The decline and fall of the University Co-op
By Phil Hostak
September 1990; pages 3, 16-17; Volume 2, No. 1
The terms "co-operative" or "co-operative society" bring to mind establishments in which management, workers and consumers harmoniously work toward a common goal: providing essential goods and services at the lowest possible cost to members. With the pressure of pure profit motives gone, the antagonistic relation between buyer and seller, the frantic drive to push good and services on the consumer at the highest prices that the market can bear, should also disappear.
But even a superficial glance at our University Co-op reveals that something far short of co-operative ideals is going on at 2246 Guadalupe Street. If anything, the Co-op looks like more like a private corporation than the for-profits concerns on the Drag. Upon entry, the customer is immediately directed by security personnel to baggage lockers (or, during rush, one is conveniently marched through a candy store in order to reach the bag-check station). Next the customer must wend his or her way through a ground floor full of trendy clothes and tasteless geegaws and then ascend or descend a staircase in order to find what the Co-op is purportedly there to provide in the first place: books and other educational materials.
The preponderance of non-educational merchandise, combined with high prices and limited availability of required texts and the overall inconvenience at the Co-op makes one wonder if the institution still deserves its designation as a "co-operative" and whether its members actually do own and retain some democratic control over its operations.
Co-operative theory vs. Co-operative practice
Why does our co-op fail to adequately fulfill student needs? Why does it appear to fall short of co-operative principles? In order to assess the present state of the Co-op and judge to what extent it has diverged from the principles on which it was founded, it is necessary to take a brief detour into co-operative philosophy and the history of co-operatives of which our university bookstore is a part.
Co-operative philosophy displays a progressive, populist bent and its development is linked with that of modern socialism in the nineteenth century. A seminal figure in the early co-operative movement was the English utopian socialist Robert Owen, who founded co-operative communities in England and the United States. Charles Weiting, in The Progress of Co-operatives, defines a co-operative enterprise as "one which belongs to the people who use it services, the control of which rests equally with all members, and the gains of which are distributed to the members in proportion to the use they make of its services."
The first successful co-op founded on these principles was established in 1844 in Rochdale, England in order to provide basic staples for the impoverished textile workers of the community.
The central principles on which the Rochdale Society was founded remain the central tenets of sound co-operative philosophy to this day:
- Open membership
- Democratic control (one member, one vote)
- Each share of capital pays a moderate limited return
- Savings of the association are allocated to each member to the degree to which he or she uses the organization
- Education of members and non-members with reference to co-operative principles
The Rochdale Co-operative was enormously successful and by 1944 it did an annual business of nearly $3 million. The Rochdale Society charged a price close to that of the market and later divided the profits to its membership (Source: David Reeves A Century of Rochdale Co-operation: 1844-1944)
The first successful co-operative bookstore in the U.S. was founded in 1882 at Harvard University. The Harvard Co-op, which remains an exemplary testament to co-operative principles to this day, held to the principles of democratic control and the lowering of prices on essential educational materials. In the first sixteen months of its operation, it effected a 5% - 15% reduction in the price of books and forced its competitors to lower their prices accordingly. (Source: Kirk Kite The History of the University Co-operative Society.)
A member of the Harvard Co-op, William James Battle, received Ph.D. from Harvard in 1893 and came to the University of Texas as an associate professor of Greek. In 1896, Battle, with a group of concerned students, founded the University Co-op and was elected as its first president. The move to establish a co-operative bookstore at UT was supported by students who were dissatisfied with the previous book supplier, Corner and Fontaine's, for reasons that still have resonance in 1990: prices were too high, the required number of books was not always available, and the books were not always made available on time. So the University Co-operative Society was formed in order "to furnish University students with books, stationery, etc. at the lowest rates consistent with good business management." Established along the lines of the Harvard Co-op, the University Co-op at UT was committed to the principles of democratic control and the disbursement of profits to the membership.
This overview of co-operative history and philosophy and the early history of our co-operative will help us to gauge the extent to which the practice of the present-day co-op falls woefully short of the principles upon which it was founded. In contrast to the principled years of its founding, the recent history of the University Co-op, beginning with the firing of Co-op President Jerry Matthews in February of 1987, has been marked by shabby labor policies and highly questionable operational policies.
