Shareholder voting discussion

This started out as a comment on another post, but the conversation is worth making more visible.  The initial comment is from shareholder Susan Mattice:

I am a non-working member-owner of HWFC. I joined in 1986, paid for my share immediately, and was a working member for many years. I am writing to say that nobody should assume that non-working members’ interests are in conflict with those of working members. “Divide and conquer” is not a good strategy. I support the member-worker program and will continue to do so. Frankly, my 2% discount does not make shopping at HWFC a bargain for me; on the contrary. I shop at HWFC because I believe in member-owned organizations, and because I believe it’s a good thing to have members who choose to work for larger discounts. I feel I should have voting rights as a member-owner, and I do not like being characterized as someone who would undermine the member-labor program simply because I no longer am a participant in it. I am still an interested party, though now rendered powerless in any decision-making. If working members want the support of non-working members, you have to give us the right to vote.


The conversation that followed is in the comments to this current post, and is well worth your time!

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18 thoughts on “Shareholder voting discussion

  1. Comment from Emma:

    In the short term crisis, it’s crucial that member-owners (working members) have “control” over the business in order to avoid being classified by the DOL as volunteers or underpaid employees.

    Those trying to consolidate power with the board and LT may well have introduced the idea of shareholder voting as a way of weakening our position with the DOL. Even if this was not their goal, there’s also the concern that since the Board and LT have control of the Coop’s communication infrastructure and have shown time and again that they have no qualms about using it to spread propaganda supporting their side of a debate, having voters who are not involved in the operations of the store could mean th e voting body could be more easily manipulated by the Board/LT. I personally have no problem attempting to address this in the long term – if DOL would be okay with shareholder voting, we could with create strong provisions for how information and different perspectives are shared prior to a vote and potentially allow it. But that is a discussion to pursue at a later stage.

    Hope that helps!

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  2. Comment from Rebekah Rice:

    Dear Susan,

    Last time the BLTF (Bylaws Task Force) met, we decided to work on two different Decision Authority proposals– one granting shareholders the right to vote AND giving residual authority to the Board, and one keeping residual authority to the Members that does NOT grant shareholders the vote (similar to our current bylaws).

    The Board and LT would prefer the first– they wouldn’t need to come to the membership for all sorts of decisions that they currently do, so decisions could be made much more quickly (the word Duke likes to use is “nimble”). As a working member, I now prefer the second, and for some reasons that I didn’t understand as recently as a month ago when I still espoused the idea that shareholder voting was a good idea. The co-ops lawyers had told the BLTF that all shareholders, working members AND non-working members, could be liable for more than the cost of their original investment IF WE WERE TO BE FOUND IN VIOLATION OF FAIR LABOR STANDARDS ACT. If this were found to be accurate (and it has not yet happened in the entire history of co-ops), I felt that shareholders should not be unable to vote on things that could affect their financial futures.

    As things have unfolded, our current decision authority turns out to be ESSENTIAL TO HAVING A LEGAL MEMBER LABOR PROGRAM. It is specifically this combination of who gets to vote and who does the work that makes the MLP legal.

    My current thinking is that, to protect our status as a member owned and member operated co-op, we need to continue to give you the ability to vote only if you work. Otherwise NONE OF US WILL BE ABLE TO WORK, AND NONE OF US WILL HAVE A MEANINGFUL VOTE. I would guess, that like many other busy people, you dream of having time to work a few hours each week at the co-op, and you look forward to having the ability to contribute to good decision making at the co-op. I want you to be able to contribute to decision making; in the meantime you need to support member workers right to work.

    Please feel free to contact me off-list (RebekahR.Rice-at-gmail.com) to continue this discussion.

