No Dividend @ The Weave

IT IS NOW OFFICIAL. Weaver Street Market made a loss in 2008, and it will not pay a dividend this year.

In any ‘conventional’ corporation, the Board would immediately accept responsibility, with all of the natural consequences that would normally entail.

It is a sad reflection on our current Board, which is supposed to be the rock-solid guardian of owner interests, that it will probably not even notice or comment – without monumental prodding.

Question: Why are we here?

Answer: We are massively over-extended going into what looks like a severe recession.

The project that was supposed to safeguard profits for years to come (Expansion and the Food House) is behind-schedule and over-budget.

And the problems the Food House has had with its food production have severely exacerbated the fall in sales already caused by the recession and competition from the likes of Trader Joe’s and Fresh Market.

Let me be clear. The fault does not lie with senior management. The fault lies with our Board.

Senior management came up with a plan (Expansion and the Food House) to meet what they believed to be the challenges facing WSM going into the second decade of the 21st Century.

That’s their job. And I give Ruffin full credit. He stood up at the Southern Village Employees’ Meeting last night, and accepted his share of the blame – without trying to pass the buck for one second.

I had asked him what he felt he had learned in the past year. It was clear the answer was painful for him. Weaver Street is his life’s work. But, he did not flinch. He said that he wished he could have anticipated better, and communicated more.

But Ruffin should not be standing up there, taking all this responsibility on his own. This is the Board’s fault. They are the ones who have a duty to owners. They are the ones who should have held management accountable to the owners. And they are the ones who have failed in those duties.

The Board should have ensured that, when presented with management’s plan for Expansion and the Food House, the proper comparative studies, economic analyses and budget forecasts were produced, against which to test management projections. I have now asked WSM’s Auditors to check whether in fact this was done. I suspect it was not.

The Board should not have blindly accepted the plans of management. The Board is accountable to owners, not to management. The Board should have asked owners if they wanted Expansion and the Food House. They did not.

The Board should have sought the permission of owners to allow management to borrow $6 million to fund their plans – a debt which will hang an annual interest payment of some $300,000 around the necks of Worker-Owners for years to come.

That interest payment is the same size as last year’s profit. It is the reason this year’s operating profit has been wiped out. It is the reason no dividend is being paid to Worker-Owners this year.

The Board did not seek permission for the $6 million debt. It simply signed the bank notes. Without raising so much as an eyebrow. Even though I asked the Board to question the debt.

When it became apparent the Food House was running into trouble, the Board only responded when I and other owners turned up at their August meeting, and begged them to intervene.

There is a way forward. There always is. It won’t be easy. There will be tough decisions to make this coming year.

But it needs a different Board to make those decisions. It needs a Board that truly understands its responsibilities to its owners. That understands that it is answerable to those owners, and not to management.

And it needs a Board that understands corporate finance in a $20 million turnover co-operative. It needs a Board that either knows how to read a financial statement, or that has the self-awareness to admit that it needs experts to help it.

We are where we are. But we do not have to stay here.

I remain optimistic. The Weave is not just a grocery store. It is a family. We will rally round. We have 200 workers and 12,000 Consumer-Owners, just waiting to pitch in and pull us through – and that includes me.

But we need the right Board if we are to return The Weave to financial security and stability. If we are to become a better co-op and a stronger business.

We owe that much to our workers, our consumers and our owners. And we owe that much to ourselves.