Every so often, something happens to demonstrate that cooperatives really are different – that the transparency and accountability inherent in member-ownership can and does lead a co-op to conduct itself in a manner that is better, and nobler, than the way investor-owned enterprises run themselves.
Last night’s events at the Hanover Consumer Cooperative Society were just such an occasion.
The scene – via zoom, since we’re stuck in the pandemic – was an emergency meeting of the Board of Directors. The scenario was one of crisis, since the president of the Board and a long-serving director both resigned recently, followed swiftly by an even more troubling event.
By “even more troubling event” I mean the announcement by Acting General Manager Paul Guidone that he would not be accepting the Board’s offer to become the permanent CEO and, in fact, would be leaving altogether on September 25.
Such an abrupt departure, combined with a sudden need to conduct a nationwide search, could be a devastating blow to the nation’s second biggest retail food co-op and, at age 84, an institution that has been an economic and cultural mainstay of greater metropolitan Hanover-Lebanon-White River Junction since basically forever. A cooperative founded in 1936 as part of the nation’s effort to claw its way out of the Great Depression is well-suited to help the community emerge from its current pandemic-induced economic crisis – but not if it is without a savvy and inspiring leader.
Over the weekend, mainly via the Local Daily Newspaper, it emerged that the Board and Paul Guidone were at loggerheads not about his terms of employment in the conventional sense. It appeared that Paul and the Board were not fighting over his compensation, the length of his contract, or anything else that falls into the conventional “H.R.” realm.
Rather, the news broke that Paul had issued a list of 13 demands to the Board, and that the Board was balking at certain undisclosed conditions that related to the institutional relationship between the Board and the General Manager. Problems in that realm have bedeviled this Board since well before I became a director in 2003. Issues of that sort are precisely the sort of thing that the Board should discuss in front of the members who elected them.
And, yet, when the Board announced last night’s board meeting the published agenda made clear that the whole thing would be discussed privately, in executive session.
The meeting began with member comments, and comment I did. (So did two distinguished fellow former directors – Tony Roisman and Richard Schramm, along with Nelson Kasfir, the spouse of a third former director.) All four of us urged the Board to do what it could to retain the Co-op’s excellent general manager, and I told the Board that the membership has “an absolute right to the facts sufficient to hold the Board accountable.”
Hooray for rookie Board member Nick Clark! He moved that the Board immediately disclose Paul’s conditions. Paul agreed and, after some dithering about whether the disclosure should include commentary that has flown back and forth between the general manager and the Board since Paul first nailed his theses to the door of the Co-op, the Board adopted Nick's message unanimously and acting Board president Jessica Saturley-Hall read them out.
I’d never had any contact with Nick Clark prior to last night’s board meeting. But I noticed that he chairs the Selectboard in his hometown of Thetford – itself a notorious hotbed of contention. It’s hardly surprising that such a municipal official would grasp how well the principles of state public meetings law apply to relations between a co-op and its members.
As for Paul’s conditions – well, I used to think Paul Guidone was the most serious strategic thinker I’d met in my 13 years serving on the Board of the Hanover Co-op. After last night, I’m certain.
His key demand are this:
-- The Board must elect a new president – “someone,” wrote Paul, “that I can work with.” It was a pretty explicit rebuke not just of the recently resigned president but of the poor job the Board has sometimes done in choosing its leader. [UPDATE: See my clarification of this statement, offered in my blog post of September 11, 2019.]
-- The General Manager “reports directly to the Board President.” Paul has clearly had enough with various individual Board members, or factions of Board members, attempting to guide or even influence his work. That’s exactly what is NOT supposed to happen under Policy Governance, the John Carver governance model the Board has been attempting to use since the mid-1990s. Policy Governance is typically honored in the breach.
-- All communications from Board members to the general manager must be funneled through the Board president, and the general manager will reply in writing to what he receives from the president.
-- The Board, having voted 9-2 in favor of a bylaws amendment imposing board member term limits, and Paul insists that the Board stand by its vote and unequivocally recommend this change to the membership for approval.
-- Paul’s annual review must be conducted in conformity with the Board’s existing policy, must take place only with the Board president (not the whole board), and, if delayed, triggers an automatic inflation adjustment to his pay.
-- The general manager will discuss his monthly reports early in each regular Board meeting and be free to leave thereafter. Generally, the general manager will only be available to the Board from 8-5, Monday through Friday.
-- Market-based compensation for the general manager.
-- The Board must accept Paul’s terms via “written agreement signed by all sitting Board members,” with new Board members also bound by the agreed upon terms.
-- If the Board violates the agreement and does not rectify the situation within 15 days, the agreement becomes “null and void” and automatically triggers Paul’s resignation effective 15 days later.
Some Board members apparently balked at many of these conditions, regarding them as an inappropriate incursion by the general manager into the governance realm, which is the province of the Board. I disagree.
In legal terms – and I’m a lawyer – this is a tempest in a teapot. Thanks to the 13th Amendment to the U.S. Constitution, which abolished slavery, the Board cannot force Paul to remain as general manager even if he signs a contract. He’s always free to walk away (though potentially liable for damages, if his contract so stipulates).
So, these demands from Paul Guidone really reduce to this message for the Board: If you want me to stay on as general manager, get your act together. Stick to the governance realm, and act like a bunch of adults who are fiduciaries of a major Upper Valley business and a bulwark of the consumer cooperative sector at the national level. If not, I will walk.
My tenure on the Board occurred during the tenure of Paul’s two immediate predecessors. I liked and respected both of them, but neither of them had the courage and the vision to do what Paul Guidone has done here: Demand that the Board act like a Board and not like a bunch of squabbling preschoolers. I say that sheepishly, as someone who did his share of preschoolish squabbling while serving on the Board.
Although it is not clear how this will turn out, there are reasons to hope. The Board and Paul Guidone have signaled a willingness to iron out their differences, and after the conditions were read out they went into an executive session. I earnestly hope that this excellent general manager stays on.
But, even if he doesn’t, he’s done the Hanover Consumer Cooperative Society a great service.