    Very truly yours,
    Rebekah Rice

    Liked by 1 person

    1. Reply from Susan:

      Thanks for replying. I think everyone on both sides is being a bit too paranoid, honestly. I have done a lot of research (admittedly all Internet) on labor law as it applies to co-ops, and the legislated laws (including minimum wage law) are silent on a hybrid of working and non-working members. However, pertinent case law has touched on that issue.
      First of all, case law is clear that when working members are also owners and choose to work for a discount proportional to the hours they work, the entity is a co-op and is not subject to legislated laws governing employers/employees. Nothing says that ALL owners have to be working members.
      Additionally, two cases, which can be looked up under “Yeshiva” and “Brookings Plywood”, focus on a definition of co-ops as entities in which all owners have a meaningful voice in managing the entity. The latter decision stated that if ALL member-owners have “an effective voice” in managing the entity, that entity is a co-op. Similarly, Wirtz v. Construction Survey Co-operative” states that co-ops are identifiable by “all members having a meaningful role”; and further goes on to state that the income of a co-op is distributed on a pro rata basis to its member-owners, based on level of participation. This describes HWFC. I fear that if anyone at HWFC is aware of this case, s/he is interpreting “a meaningful role” narrowly, to mean only labor, but the context of the case decision implies otherwise.
      By what I’ve read, if ALL owners are participating in “management” (which in our case would mean giving all of us the right to vote), we have a co-op; and if owners are compensated (in our case, by the percentage of shopping discount) via a larger compensation going to those who work, we have a co-op.
      Another issue touched upon, and I regret failing to write down in which case this appeared, was the matter of equal shares versus having majority and minority shareholders. At HWFC, we all paid for a share and were not entitled to buy additional shares. Thus, we are a co-op.
      It seems to me that the question being asked by HWFC is an unrealistic “either/or” equation. You want to deny management participation to an enormous number of owners by denying us the right to vote, OR be resigned to a situation in which the board basically has management power. This dichotomy does not exist in anything I’ve found on the subject in case law or legislated law. In fact, case law seems to be saying that a co-op is characterized by all member-owners having an equal say in management of the co-op, while compensation is determined by the number of hours of work. HWFC has the compensation aspect covered, but all owners do NOT have an equal voice at this point, and I feel this is in opposition to being a co-op.
      Beyond the legal considerations, which are paramount, my opinion is that it is not realistic to assume that everyone who believes in member labor wants to perform it personally. As some of us get older, it’s more attractive to get our 2% discount in lieu of working, and that should be fine in an environment such as HWFC, which has no shortage of members who want to work for a larger discount. The idea that we have to throw up our hands and say “Everyone has to work or the board gets all the power” is completely unreasonable and also unfair, in my opinion.

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      1. Reply from Rebekah Rice:

        Susan, I loved your response and I truly hope your analysis is correct. I hope to meet you on Saturday at the lawyer thing that the board is hosting. Your comments/ questions will be fun to have in the mix! It would be awesome to have everyone have their voice — and have a successful member labor co-op too. I’ll be rooting for that as things go forward.

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  3. Comment from Laura:

    Susan,

    Think of the people-energy we would be able to harness locally if every single current shareholder of HWFC began working either 3 hours (monthly work) or 12 hours (weekly work) a month. In other words, if every shareholder shifted to becoming a working, member-owner of HWFC – with the one, small additional step of adding their work hours to the pot – think of all the incredible community action we could do around organic, locally-produced, whole, non-processed foods! REAL foods!

    All this harnessed energy could also directly serve your own family, by keeping food costs at our co-operative DOWN. Not UP. DOWN.

    Our co-operative used to offer a 36% discount to working, member-owners. We used to pay 10% over wholesale cost on vitamins or things ordered by the case. 10% over wholesale! 36% discount. We member-owners – with the help of shareholders who take the step to becoming working, member-owners – can do the planning and make the decision to lower prices for every working, member-owner in our co-operative. We could RAISE the discount member-owners receive at checkout. That is our benefit as working owners; that is how our work benefits us, as owners.

    If you have “skin in the game” (you work) you get a benefit (lower food costs). That’s the power of a member-owned co-operative.

    Think of all the local organic farm families we could support with one or another food project … supporting the local & regional farm families who create our organic food for us. Think of the local linkages we could establish between farm families and city families! Farm kids and city kids! Think of *increasing* our access to organic foods, real organic foods that were harvested that morning… …instead of very questionable “organic” foods from China or Mexico.

    Think of how we would be securing our own family’s food supply – locally – in an age when Big Food wants us to buy and live off of pre-packaged food processed with unknown ingredients & additives which are poisonous, created in a warehouse thousands of miles away, packaged in pretty “co-opy” kinds of boxes, and sold at co-ops for ridiculous prices.

    What happens when the price of gas goes sky-high? What will happen to the prices of processed foods which come from a factory 2,000 miles away? “Natural” or not, they will skyrocket.

