Mountain Equipment Catastrophe

Dru Oja Jay is joined by Kevin Harding, one of the organizers of a spirited hail-mary attempt to save Mountain Equipment Co-op from being sold off to a US private equity firm.

Kevin is a public policy professional who works with cooperatives and community enterprises. In this episode, he shares about how tens of thousands of members mobilized to stop MEC's sale, and came very close to being successful. Dru and Kevin also discuss the situation that led to the co-operative's demise, what could have prevented it, and what became of the effort to save MEC. 

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Transcript

Dru Oja Jay: So welcome back to Half Past Capitalism, where we talk about alternatives to capitalism as if they were possible. The show is indeed part of the Harbinger Media Network. And our guest today is Kevin Harding, a public policy professional who works with cooperatives and community enterprises. Kevin was deeply involved in the last ditch effort to preserve the cooperative nature of Mountain Equipment Co-op, which will be the main thing we're talking about today. He's currently completing a Ph.D. at the University of Saskatchewan. Welcome, Kevin.

Kevin Harding: Thanks to. It's a pleasure to be here.

Dru Oja Jay: Thanks for coming on. So, yeah, I just wanted to do a bit of a recap of what happened with Mountain Equipment Co-op. So for years, MEC was a giant in the Canadian cooperative landscape and something of a Canadian business success story. At its peak, it had about 5 million members, maybe even more, and hundreds of millions in annual revenues. Maybe you can you can fill-in the proper numbers there later, Kevin. But for years it operated on a basis that deviated pretty significantly from profit seeking.

So, the fact that it didn't have to turn a profit enabled all kinds of things that were pretty interesting. So, for example, they had a very progressive suite of environmental policies and were leaders in environmental policy and practices among Canadian businesses for four decades. So that includes targeting zero waste — you know, they wouldn't give you a bag unless you asked for one, for example. But that moved up the supply chain as well in terms of the packaging of all the stuff they produced.

They also had industry leading energy efficiency. So that LEED platinum buildings — I remember the one in Montreal is still one of these industry leading type of buildings. And that was all way before that kind of thing was cool. And members could also get their gear repaired. So I had a friend who used to go- you know, he would wear out his hiking boots and he would take them back and they just either repair or replace them, which is obviously just unheard of at any any other kind of outdoor equipment store. That's sort of the opposite of profit seeking. It's like, "Okay, we're incentivizing ourselves to make gear last as long as possible.".

So, as a cooperative MEC was owned by each of its millions of members, but there was a widening chasm, I would say, between the membership and the people that ran the co-op: the staff, and the small number of people who would be on the board each year. So, in the 2000 it's sort of late in the beginning of the 2010s, the board moved to turn that chasm into a wall, putting measures in place that effectively allowed them to handpick board members.

So they basically had two different things: they would feature board members on the ballot — so that's a featured candidate — but then also they would just reject board members. They gave themselves the power to reject board members from even running, thereby basically giving themselves the power to select the next board. It would be like if Stephen Harper had been like, "Oh, well, I get to select the leader of the Liberal Party," kind of thing, just totally anti-democratic move.

And though those moves were controversial, they were nothing compared to the shock that would come in 2020, which is obviously when the co-operative announced that it was simultaneously declaring bankruptcy — so it had run up, you know, unbeknownst to a lot of people, and certainly to the members, that it had run up unsustainable levels of debt and was in a crisis — and then subsequently use that as an opportunity to sell off all the co-ops assets to a US based private equity fund.

So, for many members, the ones who knew about it, this was a total betrayal of the co-operative values. And certainly, as co-owners of the co-op they really had no say in how how those assets, and how that debt was was was dealt with. Yeah, but truth be told, in the end probably the vast majority of MEC's members had no idea what was going on.

That said, Kevin, you were a part of this effort that mobilized certainly thousands, I think probably tens of thousands of people, maybe more, to try to stop the fire sale of this multi-hundred million dollar, cooperatively-owned institution. I guess the first question that I have for you is, is how does that summary sound to you, do you think? Is there anything missing from there? Is there anything you would emphasize?

