The Future of the Co-op: A Message from the Director
To the Shareholders of the Seminary Co-op,
In my last membership letter, I wrote about the place of inefficiency in running the Co-op and 57th Street Books. As I noted in that letter, our model may not meet “best practices,” but it assures that we offer a broad and thoughtful range of books to our community; an informed and engaged staff; and a comfortable space (both physical and virtual) for the community to gather, linger and learn.
While we embrace our inefficiencies with respect to book buying, our co-op membership model has produced governance inefficiencies that work against our long-term interest. In this letter, I will briefly explain the challenges posed by our current governance structure, as well as proposed changes to ensure the long-term health of the Co-op.
Currently, the Co-op has over 60,000 shareholding members. Most joined to support the stores and receive the 10% credit associated with membership. While governance of the Co-op is the shareholders’ responsibility per the Co-op’s bylaws, many shareholders are unaware of this or, frankly, are not interested in participating. To quote a loyal member, “You guys take care of the governance. I don’t need to be involved. As long as the books are on the shelves, I’m good.”
Having a small number of shareholders involved in governance poses a significant challenge. Our bylaws require that a majority of shareholders (from those who joined in 1961 until the present) must approve key initiatives. Several such initiatives are now on the table that could significantly simplify and improve our financial situation, including re-incorporation in the state of Illinois (we are currently incorporated in Washington D.C.) and pursuing non-profit status. But fewer than .5% of all members attend our annual member meetings, and we have valid email addresses for just 15% of our membership, making it almost impossible to receive majority approval on any such initiative.
Separating governance from benefits
To address this situation, it is imperative to separate Co-op governance from member benefits, with governance responsibilities becoming elective rather than mandatory. We are taking several steps to accomplish this, beginning with a new membership classification that does not include a stock purchase (with its accompanying governance responsibilities).
Solution, part 1: Customer loyalty program
In September 2016, we introduced a customer loyalty program that is not associated with stock ownership. Members of our loyalty program earn 10% back in store credit for all purchases, but are not shareholders (no stock purchase is required for participation). Nearly 4,000 people have become loyalty members in just five months, and we’ve seen an increase in repeat visits to the stores. We have also considerably grown our marketing reach and mailing list. And, because these members are not shareholders, the program did not exacerbate our unwieldy voting situation.
Solution, part 2: Regrouping existing shareholders into Charter Members and Active Shareholders
Next, we will be implementing an initiative to address the large number of existing shareholders who do not or cannot cast votes, while ensuring they retain all benefits of their membership. To achieve this, shareholders will be divided into two groups: Charter Members and Active Shareholders.
Honoring your preferences
- Inactive shareholders (i.e., those who haven’t made a purchase in more than two years, and for whom we don’t have valid contact information) will automatically be converted from shareholders to Charter Members of our new loyalty program.
- This designation recognizes Charter Members’ long-term association with the Co-op, and they will continue to receive a 10% store credit on purchases. In addition, Charter Members (unlike other loyalty members) will have access to the top tier of the annual sale and other value-added programs.
- Charter Members will no longer have governing responsibilities and their shares will revert to the Co-op.
- Those who have made a purchase within the last two years and wish to continue to participate in governance will be designated as Active Shareholders and will retain all current perks as well as responsibility for governance.
- Should any Active Shareholders wish to relinquish this responsibility, they may notify us and we will change their status to Charter Member as described above.
We will honor your preferences regarding your standing vis-à-vis the Co-op. If you are unclear on where you fall, or have a strong preference about either retaining or relinquishing your governing responsibilities, just let us know and we’ll be happy to accommodate your request. If, however, you are an inactive member and we do not hear from you by April 1, 2017, we will welcome you as a Charter Member of the loyalty program and your role as a shareholder will come to an end.
Maintaining our treasured cultural institutions
The specifics of these changes have been considered carefully by our active shareholders and shareholder-elected board, and are consistent with Article VII, Section 2e of our bylaws. Perhaps most importantly, however, this solution allows us to return to core elements of the co-operative model: people working together as a community to ensure that an organization they have invested in both financially and emotionally remains robust and viable. The Seminary Co-op Bookstores are, without doubt, a treasured cultural institution. Indeed, as one of our shareholders told me, “If Hyde Park were to lose this institution I think it might very well lose its soul.” During the fiscal year ending on June 30th, 2016, we had our first year of growth in over a decade, resulting in a 5.3% sales increase over the prior year. As I write this, we are halfway through the current fiscal year and are seeing another 4% sales increase. There is no question that our future is bright. The co-op model is a critical part of our strength, and I am confident these changes will bring us closer to our ideals and ensure that our stores – and the community we have built around them – endure for generations to come.
Yours in bookselling,
Director Seminary Co-op Bookstores, Inc.