In a shift away from its cooperative roots, the management of True Value last week announced a proposal to sell 70 percent of the hardware company's ownership to a Washington, D.C.-based private equity firm. It is now up to the members of the cooperative to consider and vote on the proposal.
At the heart of the cooperative business model is the assurance that co-op members—in this case, the storeowners—have the final say in how their company operates, even when that means voting to demutualize. In exercising this right, True Value members will reshape the future of their company and their local communities, for better or worse. If they choose to demutualize, it may be the last time they have such a significant say.
The members’ decision is a heavy one—not only for the viability of the company and the financial health of the particular storeowners, but also for the neighborhoods those storeowners serve. One must assume that the members are weighing the fact that the profits of the Chicago-based co-op, which currently all come back to the storeowners’ and their local communities, will now be captured by the investors of a private equity firm on the East Coast.
Whether or not True Value remains as a member-owned business is up to its members, but there is certainly a place for the cooperative business model in 21st century commerce. The idea of empowering people through their business model will continue. In fact, its relevance only broadens in today's climate of increasing inequality that has left many people feeling excluded from economic opportunities. This is true across numerous sectors, including in hardware retail.
On the cusp of the most recent recession in 2007, Ace Hardware briefly considered converting from a retailer-owned co-op to a for-profit corporation. Ultimately, the management and members chose to stay the course and, by 2015, the hardware cooperative had demonstrated the worth of that decision and was worth $4.7 billion. As of last year, that growth continues. Ace saw record revenues of $1.34 billion during its third quarter, representing a 9.1 percent increase from the prior year.
Cooperatives are designed to weather economic challenges and stabilize communities by providing a substantial voice to its members. In an interview with Forbes, Ace CEO John Venhuizen credited the co-op’s success to its store owners: “entrepreneurs with a deep knowledge of their local market, inventory fine-tuned to a neighborhood’s demographic and the sort of exacting customer service a typical big-box store with low pay and high employee turnover just can’t match.” Without the cooperative business model, Ace store owners wouldn’t have been able to simultaneously maintain that hyper-local touch and compete in their changing marketplace.
At NCBA CLUSA, we still believe the best way to build an economy that works for everyone is for people to own and control their businesses and—as a result—have a greater say in their futures and more equitable access to sustainable jobs and opportunities. In an environment in which the top 3 percent of the population holds half the wealth in the U.S. and companies are increasingly beholden to stockholders, now is not the time to cede the power of the cooperative business model.
While the members of True Value wrestle with the future of their cooperative, this is a moment for the larger cooperative community to pause and consider how best to position their cooperatives for the economy of today and tomorrow. As the pace of economic change continues to accelerate, the cooperative community (members, boards and managers) needs to embrace and drive that change, not be a victim of it.
—Doug O’Brien is president and CEO of NCBA CLUSA, where he works with the cooperative community to deepen its impact on the economy.