Under scrutiny, Durham Co-op withdrawing referendum on worker shares, governance
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Workers didn't know they were to lose governance rights, and other revelations from the Durham co-op meeting

This story was updated at 10:45 a.m. on Monday, Nov. 9, to include comments from Marilyn Scholl, who is with the consultant group CDS.

Disclosure: Until mid-August, I was a co-op member  as part of the INDY's company share. After I left the INDY, I was no longer a member. Since only members could attend last night's meeting, I asked people who were going to take notes. So these accounts are second-hand; if you attended the meeting please chime in with more info and insight.

Durham co-op workers were blindsided by the news that they would lose their shares and seats on the board if a referendum passed stripping them of those rights. In fact, some of them didn't know until last Friday that such a vote was pending. The referendum was canceled after public outcry over the lack of transparency on the measure.

These and other bombshells were dropped at Sunday's annual Durham co-op meeting.  Davis Hodge, grocery manager and three employees told the crowd of more than 100 that, “The entire staff definitely felt blindsided by this referendum.” Employees came to work at DCM with promise of ownership. “We felt like that was something that was owed us, and something that was going to be taken from us unjustly. This feels so ridiculous to me.”

Cris Rivera, finance manager, also spoke to the membership: “We just felt really disrespected. There’s something very different about a worker’s owning the means of production.”

Board chairman Frank Stasio admitted that the board hadn't talked to members or to employees about any of this. “It’s a huge error and I made it,” he said. He added that worker-ownership is a "core value" of the co-op.

How worker-shares came to be written into the articles of incorporation was also a point of contention. Stasio told the membership (and me on Friday) that the bylaws were essentially cut and pasted from those of Weaver Street Market and Chatham Marketplace. Both those co-ops include worker shares and up to two seats on the board of directors.

However, former board member Michael Bacon piped up from the back of the room, disputing that account. He said founders of Durham Co-op looked at both Weaver Street and Chatham Marketplace and made deliberate decision to include worker-owned shares. “This was a very intentional act," he said. "It wasn’t a simple photocopy.”

“Sadly, this is the first time I’m hearing about it," Stasio replied.

CDS, a coop consulting group based in Vermont, advises against worker shares and board seats because it can create a conflict of interest, Stasio said. (Marilyn Scholl of CDS commented on the original story about this issue.)

But worker shares as a separate class also allows employees to participate in profit-sharing, should the co-op turn one. That could help buoy their hourly wages, which start at $9.04. Some workers are up to $9.17. “That’s what most people are making” a worker, Anna, told the membership. She would get health benefits if she worked full-time at the co-op, but can’t afford to because she makes more money as a barista.

Which brings the discussion to finances. Co-ops, like most fledgling businesses, initially lose money. In the first six months, the store lost $87,000, below projections. Actual sales, $2.2 million, are well above projections, $1.3 million. 

But the co-op is still in the red, and paying low wages. General Manager Leila Wolfrum said average hourly wage for full-time employees, including health benefits, is $11.72, "above what I thought I'd get it at this point."

That makes it nearly impossible to reign in turnover, even though Wolfrum said, “We want people to look at this store as a career. We want them to come and stay.” 

“We caused pain," Stasio said at the meeting, "and I beg your forgiveness.”

Before the meeting, I spoke with Elise Apelian, a former co-op worker. She is still in contact with many current employees. They reported that no one told them the vote was happening and what they stood to lose. She made other points that aligned with what happened at the meeting. 

She described morale as "weird." Employees are happy within their own sections—produce, cashiers, deli, etc.—but "there is a rain cloud hanging over you all the time. Everybody is close but there is a lot of frustration."

Her frustration boiled over after she asked for a raise when she moved from deli clerk to demo coordinator, the person in charge of working with vendors who want to set up tasting tables. She did not get a raise, and said she complained to Wolfrum to no avail. Frustrated, Apelian did not show up for work one day. 

