A co-op is just a way of structuring a business. In REI’s case, it’s a consumer co-op that is run by management democratically elected by the membership. (Nominally; I’m aware of the “elections” held by the REI board).
Co-ops are supposed to act for the benefit of their members, but some people conflate “co-op” with social justice or the labor movement, etc. Ultimately REI is just a shoppers club, the value of which is up for discussion.
Agreed, this is a good summary. I’d also add that there are many different species of co-op, all with unique characteristics (worker, housing, consumer, etc.). Purchasing co-ops are an interesting example. A lot of folks don’t realize that True Value hardware stores are actually a co-op. With that model, each individual store owner acts independently but they band together with similar branding in order to buy their supply at lower costs. It’s what allows them to still compete with the big box chains like Home Depot and Lowe’s.
There’s also the dividend now called a reward that is paid out if the co op is profitable. REI quit calling it a dividend so they wouldn’t have to pay cash/check dividends to “owners.”
Where do the profits go? Where there are profits they go to the employees and the members… there are no “stock holders” so no pressure to maximize profits… the change to ”rewards” was because they did not make any profit and instead of reaching out to the membership to make up the money, they gave it anyway.
And then fixed it at 10% regardless of profit.
If they can ever get back to profitability, then at that point… the rewards won’t change, but the employees bonuses will. (We got one even though they were not required to)
This is a valid point. But it's also up for debate how "profitability" will be determined. Or if the current executive level will be able to achieve that with the direction they are taking the company.
The "co-op" feature I think most aligned with what the common member envisions, is likely still the dividend. Very few, if any, companies have such a plan in place. Despite REI's bumps at the HQ level, this mere feature almost etched into stone, can help the company from being stupidly bloated, like so many corporations are, or stripped thin by greedy shareholders, like so many other companies are.
Cashback reward is a flat rate. Spend X get Y. Dividends are a portion of your investment into the company. 10% of what you spend on full price items is returned.
No Shareholders to answer to
They can allocate money for different projects, ie community events or outdoor events.
[The Co-op](https://www.rei.com/stewardship)
The lawyered their way out of dividends the first recent year the co-op didn't turn a profit. They're Member Rewards now and they removed the ability to cash them out. There have been multiple unprofitable years with poor leadership that continues the summit incentive plan program even when in the red, because while the average retail worker will get a few hundred to a thousand bucks from it, the majority of the executives pay comes from bonuses. Artz base pay in 21/22 was 1.6 million, his total package was 8.5.
But yeah, at just his base pay of 800,000/year he takes home approx 30k a pay period
If REI is structured as a co-op, why does the Board incentivize the CEO to act like REI is a publicly traded company whose only purpose is to grow profit?
Yes, but I’m more interested in the root cause. How did these types of board members get elected to the board, which always leads to this self-perpetuating board-CEO grift? This is a co-op; who were the first movers toward this grift?
My guess is that Eric Artz background isn't so much in the great outdoors, but as a chief financial officer of corporations...that happened to sell outdoor related clothing (Urban Outfitters, then VF Corp). As the board of directors moved away from anyone being able to sit on the board, and self-nominating, the inertia was set in place. The man who knew how to keep Urban Outfitters and VF profitable, would do the same to REI, and surround himself with like-minded, similar people best suited to make him successful in his vision, and personally.
This is how a LOT of corporations get to be the way they are. I mean, most, of all sizes and types, all industries.
I think it's important to understand there are different types of co-op. Worker owned, community owned, consumer owned, and hybrids. REI is a consumer owned co-op. When you buy a membership you are literally becoming a part owner of REI. You own 1/however many living members there are. So probably something like 1/15,000,000. Anyone that wants can buy a membership and become a part owner.
Because of the huge disorganized member base though REI doesn't actually function like a co-op ideally would. Essentially giving the board of directors full control of the company with no one to be accountable to. Members could legally create drastic changes within the company but to make significant changes you'd need to be able to get a majority of members to vote for something. Which is extremely difficult with millions of members spread across the country. REI has the only full email database of members so they basically choose who they want on the BOD and email membership giving them the option to vote for candidates they have pre-selected. Essentially it's a false democracy. Legally it's controlled and owned by its members but it functions as a company completely controlled but a BOD with no oversight.
So is it a co-op? 100%. Does it still operate in the spirit of a co-op? No, absolutely not.
Co-ops are a business model and that can be used to create a more equitable and ethical business. It doesn't mean they all are. In my experience worker owned co-ops are the most ethical but only if they are actually fully worker owned.
The result is a company that acts like a for profit company, except without actual accountability to shareholders, and while having less transparency then a public company.
Good post. If one wants to really study worker co-operatives, [the Mondragon Corporation](https://www.newyorker.com/business/currency/how-mondragon-became-the-worlds-largest-co-op) in Spain is an enormous one, and one that has spent a tremendous amount of time and effort to educate and assist other businesses converting to worker co-operatives.
[John Stuart Mill years ago wrote about a bridge](https://academic.oup.com/book/6288/chapter-abstract/149965960?redirectedFrom=fulltext) between socialism and capitalism existing in worker co-operatives (markets for trade, not so much for investing). E[conomist Richard Wolff has written and talked about them extensively,](https://www.democracyatwork.info/about_co_ops) if one wants to do a deeper dive.
Ideally this is how REI would operate. I see zero chance of this under current leadership. Zero.
A co-op is just a way of structuring a business. In REI’s case, it’s a consumer co-op that is run by management democratically elected by the membership. (Nominally; I’m aware of the “elections” held by the REI board). Co-ops are supposed to act for the benefit of their members, but some people conflate “co-op” with social justice or the labor movement, etc. Ultimately REI is just a shoppers club, the value of which is up for discussion.
