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.”