to make the dream of this market a reality. You have always shown great faith in us. With your help and confidence, we opened the store that is on the path to success.

We want to boost that success going forward by continuing to work closely with all of you to maintain the strong sense of collaboration and unity that has brought us this far.

Please join us at our Annual Meeting tomorrow (Sunday) at 6 pm at the store.

Sincerely,
The Durham Co-op Market Board of Directors

David Fellerath

@bullcityrising--Any idea if "John Mackey," who commented above, is that John Mackey, or is it someone pulling our leg?

Lisa Sorg

I need to doublecheck his email address, but I do believe it is THE John Mackey.

Jeff Bakalchuck

So let me see if my scorecard is correct.

The bad capitalist pigs that run whole foods pay an average hourly wage of $18.89 and a minimum of $10.

The good egalitarian co-op pays an hourly wage of just over $9 an hour.

I'm a little sleep deprived right now so my math might be suspect but isn't 18 twice 9?

Disclosure: I don't shop at Whole Foods and I'm not a member of the co-op.

Brian Hawkins

The comment signed "John Mackey" above is, I believe, a quote from his book "Conscious Capitalism".

(I have no idea who posted it.)

http://www.forbes.com/sites/davidshaywitz/2013/02/16/five-take-aways-from-whole-foods-ceo-john-mackeys-surprising-new-book/

Dick Ford

Is it correct that the Co-op pays $9/hr, less than a livable wage??

Lisa Sorg

Yes, the starting wages for non-management are ~$9/hr. That's what I was told by the marketing person earlier this year when I wrote about the opening for the INDY. Since then, it's my understanding the starting wages are the same.

Marilyn Scholl

There are all kinds of cooperatives including consumer-owned, worker-owned, farmer-owned, and multi-stakeholder. We love them all! CDS Consulting Co-op is a shared services cooperative owned by our member consultants. As consultants committed to supporting other cooperators, we often base our recommendations on what we have seen work for other co-ops.
While we are intrigued with multi-stakeholder models, we know of only one example of successful implementation of a worker/consumer hybrid food co-op - Weavers Street Market. Given the rarity of this model, it's not one we have a strong reason to recommend or identify as a best practice.
Starting a new food co-op is a very complicated and challenging endeavor that takes several years to implement. In order to survive, new co-ops require an intense focus on building sales, improving operations, and achieving profitability. We think the more complicated multi-stakeholder model makes it even more challenging and therefore do not advise it at the start up stage. This is a matter more of practicality than of values.
We support the Durham Co-op Market's board decision to take more time to discuss the organizational structure with the co-op's members. If they decide to implement the multi-stakeholder model, we will offer the best consulting support we can to help them move forward with their decision.
Marilyn Scholl, manager
CDS Consulting Co-op

Coöp Owner

I believe that there is an error in the article about when voting closes. In the article, published November 6th, you say, "Voting ends Sunday at the co-ops’s annual meeting." This would imply that voting ends on the 8th. However in a correspondence I received from the coöp they say, "Ballots must be deposited in the Ballot box next to our registers by Nov. 13th." That would imply that voting ends on the 13th. Is the error in the article or the communication from the market?

Michael Bacon

Folks, I need to make a slight correction to the story. I didn't see when I read this the first time that Lisa referred to me as a current board member.

I am not a board member and have not been since 2012.

Lisa Sorg

Sorry, Michael. I'll make the change. As for the voting, it was supposed to have ended tonight, at the annual meeting. I had not heard anything about the 13th.

Jodi Koviach

Voting for the Board members does in fact end on Nov. 13th as stated on the ballot and announced at the meeting this evening. Members still have time to vote if they were not able to attend the meeting tonight. You must cast your vote in the store - Thanks!

Jodi Koviach
Durham Coop Board Member

Weaverstreetgeoff.blogspot.com

I apologize, but I'm going to introduce a slightly tendentious note. As before, I want to stress the views I'm about to share are personal, and do not represent in any fashion the official line of Weaver Street Market Co-operative - although I might wish that they did. These views are, however, based upon some nine years of advocating for worker rights within WSM, and attempting to make WSM a stronger business by being a better co-op (and if you're in any way interested in what that looks like, maybe take a peek at my blog, linked below).

The representative of CDS says: "In order to survive, new co-ops require an intense focus on building sales, improving operations, and achieving profitability." I'm bound to say this is very much reflective of a fearful attitude prevalent among many in the co-op community. The inference is that we can get around to being a co-op once we're successful as a business.