    Why not – with our co-operative energy – put more of our money into the pockets of the farmer who just harvested the eggs that morning over in Altamont; the farmer who has locally-produced organic milk, the farmer family which grows organic onions & garlic & greens or makes raw milk cheeses over In Columbia County? …the farmer who raises grass-fed, grass-finished beef 40 miles away in Carlisle or over in Hoosatonic? Put our family food money into the hands of our neighbors. Keep it local.

    With shareholders of HWFC making the simple change to working member-owner, we could have a small co-op store in every neighborhood in the city of Albany (the former Mayor of Albany actually offered HWFC federal dollars to do this exact thing and HWFC leadership turned it down). Imagine, walking to your co-operative right in your own neighborhood!

    HWFC’s mission used to be to offer high-quality food…at low cost. With shareholders making the small shift to becoming member-owners, we could get high-quality, low cost food to the neighborhoods in the South End and Arbor Hill, and start meeting our ORIGINAL mission, once again.

    With shareholders being encouraged, and trained, and supported in making the shift to working OWNERS, we would have a whole bunch more people making the decisions about the food each of our own families need to survive and thrive.

    Go research the history of co-operatives (and granges) in the United States. Honest Weight Food Co-op is a living, breathing part of a 200+ year-old history of families working together with other families to keep food costs rock bottom, quality high, and to keep food production local. Neighbor supporting neighbor.

    So, as a member-owner my “dream” is that we member-owners do our job – with the complete backing & support of the board & upper management – to utterly inspire shareholders to join up with us – join the team and become working member-OWNERS: add to the pot of local “people hours,” and get our own family food prices LOWERED.

    And then we need to effectively harness all that newly-created people-power energy…

    … instead of being turned away by management and being told that there aren’t enough work slots here for member-owners,
    …or being told by the board we’re going to just eliminate member-owner work on the floor of the co-operative entirely.

    You see if a member-owner in our co-operative can’t work, s/he can’t vote. And it you can’t vote you just lost all decision-making power of the business you are supposed to OWN. It has been wrestled out of your hands …and the hands of EVERY OTHER OWNER.

    When you are an OWNER of a co-operative YOU make the decisions, in co-operation with other individuals and families. You work. You hold the vote. You decide. You OWN.

    Years ago the term “Co-operative Self-reliance” was popular among co-op people. Let’s bring that slogan back again. Families helping other families to get what each needs, together.

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    1. Reply from Susan:

      Laura, I think you and I were writing at the same time. Please see my response to Rebekah. I made valid points. So have you, based on some great ideals. I still don’t see why or even HOW every owner even CAN work, until the day, if ever, there IS a branch of HWFC in every neighborhood. Until that day, people who characterize non-working members as “having no skin in the game” are playing “divide and conquer”. This issue is about whether the co-op is run by the membership or by a small group of board members; NOT about owner versus owner. It’s very unfortunate that the issue is being framed that way.

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  4. Comment from Rebecca Tell:

    Laura, I like your vision but agree with Susan that there will always be people who are valuable, longstanding members of our community who are not able to put in labor hours, so telling everyone to work if they want to vote, with no further nuance, comes across as insensitive to that.

    Susan, I really appreciate your thoughtful comments and the time and research you have put into this. There is no question in my mind that someone like you is a “real” and “full” member of the co-op community and does not deserve second-class status.

    My understanding is that we can expect a real audit from the Department of Labor, now that the executive team has asked their opinion. I guess that *until that is over* I would rather wait on making any changes that might make our status as a true co-op even a little more open to debate, and I think shareholder voting would fall in that category based on what I understand so far. But I am still listening to all the legal arguments, and open to be convinced otherwise. Wouldn’t it be wonderful if the lawyers could all agree on an assessment of the situation?

    Before I became aware of the legal issues, I was (as a shareholder myself) opposed to shareholder voting for a different reason. My formative experience with co-ops came from the Oberlin Student Cooperative Association, and they gave me a strong sense of the value of being a co-op as wrapped up in the fact that the people who make the decisions are the people who make the day to day operations go, because they are the ones who really have the best sense of what’s going on and what the organization needs. What I don’t want to see happen would be if the collective judgement of the truly involved working members no longer had a decisive voice in management because their power was so diluted by thousands of shareholders who are just getting emails from the Leadership Team and deciding how to vote based on that without much other perspective.