Kevin Harding: I think you covered off the basics of it really well. So Mountain Equipment Co-op — MEC, as I think probably most members called it — was formed in, I think 1971, and it was formed by a group of students at the University of British Columbia who were members of a hiking club. So really organic basis of starting off what became a multi-million dollar business, multi-hundred-million dollar business.

And they were facing problems where they couldn't buy climbing gear in Canada. And the easiest way for them to get the gear was to cross the border or drive down to Seattle and buy it from REI, the American co-operative. And they built a buyers club, essentially. They'd collect orders on order sheets, they'd pool money, they'd go across the border, they'd probably smuggle it back to be perfectly honest, I'm sure that there was some adventures with the border at that point in time. And over the years, they built up this organization into something, like you said, that was world leading, that was Canada's largest consumer cooperative.

And in 1971, when they made this decision to start this organization, there was a debate, but they very consciously built it as a co-op with very, very solid intention behind it to meet needs and not put profit above access, because those were the problems that they'd assessed with the outdoor equipment scene in Canada at this point in time. You know, some of them were university students, very idealistic. I know I was, in university when I was idealistic, and so that's how it started.

When they started selling more retail oriented in Vancouver in the 1970s and 1980s, they started by selling out of a VW van that they would park and people would come and shop from there. The first tents and things that they sold were made by members. It was it was cooperative labor and production. They sold them out of an attic in someone's house in Kitsilano. And then over time, they built up their business by buying a store, by putting in a workshop and still making equipment.

And then as they grew over time, they put principles into their purchasing. You mentioned things like low waste, but they also had sustainability and targets towards human rights. They had ups and downs with that throughout their history, but that was core to their business. They grew they they connected with other businesses in other provinces. They merged with other cooperatives. They grew themselves into a pan-Canadian organization. Core to that was that democracy in the heart of the business. At some point in time, members had actually a fair bit of influence in the way that the co-op was run. There was debates over whether or not things like products from occupied Palestine should be sold in stores, or whether products connected to arms manufacturers should be sold in stores. And members made their voices heard, and it was fascinating. It was an alternative way of doing business.

But like you said, it seemed to be around the 2010s that the business took a really significant turn in how it managed itself, its principles, and its commitment to co-operativism instead of business capitalism. And it ended in 2020 in that really heartbreaking manner.

Dru Oja Jay: I meant to mention in the intro that I actually ran for the board in 2011, and it was very much on some of those issues, like trying to up the environmental standards, and certainly the sort of solidarity with Palestine, because there was an Israeli weapons manufacturer that had some products that were in the store. So asking them to take those off the shelves, as well and to create a principled sort of ethical sourcing policy. But obviously that was building on what was already like a head-and-shoulders above all the other ethical sourcing policies. So it's like it's relative speaking. But obviously you hold the co-op to a higher standard.

But in terms of what you're just saying, like when the turn was happening, do you have a sense of where that came from, or what started that? My sense of it is that you had people- part of the problem is that you have a culture of- you don't have a culture of cooperation in terms of the people who can run a business that big. So when you hire people, you're hiring from the private sector, and then you get these people who are sort of formed in profit-making, and advancing their careers, and maximizing profit, and you get them in a situation where they're heading up this thing that's not needing to make a profit, not wanting to make profit, not mandated to make profit. And yet they're running it as if it's that. And then somehow, "and now it has become that." But I guess yeah, my question for you is what kinds of clues have you picked up in your in your travels about how that shift happened?

Kevin Harding: Yeah, it's an excellent question, and it's a bit of an adventure that MEC had in its lifetime. Like any organization, there's always a degree of growth, or a degree of expansion that they were able to sort of engage in as they matured as an organization, matured as a business.

And you often had examples of growing pains with that. Like the name of the co-op was Mountain Equipment Co-op, and some of the core members from the 1970s- I can remember in the late 1990s, when Mountain Equipment Co-op started carrying things like kayaks, or canoes, or bicycles. Members were really upset at that point because they saw that as a diversion from the core principle of the co-operative. And members had a debate, the board had a debate and, the idea was that the core purpose of a co-operative was to meet members needs. It's not to generate profits, it's that members of the co-op have a problem, they have an access-to-market problem, they have an access-to-resources problem, or finance, or something like that, and that they've determined that the best way to solve it is by working together and supporting each other, rather than under-bidding and overpaying, and things like that.