Look, I'm not stupid. I used to earn six figures a year as a management consultant. I know how to do corporate capitalism. But why is it that so many in our co-op community are so scared of the notion that it is co-operation that enhances the chance of profitability, rather than being an obstacle or an afterthought?

What first attracted me to co-operation was the notion that it represented an alternative business model. Not just an alternative ownership model. But a whole new way of making a business successful.

As I see it, the concept always has been this. You get to the heart of what it is you want to do. You have a group of people who have a common need. Could be groceries. Could be a mushroom farm. Or horse-riding. You set about mutually meeting the need. While removing all the extraneous outside interferences that add cost to the equation: capital that can be speculated; empire-building management; marketing that guesses, as opposed to consumers deciding what they want.

You bring in people dedicated to providing the need, and ask them how they would like to provide the need. Because if you ask, and they are allowed to decide, then they are invested in making sure the how they decided actually works.

Nothing here of that intense focus on remote management techniques, operational excellence, building sales, etc. etc. Just meeting a need, the simplest way possible, by asking consumers and then asking workers. Democracy.

And for the life of me, as simple as the concept appears to be to me, someone steeped in the arcane intricacies of corporate capitalism, I simply do not understand why co-operative consultants seek solace in those arcane intricacies, rather than actually giving economic democracy its best chance.

DCM have taken a moment to rethink their path. I would invite them to use the moment to rethink more than just the voice they give to workers. Actually take a longer moment genuinely to work out why you want to be a co-op at all.

Co-operation. Democracy. Inclusion. Consensus. These are not afterthoughts to the business model that should be DCM - and WSM for that matter, too. They are the very foundation which creates the business model that is the much better alternative to conventional corporate capitalism.

John

...Except corporate capitalism:

1) gives more to employees (double average store wage)
2) gives more to customers (20 times more sales per store)

Slandering the competition doesn't have to be part of co-op values. Some find it rather unattractive.

Rann

Those average wages at Whole Foods are misleading at best, and outright false at worst:

http://www.glassdoor.com/Hourly-Pay/Whole-Foods-Market-Hourly-Pay-E422.htm

Sarah Waggoner

Just saying I very much liked Geoff of WSM's post... Also, I didn't know that co-op workers only made $9. I wouldn't be inclined to blame the co-op leadership itself, but am interested in how the community and "ownership" might support an increase in that wage.

Joseph

Sarah, read my comment on the large amount of debt new co-ops have and the low margins that grocery stores have.

root

one would think with all the new condos/apartments going up business would be around the corner, but then there is this:

http://www.nakedcapitalism.com/2015/11/wolf-richter-fed-trips-over-eye-popping-commercial-real-estate-bubble-accidentally-looks-sees-early-signs-of-search-for-yield.html

Bull City Rising

@root: The question of the Fed's low interest rates and whether it is contributing to disruption. Those worries have emerged on the right and the left, by the way: on the left, the fear is capitalistic exploitation, too-big-to-fail and subsidized greed; on the right, it has been fear of impact to savers/retirees and especially the gold/silver bubble. Recall all the folks a few years back who were sure that the easy-money policies of reserve banks during the Great Recession would cause deflation, and the flight to "safety" in gold. (Of course, it's clear how that turned out for the metal-stackers, whom I would mock more openly were it not for their predilection to also stack guns and ammunition.)

On the left, I think it's reasonable to worry about the impact of low rates on incentivizing construction. I have been hearing an alternative theory recently, which is interesting -- namely, that we may be seeing secularly low interest rates due to an oversupply of savings globally.

To me, that's a likely offshoot of economic inequality. When incomes are fairly even you have high velocity of money in an economy as people generally spend, which keeps an economy working for all.

In an unequal economy, we tend to focus a lot on the impact to workers -- who earn less, spend less, and face higher unemployment. But, we also have to think about the high savings rates of super-earners (and, the SF Fed notes, emerging economies with high trade imbalances.) Globally, we now have untold trillions of dollars that aren't circulating for commerce, but are instead flowing into lots of savings mechanisms, including REITs, chasing yield.

My suspicion is that the Fed's ability impact market rates by raising its own rates may be more limited than we think, and that interest rates may stay lower, longer, due to an oversupply of money.

Which, in Rann's world, could be solved by a "much more than 90%" tax rate! I can fail to think of a better way to bridge Rann's comments in the affordable housing thread with this one by reminding us all of those famous People's Intergalactic Food Conspiracy fightin' words, "STALIN WOULD APPROVE."

Rann

Well, I believe that under FDR top marginal tax rates were de facto higher than under Stalin. And of course, we all know that FDR totally destroyed America.

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