    To me, the category of “shareholders” is so heterogenous it’s almost useless. If the legal mess could get sorted out, I am curious about the idea to extend the vote to longstanding members of the community – who aren’t currently working but who know the co-op well and want to actively participate in governance – without extending it to folks who “just shop here.” Set some criterion like maybe holding a share for ten years, having worked for five, and having attended membership meetings for 2 out of the past 3 years, to vote without currently working? Where exactly to put such a threshold would need to be worked out. But I wonder if something along those lines might get us closer to decision-making by a group that really knows the organization well enough.

    The other piece of this is, whoever the decision makers are, we need a better system to allow for democratic participation in actual management decisions. That’s another post, but I am hopeful that there will be more opportunities in the future for meaningful participation. If you had the chance to come to a meeting with your board member or correspond with them online about the decisions coming up at the next board meeting, to give your feedback, would you participate? Would it be reasonable to say that those who participate in such a system should have a vote, and those who don’t, shouldn’t? I don’t know yet. But I’m hoping we will have the chance to get creative and figure out something that works.

    Thank you again, Susan, for getting this conversation started.

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  5. Erin ethier

    I can’t say that I agree as there are so many shareholders that I see it backfiring on the member workers for the few shareholders that would vote in our favor or vote at all. Once 12000 people can vote we will be unable to gain signatures for petitions in any kind of timely manner. We wouldn’t be able to get changes made and how many honestly of those shareholders will show up to vote.

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  6. Shauna

    It’s my understanding that our member lawyer and the ex-commissioner of labor (who were both at the member meeting) were very clear in that extending voting rights to non-working members would put us in violation of current labor laws.

    My initial thought regarding this, outside of any legal consideration, is, if a person cannot carve out even three hours a month to participate in the coop in some way (outside of actually working in the store, attending membership meetings and other governance type activities count towards hours as well), then how will they stay current on the issues? Would they even show up to vote? Considering the responsibility that voting carries, and the damage that can be done when people do so uninformed, I still believe that only those vested enough to work and be current should be voting. When I was a non-working member I had absolutely no idea of how the store operated and the issues inherent in being a cooperative and as such, would never have thought to vote on those issues. I understand it’s crazy hard to find the time to commit, either monthly or weekly, but again, to me, committing to working speaks to the person’s commitment to stay current on issues and actively participate in meetings and votes.

    I also agree that we’ve lost sight of our original mission; to make organic food more affordable and more readily available to people through our cooperative commitment; everything from the array of junk we now carry to the prices we charge are working in direct opposition to that mission. And certainly this new corporate push by the board and LT is the polar opposite of a community cooperative; we already have a Trader Joes and a Whole Foods if that’s what people are looking for, we don’t need to gut the coop to try and be some bad copycat version of what’s already out there.

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  7. Steve Young

    Extending the vote to all working members would also raise some issues around a quorum for membership meetings (currently 10% of members). We would need at least 1200 people at the meeting. Alternatively, we could lower the quorum requirement or allow voting by mail/internet, etc.

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  8. Steve Young

    One more issue: Does anyone have an idea to what extent the new store and the debt that comes with it have forced us to try to maximize sales in order to service our debt?

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  9. Susan Mattice

    Thanks for all the feedback, everyone. I truly don’t believe the co-op is in violation of laws intended to prevent employers from scamming employees out of benefits by calling them “independent contractors”, and to prevent fulltime employees from being paid less than minimum wage. That’s why those laws exist, and the courts take that into consideration. HWFC member-workers are compensated via grocery discounts on a pro-rated basis, and have much more freedom to choose when they work than employees do. The 50-year-old Maine case could be seen as troublesome, but more recent cases say differently. I wonder whether the lawyers have actually said HWFC IS in violation of the law, or whether they said there is a risk of that being someone’s interpretation. There is always that risk, but I think it’s extremely small.
    Rebecca Tell: I really appreciate your thoughtful comments. I don’t think it’s necessary to create a special class of non-working members who would be allowed to vote. As Erin said, most non-working members would probably not be interested in voting, so the numbers would be self-limiting. I am not sure where this idea comes from that non-working members would be more prone to taking the board’s “side”, although I can see that the board has more access to means of communication, which could and should be changed. Shauna, I have attended membership meetings when I can, and believe I can understand the issues enough to vote. My history as a working member also helps me understand some issues. Certainly, the issues raised by Shauna and Steve (food we sell; possible consequences of our debt burden) are not difficult to learn about, whether we work in the store or not. I can’t speak for others, but again, I think most non-members just won’t bother to vote. I still think they should have the right to vote.
    As pointed out by Erin and Steve, the quorum issue, for petitions and meetings, could become problematic. That’s a really good point that I had not considered.
    Shauna, I understand that many working members feel that non-working members don’t deserve to vote, and I can’t argue with that, because it’s their opinion. My feeling is that I don’t deserve the discount you get, but I still have a stake in the general directions the co-op takes. I don’t think these opposing feelings are very easy to resolve. I don’t want to have to defend my not being a working member. It works for HWFC to have a balance of those who work and are compensated more, and those who don’t work and are compensated less.
    Again, I do think the quorum issue raised by Steve and Erin is something that might make me, on practical grounds, re-consider my stance on giving non-workers the vote, but maybe that could be ironed out somehow.