So when Mountain Equipment Co-op went in the direction of carrying things like kayaks, it was because members couldn't access something, and the members determined to provide those services, and those products, and support to help each other out. But it seems to have been around the 2010s, 20- you know, late or early 2010s sometime in then, that there was really a market shift away from growing stepwise, step-by-step in order to meet needs, and to continue providing services that members needed. And they shifted it a little bit in towards growing the membership to meet the business's needs. It's a nuanced shift, but it was really fundamental because you go from what do our members need and what can they not access, to how many members do we need to grow our book of business?

And there were a lot of things that went in at that same time. They started hiring, like you said, from the private sector. So, large retail businesses started coming on, they hired executives from there to drive their product strategy, and their marketing strategy. There were little signals in the development of the co-op that people saw from the outside. One was abandonment of the name Mountain Equipment Co-op for the logo M-E-C, and people saw that as a hint of of problems to come. And honestly, a lot of us should probably have listened to those people, like you, who who raised those concerns in the early 2010s.

And then it was that really significant restructuring of the internal democracy of the co-operative, where- I mean, you ran for the board, I once considered running for the board, and I had been elected to the board of a university for three years, a multi-hundred million dollar public institution. And even then I didn't have the background of large multi-hundred million dollar a year businesses. That was the basic minimum criteria to be considered for election to the board. And it was these little things that added up to start to create problems. And I mean, I'm sure you can imagine it, that once you narrow the range of perspectives and opinions that sit around the board table, and your members — who the definition of the business is supposed to be meeting their needs — they're not being heard because of the people that are around the table. The direction of the business might go in one way, where members want it to go in another. And that's that beginning of that chasm that you mentioned.

Dru Oja Jay: Yeah, that's a really interesting sort of- you know, I appreciate how structural that analysis is. It's not like a individual failing, but it's it's more of a systemic look at what happened there. I mean, it's easy for me to imagine. I mean, I tend to look at things systemically, but even in this case, it's like there's some kind of nefarious thing that happened, like somebody made a decision at some point. Obviously, I guess we don't know when that happened. But clearly it did. Clearly, somebody was like, "we're going to keep this secret and we're going to sell it off." And that's going to be- and we're getting hoodwinked, basically.

Kevin Harding: Yeah, yeah. I mean, there's lots of little things that in 2020 we were able to look back and say, "Okay, in 2016 they did this. In 2013, they hired this person." You know, they hired some people from mass market jewelry and clothing chains to start to be vice presidents and the senior executives in various places. And you can point to that, but there are elemental individuals that you can point out that were perhaps symptoms of the bigger thing.

And then there were bigger strategic issues that came up. To me, from the systemic perspective, the big thing is the change from their initial strategy as an organization, which was make sure that we can meet members needs. And if we identify a gap where member's needs aren't being met, then maybe that's an opportunity to grow. And then their strategy shifted from that into "let's grow the members as much as we can by throwing everything we can at them, to get the book of business bigger and bigger and bigger." So one is like mass market retail — where you can walk into a big box store and not walk out for a week because there's this many products that you never knew you needed — and the other one is one that's focused, a smaller store with maybe a more curated selection of products, but that are founded on understanding the member-owners rather than growing the customer base. And it's that shift, but then individuals enabled that shift, and then a narrowing of the perspectives around the board table cemented that shift, and then it led to business decisions and big problems.

Dru Oja Jay: Yes, I guess you are on the front lines of this of this sort of battle, you know, where there was a legal challenge. Thousands of people gave money to to help with the effort to stop MEC from being sold off, all these things. Can you describe a little bit about what that effort looked like?

