Who's Moving My Weaver Discount?

[What follows is an e-mail I sent to Jacob Myers, Weaver Street Board Chair these past three years, after the September Board Meeting]

"Dear Jacob and Weaver Street Board,

I have no strong feelings either way about the Consumer-Owner Discount. After all, I'm a Worker-Owner.

I do, however, have strong feelings about the manner in which its potential removal is being discussed by the Board of WSM. This affects all of us in our co-operative.

I am worried that the Board may consider the return to Consumer-Owners through the Discount as being the cause of the gaping hole in WSM's finances. This simply is not the case.

That hole is caused by the fact that we find ourselves over-extended (by Expansion and the Food House) going into a potentially severe recession. And the fact that the over-extension has an associated debt of some $10 million (with annual repayments of increasing size, leading to repayments of some $700,000 in 2011 and $1.5 million in 2012).

As the Auditor clearly explained at the September Board meeting (clearly, to anyone who understands the manner in which Auditors address Boards), the Board now has the task in 2009 of coming up with a comprehensive plan to address The Weave's over-extension and over-indebtedness.

Removal of the Discount may well form a part of such a plan. But it is not a substitute for that plan.

The Board is aware that, under the John Carver Policy Governance Model, to which WSM subscribes, the Board is supposed to be accountable to Owners, not to the management of WSM.

It is commendable that management have suggested ways to the Board of keeping WSM on financial track, but it is the Board's responsibility to run those plans by Owners before moving ahead with them.

That much should have been learned from the last couple of years.

Management came to the Board with the plans for Expansion and the Food House. Fine. What was not fine was that the Board then approved those plans without seeking the permission of Owners.

Management approached the Board with requests to borrow $10 million, using Owners' assets and equity as collateral. Ok. Up to the point the Board decided to approve the requests without first seeking Owners' permission.

This year, management asked the Board to remove the Policy requiring a 1% profit, so that management had room to maneuver with its plans for the Food House.

The 1% profit requirement was what protected the Worker-Owner Dividend. Worker-Owners should have been asked. They were not. As a result, we lost our Dividend.

And now, instead of coming up with a comprehensive plan to address over-extension and over-indebtedness, management have come up with the idea of removing the Consumer-Owner Discount.

I hope that, on this occasion, the Board will agree to move ahead only after it has the full permission of Consumer-Owners.

Why not make a start at the Annual Owners' Meeting on October 19? Why not put down a motion (someone; anyone) along these lines:

'That the Consumer-Owner Discount will not be changed unless approved by a Referendum of all of the Consumer-Owners.'

If you can achieve a demonstrable plurality of those present to proceed without a Referendum, then you pretty much have a green light to make the decision on your own. Otherwise, John Carver should apply. Or. You abandon John Carver - but again, you should only do so with the consent of your Owners...

Frankly, I think it very unlikely that you will get the agreement of your Consumer-Owners to mess with their Discount, and replace it with a Dividend.

I'm guessing they'll see this year something like this: our butcher disappeared; our meat turned brown; we made a wopping great loss; and now you want us to pay more for everything; and agree to get a Dividend instead - would that be the same one you just didn't pay to Worker-Owners...?

If you try to proceed with changing the Consumer-Owner Discount without the permission of Consumer-Owners, it is reasonable to assume that this will lead to an exodus of Consumer-Owners.

Aside from having a potentially severe effect upon sales, and therefore the profit margin (which would be counter-productive), it would also leave the General Manager possibly having to report at the end of the 2009 Financial Year that he is now in non-compliance with the Board Policy requiring that he not do anything that has the effect of reducing Consumer-Owner numbers.

If you are intent on attempting to improve the financial numbers, then I believe you will only receive the support of the majority of Consumer-Owners if you present them with a more attractive alternative to their Discount.

The opportunity presents itself. Nationwide, the co-operative grocery movement is learning to cope with increasing competition, the recession (and, I guess, in our case, the over-extension and over-indebtedness caused by Expansion and the Food House) by working to increase the loyalty of their Owners.

This is done with 'Ownership Culture,' whereby Owners are weaned away from the view of their co-op as an organic Sam's Club, into more of a traditional co-op culture, by involving them more in the decision-making of their co-op - much along the lines the WSM Elections Task Force was talking about at the beginning of this year.

Consumer-Owners might be much more likely to support the tough decisions needed to regularize WSM's finances (including, perhaps, the replacement of their Discount by a Dividend) if they felt that they were meaningfully involved in the important decision-making process.

We are where we are. I remain ridiculously optimistic that we can move forward positively from where we are.

But we can only do it by honestly recognizing we have a problem (over-extension and over-indebtedness), and then working collaboratively and creatively to address the over-extension and over-indebtedness in realistic ways, and ways that retain, as much as possible, the benefits of Expansion and the Food House, in whatever form the finances finally allow.

What we can not do is pretend the problem is something else, and then fashion a solution which does not begin to address the real problem, and ends up only aggravating the problem and making it worse."

*******

In the interests of balance, I link here with an article about a grocery co-operative which has quite successfully introduced 'Ownership Culture,' and as part of the move, replaced a discount with a form of dividend.

The important point to notice is that there is a clear sense in this article that owners were and are fully included in the important decision-making in their co-operative - as an important 'quid pro quo' in this co-operative's interpretation of 'Ownership Culture.'