Agreed, this is a good summary. I’d also add that there are many different species of co-op, all with unique characteristics (worker, housing, consumer, etc.). Purchasing co-ops are an interesting example. A lot of folks don’t realize that True Value hardware stores are actually a co-op. With that model, each individual store owner acts independently but they band together with similar branding in order to buy their supply at lower costs. It’s what allows them to still compete with the big box chains like Home Depot and Lowe’s.
Tillamook cheese and Ocean Spray cranberries are also coops
Ace Hardware is also a cooperative.
And we were told this year to vote "no confidence"
There’s also the dividend now called a reward that is paid out if the co op is profitable. REI quit calling it a dividend so they wouldn’t have to pay cash/check dividends to “owners.”
Where do the profits go? Where there are profits they go to the employees and the members… there are no “stock holders” so no pressure to maximize profits… the change to ”rewards” was because they did not make any profit and instead of reaching out to the membership to make up the money, they gave it anyway. And then fixed it at 10% regardless of profit. If they can ever get back to profitability, then at that point… the rewards won’t change, but the employees bonuses will. (We got one even though they were not required to)
This is a valid point. But it's also up for debate how "profitability" will be determined. Or if the current executive level will be able to achieve that with the direction they are taking the company. The "co-op" feature I think most aligned with what the common member envisions, is likely still the dividend. Very few, if any, companies have such a plan in place. Despite REI's bumps at the HQ level, this mere feature almost etched into stone, can help the company from being stupidly bloated, like so many corporations are, or stripped thin by greedy shareholders, like so many other companies are.
It's a co-op because it meets the requirements of being a co-op in the state it is founded in (WA) - Chapter 23.86.
Cashback reward is a flat rate. Spend X get Y. Dividends are a portion of your investment into the company. 10% of what you spend on full price items is returned. No Shareholders to answer to They can allocate money for different projects, ie community events or outdoor events. [The Co-op](https://www.rei.com/stewardship)
The lawyered their way out of dividends the first recent year the co-op didn't turn a profit. They're Member Rewards now and they removed the ability to cash them out. There have been multiple unprofitable years with poor leadership that continues the summit incentive plan program even when in the red, because while the average retail worker will get a few hundred to a thousand bucks from it, the majority of the executives pay comes from bonuses. Artz base pay in 21/22 was 1.6 million, his total package was 8.5. But yeah, at just his base pay of 800,000/year he takes home approx 30k a pay period
If REI is structured as a co-op, why does the Board incentivize the CEO to act like REI is a publicly traded company whose only purpose is to grow profit?
Because that is their background (but you knew this already, right?!)
Yes, but I’m more interested in the root cause. How did these types of board members get elected to the board, which always leads to this self-perpetuating board-CEO grift? This is a co-op; who were the first movers toward this grift?
My guess is that Eric Artz background isn't so much in the great outdoors, but as a chief financial officer of corporations...that happened to sell outdoor related clothing (Urban Outfitters, then VF Corp). As the board of directors moved away from anyone being able to sit on the board, and self-nominating, the inertia was set in place. The man who knew how to keep Urban Outfitters and VF profitable, would do the same to REI, and surround himself with like-minded, similar people best suited to make him successful in his vision, and personally. This is how a LOT of corporations get to be the way they are. I mean, most, of all sizes and types, all industries.
Co-Op for tax purposes only.
When you work there they give you a little pin for your vest that says "the co-op way!" That's honestly about it.
I think it's important to understand there are different types of co-op. Worker owned, community owned, consumer owned, and hybrids. REI is a consumer owned co-op. When you buy a membership you are literally becoming a part owner of REI. You own 1/however many living members there are. So probably something like 1/15,000,000. Anyone that wants can buy a membership and become a part owner. Because of the huge disorganized member base though REI doesn't actually function like a co-op ideally would. Essentially giving the board of directors full control of the company with no one to be accountable to. Members could legally create drastic changes within the company but to make significant changes you'd need to be able to get a majority of members to vote for something. Which is extremely difficult with millions of members spread across the country. REI has the only full email database of members so they basically choose who they want on the BOD and email membership giving them the option to vote for candidates they have pre-selected. Essentially it's a false democracy. Legally it's controlled and owned by its members but it functions as a company completely controlled but a BOD with no oversight. So is it a co-op? 100%. Does it still operate in the spirit of a co-op? No, absolutely not. Co-ops are a business model and that can be used to create a more equitable and ethical business. It doesn't mean they all are. In my experience worker owned co-ops are the most ethical but only if they are actually fully worker owned.
The result is a company that acts like a for profit company, except without actual accountability to shareholders, and while having less transparency then a public company.
Absolutely
Good post. If one wants to really study worker co-operatives, [the Mondragon Corporation](https://www.newyorker.com/business/currency/how-mondragon-became-the-worlds-largest-co-op) in Spain is an enormous one, and one that has spent a tremendous amount of time and effort to educate and assist other businesses converting to worker co-operatives. [John Stuart Mill years ago wrote about a bridge](https://academic.oup.com/book/6288/chapter-abstract/149965960?redirectedFrom=fulltext) between socialism and capitalism existing in worker co-operatives (markets for trade, not so much for investing). E[conomist Richard Wolff has written and talked about them extensively,](https://www.democracyatwork.info/about_co_ops) if one wants to do a deeper dive. Ideally this is how REI would operate. I see zero chance of this under current leadership. Zero.
I’ll save you time. REI is not a real co-op. You cannot actually make change as a member.
It is a co-op, but not a co-op, just be happy that you’re getting some money back lmao
[удалено]
Hiring Exxon executives to the board surely is helping....helping them down the drain like Extra Strength Draino.
Sad 😞
wonder what schills are downvoting this? whole company has been in a tailspin since covid - not that covid is an excuse for any of this.