Kevin Harding: Oh, yeah. I still sort of look back at that time and think about how at the height of the COVID pandemic that we managed to somehow pull together tens of thousands of Canadians who connected the only way that we could, online through WhatsApp, and Facebook, and all of these things, to oppose a giant corporate sale. It was bizarre, but it was also the spirit of the co-op trying to assert itself, in some sense or another.

It started with this surprise announcement on CBC Radio that the co-op was being sold, and I remember being heartbroken because, co-ops and cooperatives are core to where I see that society needs to go to build a better possibility. And I wanted to get out there and just share with people that this was probably a business failure. You know, like numbers on a spreadsheet were done somewhere wrong. Somebody made a poor strategic decision. It wasn't a failure of the co-op model. And it turned out that there were dozens, hundreds of people talking about that when I woke up in the morning, because it has hit an Eastern time zone before it hit in Pacific Time.

And a lot of folks gathered together online on Facebook. There was a Zoom meeting that was called. There were people and organizers with lots of experience, and political party organizing, or union labor organizing, that convened a great group of people. And really everyone pulled together in ways that they could. I'd had experience with co-ops in the past. I've worked in business development, supporting co-ops and credit unions, so I was there providing what I could. We had communications experts who were francophones that would translate everything that we developed into French. We had an online campaigner who gave us the tools and the framework and the structure to make this happen. There were people behind the scenes pulling together experts, from lawyers and- everything came together.

But what it really was like, was that theory of coordination between people who want to coordinate together and voluntarily associate. It was the heart of what a co-op is supposed to be. We had a problem that we wanted to solve, which was that this organization that we owned, and that was ours, was being sold out without notice and without without consultation, and we needed to organize around it. And people did. And it was just it was an astounding period of time.

Dru Oja Jay: And so can can you just sketch out how that played out? You know, without getting too into the weeds, obviously there's legal briefings and all kinds of stuff we could dig into. And I'm sure you were fully immersed in it for a certain amount of time. But yeah, what did that look like? Do you feel like you ever came close to being successful? I mean, I feel like there were some people who are very convinced that it was possible to turn this back.

Kevin Harding: This is such a good question. You know, how close did we get? And I think that this is something that's fascinating. We- this group of people, this group of dozens, of hundreds of people that were the core organizing team, we existed on Slack for weeks, and Zoom meetings, and things like that. We pulled together tens of thousands of people and we pulled together support and advice from large cooperative financial institutions, credit unions, insurance companies. We we were really remarkably close to being able to do this. And what ended up hitting us was the legal system.

So the problem that we faced here was that MEC was in a position where the money that it owed was bigger than the money that it had. And the pandemic had hit them hard, supply chain issues had hit them really hard, so they weren't generating a huge amount of revenue. They'd started off secretly, under non-disclosure agreements, sort of shopping around to try to figure out how they could get a loan from a banking consortium renegotiated. And it turned out that it was getting kind of hard to do that, because they were talking to banks, and banks didn't want to really do this for them.

And so their financial advisors — which hilariously was also their bankruptcy advising firm — told them, "You really just need to start looking around to sell." And then this US capital firm came up and said, "Well, we'll buy it. We'll pay off your outstanding loans, we'll own the business, and things will be done." And part of that agreement to sell the assets of the business was that they'd go under the Canadian Companies Creditors Arrangements Act. This federal bankruptcy legislation that came from the Great Depression, that allowed them to circumvent all the bylaws of the co-op and all the provincial laws and have a judge stamp a piece of paper that says, despite everything else, you can sell the business. That was the condition of sale.

So they went to the Supreme Court in British Columbia. They did a ex-parte application: "protect us, allow us to start the sale." And that was when members first heard of it. And that was when we started organizing online, when we started a petition, started an email list, we started GoFundMe. We didn't even start the GoFundMe to begin with, we were just outraged and meeting people together, but some law firms stepped up, offered pro-bono support and representation. We felt it was important to pay them at least a certain amount of their time because they were they were doing so much work to support us. And Canadians across the country and around the world stepped up, and put money into a GoFundMe to pay off some of those legal bills.