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    1. Shauna

      Susan~
      I never once said anything about who “deserves” the right to vote; I questioned whether non-working members would even bother to vote (citing working members commitment to work as an indicator of their commitment to vote as well). According to your response, we agree, the majority would not. We differ in that you feel, regardless of that fact, that voting rights should be extended anyway, and I do not. I fail to see the point in creating the logistical nightmare of needing to obtain signatures of >4% for petitions and trying to meet our voting quorum with such large numbers of mostly people who don’t care to vote. How does that even make sense for the good of the coop?

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  10. Gene Reilly

    Thank you ALL for this excellent dicussion! I am glad I FINALLY made the time to read through it entirely. I found persuasive positions that I need to consider more thoroughly. Susan, thank you in particular for doing legal research and I look forward to looking at some of the cites you referenced. I am gratified you mentioned the 50 year old Maine case (Goldberg -vs- Whitaker House Coop) which the Board and it’s legal counsel (yesterday’s “Inside Scoop”) still refers to. I managed to read that case yesterday and want to point out that although the Supreme Court reversed two lower courts in finding against the coop in that case, it was a “split decision” and three justices dissented voicing the opinion that the prevailing justices were ignoring the ligitimate formation of the coop under the laws of the state of Maine.

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  11. Sorry I had trouble finding this site again. I ended up posting on a more general site instead. What I want to say now is this: I have found out that there is a whole discussion going on among member workers, and one of them asked whether the information could be shared with non-working members, called “shareholders” these days. (We’re ALL shareholders, so that’s not a very precise term.) The fact that this question even needs to be asked is telling as to the way non-workers are being perceived. We are members of the co-op, too, whether you call us that or not. You don’t like the Board being secretive; neither do I. I also don’t like the idea that information can be hidden from those of us who choose not to work. This has now gone beyond the question of voting, if our access to information is even in question! I have considered resuming being a working member, but I’m human enough to feel resentment that my decision to stop working for several years has made me such an “other” in the eyes of some worker-members. This is not a good environment, and certainly not the environment of the era in which I was a working member while non-workers were also called “members” and COULD vote.

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    1. Rebecca Tell

      Susan, thank you again for bringing your concerns here. I have a little information that may partially address some of them, and hopefully further dialogue can do more.

      The online group for working members: yes, there is one. It formed this Fall in response to the events around the Member Labor Program and the folks who organized it wanted a safe space to discuss organizing around member worker concerns. It also excluded anyone on the board or in management. As part of that group myself, I can say I don’t think there has ever been intention to keep things secret from community members who are not currently working members. I have not ever seen anything like “don’t tell shareholders this” go by. There was a conversation recently (which might be related to what you heard?) in which someone asked about sharing specific text that someone else had posted in the group, and the answer was not to share someone else’s writing without the permission of the author – a reasonable guideline on any online forum I think. But the author then gave permission. In general, important information that comes up in that group that everyone should know about, gets out into more public channels as quickly as possible. There’s no advantage to anyone in keeping some of the community in the dark. The reason for having a space with some privacy is that some individuals are concerned about being publicly identified with their comments because of worry about negative consequences to them within HWFC.
      But. The question of whether interested shareholders should actually be excluded from that group is a totally valid one. I intend to bring up your comments there and raise the question to that group again.

      Re: the term “shareholders”: I don’t like it either. Does anyone know the specific history of how HWFC started using it? I have always guessed that it came from management – I’ve never thought of it as a term working members chose to make non-working members more “other.” But I don’t actually know, and I’m curious.

      Was there really a time at HWFC when non-working members could vote? When was that? I had not ever heard that before.

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