After Matthews was discharged by the board, then-chair of the board, Roy Harris, a UT management professor, became acting president as well as chair of the board of directors. This arrangement represents a severe conflict of interest, since the board is elected to oversee management. Three days after this major upheaval in management, which occurred in the midst of contract negotiations between the employees' union and management, the board announced personnel cuts and a proposed three-month deferral of the automatic annual pay raises required by the co-op's binding contract with the union. On February 24th, The Daily Texan reported that "employees said the firing of Matthews sparked concern over the lack of communication from the board about recent policy and operational and personnel changes." Co-op employee Abbe Wenger told The Daily Texan tht "We're not being told where the decisions are coming from, and the lack of communication has people scared for their jobs." Harris ascribed the firing of Matthews to basic management disagreements between Matthews and the board. Harris told The Daily Texan that "a president of an organization has to be mean and hard-nosed and Jerry had difficulty with that."
Enter Mitchell: the 'mean and hard-nosed' solution
In mid-1987, the Co-op board appointed a new president and general manager, George Mitchell. If Harris' criteria of meanness and hard-nosedness were indeed the qualification for the presidency of our Co-op, Mitchell, judging from many reports concernings his tenure as manager of the University of Maryland book store as well as his record at the UT Co-op, appears to be particularly well-suited to the job. Ex-employees from the University of Maryland Book Center (who resigned in the period after Mitchell became manager of that enterprise) reported that turnover at their place of employment was immense due to Mitchell's "high-handed" management style.
In March of 1982, four former employees of the University of Maryland, Joyce Aris, Avis Hall, Joanne Janus and Elizabeth Youkel, brought a suit against Mitchell charging that Mitchell had harassed them into resigning after they went to University officials to report what they saw as "mismanagement and abuse of authority." Detailed in the suit were charges that:
- Mitchell moved Joanne Janus's desk to a storage area and "degraded her duties to those of a textbook clerk" (Janus, an assistant manager, was a veteran employee of more than 24 years).
In 1983, the State settled out of court in favor of the plaintiffs. The minutes of the Maryland Department of Budget and fiscal planning state that the settlement was approved with the understanding that it be taken out of the University Book Center funds. (Sources: Prince George's County Records Office, The Baltimore Sun, March 31, 1982; Prince George's Journal, April 2, 1982; The Diamondback, April 1, 1982)
An example of Mitchell's managerial prose style can be found in the conclusion of a letter of reprimand that Mitchell sent to Steve Falke, manager of the book department at the University Book Center in January of 1981:
I hope that you understand that I do not play games. I expect immediate results and will not tolerate inefficiency. We are here to serve the people of this community and that is what we will do, and we will do it my way. If you feel that you cannot accomplish this mission, then you should look elsewhere for employment. (You should realize that you are one of the highest paid Book Department Managers in the country). Because if I find this ineffiency continuing, I will recommend to Mr. Goecker that we terminate your employment.
Falke was not involved in the lawsuit, but he did resign, citing Mitchell's managerial practice as the cause, in a letter sent to the University of Maryland Personnel Department as a response to a post-employment questionnaire. In this letter, Falke refuted the substance of the charges levelled by Mitchell in the letter of reprimand and further stated that Mitchell "made a totally inappropriate phone call" to his home January 12, 1981. Falke states that Mitchell called to ask where the buyback rooms were and when Mitchell was informed that he had the room reservation, Mitchell said "don't give me any of your shit" and hung up.
Mitchell's attack on the union
When Mitchell became president of the University Co-op here at UT, one of his first acts was to lay off 15 people in June of 1987. Four of the people discharged were department heads, six were part-time employees and five were full-time employees. 8 of the 15 let go were members of the University Co-operative Employees Union and 11 of the 15 were covered by the Union contract. The number of union members laid off was disproportionately high since union membership comprised approximately 21% of the Co-op's work force at the time, while the ratio of union members laid off was 53%. The president of the Co-op employees union at the time, Doug Brown, stated in The Texan that Mitchell hired 15-20 temporary workers in July to replace the employees that he had laid off in June. In a recent interview, Brown stated that, in retrospect, the layoffs appeared unnecessary since additional employees had to be hired to cope with the fall rush. "But they were hired at lower salaries," he said, adding, "and it does seem that it was a convenient way for [Mitchell] to get rid of a large number of union members."
As noted above, the management upheaval that culminated in Mitchell's accession to the presidency of the Co-op occurred in the midst of contract negotiations between the union and management. In a recent interview, Brown, who resigned after nearly ten years of service to the Co-op on account of Mitchell's management style, stated that Mitchell rejected all of the provisions already negotiated between labor and management when he took over negotiations on the part of management. After this rollback of negotiations, the renegotiated contract (which continues in effect until October of this year) contains provisions that cannot be seen as equitable to employees:
- Probationary periods are unusually long: six months for full-time employees and one year for part-time employees. During these probationary periods, an employee can be fired without cause and cannot grieve dismissal with management.
'Massive' theft or management intransigence?