"Obviously, that was a mistake," she admitted. Apelian was fired. However, the employee handbook outlines a three strikes rule, she said, and that was her first one. "If you have a three strike rule, you should follow it," she said. 

"What concerns me is a lack of respect for the workers," Apelian went on. "At the end of the day, we're trying to make it a better place."

Marilyn Scholl, manager of CDS Consulting, which advises about 300 co-ops in the U.S. and Canada. She said that the hybrid model of worker- and consumer-ownership is not inherently wrong. However, for start-ups, it does add a layer of complication in hashing out the governance. "There are so many things to juggle, and this is one more ball in the air," Scholl said.

Workers can have other ways to be involved in profit-sharing—their own class of shares isn't required for that, Scholl said—and monitoring the co-op for accountability. 

One could argue, though, that had there been a worker representative on the current board, the lines of communication to the rank-and-file could have been clearer.

Weaver Street is the only successful co-op in the U.S. that operates on the hybrid model. CDS has one consultant on staff who worked for Weaver Street Market. She is on leave and was not involved in this matter, Scholl said.

However, there are successful examples in Canada, including Cooperative La Mauve in Quebec. 

Other U.S. co-ops are experimenting with this structure: Apple Street Market in Cincinnati, plans to go this route when it opens, as will Dorchester Community Food Co-op in Boston.

Whether or not this hybrid model reflects a "best practice, I don't think we have the evidence to say," Scholl said. "I'm intrigued by it."

 

Comments

Joseph

So they are 87K in the red after 6 months. I think this brings up an important point about how co-ops like DCM, Chatham Market Place, and Burlington (NC) get started. Since they take on such large amount of debt from the get go, it is not shocking that they cannot pay folks what they need to live.Co-ops need to go back to the idea of opening up as small buyers clubs, get some capital, then expand further. The national co-op organization and the consultants drive this folly for their own interests. Yes I know it makes people hearts swell with civic pride to open a shiny new building and say "we own it, man" but you need a reality check on how tight the profit margins are in the grocery biz. All that shiny equipment costs money and that product better turn because you have 30 days to pay that bill.

Katherine

I appreciate the controversy. I have to accept my responsibility as an owner for not throughly reading the Articles of Incorporation or the by-laws, for deleting too many DFC e-mails and being a little too lazy about my role as an owner.

It was obvious from Sunday's meeting that owners care deeply about the employees.

And I am most certain the years ahead will be full of many more lively discussion including "where is the best place to put the carrots."

Time to hit reset and get myself educated.

http://www.forbes.com/2010/05/13/cooperatives-co-op-leadership-citizenship-ethisphere.html

And remember: Buy a Turkey and One More Item.

Michael Bacon

@Joseph -- basically no grocery store makes a profit in its first year of operation. The original pro formas that DCM developed anticipated about a $300k in the first year of operation. $87k in the first six months is actually fantastic news for the future of the co-op and means that sales growth is well ahead of schedule.

Michael Bacon

Oops -- the pro formas anticipated about a $300k *loss* in the first year of operation.

Stephen Hren

I was on the original board with Michael Bacon. The bylaws were not just "cut and pasted" from Weaver St.- there was long and serious discussion on this issue, and worker ownership is a fundamental value of this coop from its very inception. I would rather see the coop go the other way and be entirely worker-owned rather than consumer-owned, if it is too complicated to do it one way or the other. To my knowledge, this is the only at least partially worker-owned coop in Durham, and to upend its core structure in a willy-nilly ad hoc fashion brings the current board's leadership into serious question.

Josh

One has to wonder about this Frank Stasio character. He tries to get the board to strip workers of their ownership and governance rights without having even talked to the workers about it, but then claims that "worker-ownership is a "core value" of the co-op." I mean, he obviously didn't think so when he was trying to remove worker-ownership from the business structure, right? Sounds like a politician to me...and that's one thing co-ops don't need in their leadership.

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