In 1988, Mitchell began to act on a board report that the Co-op had shown a $600,000 loss in the previous fiscal year. His reaction, predictably enough, was to harass Co-op employees. He began in January of 88 by rigidly enforcing a previously unenforced internal security measure requiring that all employees enter and leave by the back door and leave their coats in a cloakroom and purses in a locker. The first victim of this policy was Berta Gonzalez, an employee of the Co-op for nearly nine years who was fired for bringing her purse to work with her. The policy was widely unpopular with employees. Becky Escamilla, who worked in the textbook department at the time, told The Texan:
"I imagine when my name's quote in the paper, I'll get all sorts of hell, but that's OK; I want the truth to be told ... I don't have a locker. I don't think it's safe so I didn't get one. I don't even bring a book to read for fear of being accused of textbook theft ... It insults us, it implies that you're a thief ... They can search our things without us ever being there. But we can't complain or we lose our jobs."
After her dismissal, Gonzalez said that Mitchell "would not listen to our concerns or in many cases not even take them into consideration in determining policy." (The Daily Texan, April 21, 1988.)
A private investigative firm, Wells and Associates (headed by former FBI agent Joseph Wells) was then commissioned to investigate alleged theft on a "massive" scale (the theft allegations involved a "significant discrepancy" in inventory - how significant was never reported). The primary object of investigation? You guessed it: Co-op employees. After Mitchell announced that the firm would be questioning employees, Wells told The Texan that the interviews would not unduly alarm the employees. But Bill Carr, a Co-op employee for over seven years who also resigned under Mitchell's management, told a very different story concerning his questioning. "The questioners were extremely hostile," said Carr in a recent interview. "They told me things like 'We know you stole the books' and 'You don't have any friends here at the Co-op, so you might as well tell us about it' - all of which was completely untrue." Toward the end of the interview, Carr said, there was a loud click which turned out to be a tape recorder hidden inside some software boxes nearby.
Although Mitchell stated that the firm was commissioned to "find the guilty party or parties" and Wells vowed that "We will get to the bottom of this," no definitive word on the discrepancy ever issued from the Co-op or its board. Greg Brown, however, indicated that some of the discrepancy was due to the large number of markdowns from the text and trade book departments which are authorized during Roy Harris' acting presidency. Bill Carr who, as shipping and receiving clerk, executed the markdowns, corroborated Brown's statement. So the private investigation of the Co-op evidently did nothing more than cause more duress at an already tense workplace and waste Co-op funds.
When a co-op isn't a co-op
The abusive labor practices detailed above are certainly a far cry from the progressive aims that we normally associate with co-operative enterprises. But the questionable practices of the present-day University Co-op are not limited to reprehensible employee management, but also extend to the adherence to co-operative principles with regard to dividends, merchandising and democratic control.
The current rebates issued by the Co-op are in the form of gift certificates which can only be used at the Co-op. Before 1987, however, the Co-op gave cash dividends. Issuing credit slips instead of cash allows the Co-op to pay only a fraction of the percentage that they are "giving" to members since their merchandise is bought wholesale. The Co-op board cited losses from the previous fiscal year, but despite the fact that Mitchell announces higher profits each year, we still do not get cash refunds from our co-op. And since the rebate does not come until October, students have already been hit for cash for their fall texts and cannot use their credit for essential texts at the time of greatest need. Graduating seniors who have left town have no chance to redeem their receipts.
Presently, the store emphasizes "soft goods" - clothing, candy, souvenirs, and the various totems of UT jingoism. It's become a Foley's with books, a sort of boutique for foppery and candies that reduces the intellectual needs of the community to the status of the afterthought. The immense allocation of prime space for such merchandise appears to conflict with the stipulations of the Co-op charter, which state that the Co-op is to be "operated exclusively for the educational and charitable purposes within the meaning of Section 501(c)(3) of the internal revenue code." As the educational value of souvenirs shotglasses and "Just Do Me" T-shirts is at best questionable, the consistency of such merchandising with the aims of the co-operative is highly doubtful.
Not only does this kind of merchandising conflict with the educational goals of the co-operative as stated in the charter, but it also threatens the Co-op's tax-exempt status. Internal Revenue Service code stipulates that tax-exempt businesses "must both be organized and operated exclusively for one or more [tax exempt] purposes" - i.e., in the Co-op's case, if it doesn't run "exclusively" for either educational or charitable purposes, then it could lose its tax exempt status.
The new progressive student leadership, led by SA president Toni Luckett and Co-op boardmember Omar Hallaj, should wield this apparent breach of IRS code like a club to force the Co-op into reform. The reforms should perhaps start with the ouster of the bullying, repressive George Mitchell, and end with the establishment of an authentic Co-op - based on the principles of mass student participation, affordability, and dedication to the academic needs of the commmunity.