The lawyers assisted us in a challenge, and they'd had a lot of experience with these kinds of bankruptcy arrangements, with this law that allows companies to walk away from pension obligations, walk away from unpaid wages, and deliver assets into other corporate buyers. And they told us that really one of the only ways that we'd be able to succeed is if we pitched an alternate arrangement. Another way to satisfy the loans, that would allow the the cooperative to continue, that would be competitive to the prearranged American investment capital firm.

And so the organizing team and myself, we pulled together advisors from the co-op and credit union financial sector from across the country. And there was a very real possibility that had there even been five business days worth of time to look at the books of Mountain Equipment Co-op, that the credit unions and the financial institutions would have gotten past their due diligence obligations. A credit union is owned by members. It can't just risk money because these are people's homes and people's savings. But if they'd gotten enough time to look at the books — because the company still exists, it's still doing business, it's existing — there's a valid case to be made. If they could get that level of trust, they would have been able to put up sufficient funds to bridge the co-op through the challenging time.

We would have been able to pull together a board of experts that could have stepped in and run the co-op and rearranged things, keeping jobs and activities going, and the story wouldn't have been the same. But this law from the 1940s is not written to allow that. It's designed to satisfy banks and to satisfy lenders, it's not designed to prioritize social capital or communities. And because of the way that the law is written, and because the judge is duty bound to follow the law, this reasonable five day pause to look at the books wasn't permitted. And that's really where the core of the problem came from, and fell apart. And, you know, it was five days and we would have been able to do it.

Dru Oja Jay: That's unreal, and so interesting to see that sort of cooperation in action. I mean, obviously, we all have our critiques, and bone to pick with all the big financial institutions, and so on, but the fact that there was a possibility that all of this other cooperative infrastructure could have been mobilized to keep MEC alive, if only the people there had had any clue, really, or any inkling or intention of operating in a cooperative context, as opposed to just doing a fire sale. But that's super interesting.

Kevin Harding: That's so true, because the root business problem here — not to sound too much like a business analyst, because I'm not — but the business problem with Mountain Equipment Co-op is that they went into this expansion phase, like you'll see with a lot of other businesses. They thought, you know, "Calgary needs three Mountain Equipment Co-ops. Saskatoon needs two, Vancouver needs four." And so they started signing these big leases, and these big renovation plans to renovate malls to have their stores built.

And it was just too much all at once. They had this giant loan that they needed to pay. This was completely 180 degrees opposite from how they'd previously done things, which was buy land, build a store, sit on it for a while until there's demonstrated need somewhere else. And because of that aggression in entering the market, like you'll see with all kinds of other retail private firms, they just ran into this zone where they couldn't pay the bills, and that was the core problem. But their loan was from a bank. It was from the big five banks in Canada. And the credit union sector had always been a little bit upset that Mountain Equipment Co-op, Canada's largest retail co-op, hadn't done loans through the credit union sector, because then there would have been aligned interests, and principles, and support. Where the banks, they just want their bills paid, credit unions want to support the communities and their members in a different direction. So, that was another opportunity that, you know- And then in the '80s or the '90s, or the early 2000s, that should have been taken because you can if you can build the system in a different direction, you don't have to worry about profit-taking at 16 levels.

Dru Oja Jay: I remember at a certain point in the in the 2010s, at some point you had, MEC people sort of saying, "Oh, well you can't just stop growing when you're that big, because you have to keep- because there's a financial imperative to keep growing." And I guess that was the justification for them opening up all these urban sort of boutique yoga shops, and changing the logo to that ugly thing, that's just totally generic. Which is fascinating, because as soon as the private equity bought it, they went back to the old logo.

Kevin Harding: They went back to the old logo, yeah.

Dru Oja Jay: Totally fascinating. Anyway, just sort of a side note. But what do you make of that case that was being made at the time? Like I mean, I've never run a $700 million a year co-op so I don't know, but do you have to keep growing? I mean, assuming you do- but there's different ways to do it. But, you tell me.

Kevin Harding: Yeah. This is a core question to a lot of co-ops right now in the country. There's always going to be some degree of growth that a co-operative business needs to get into because members may resign their membership, they may leave the country, they might not need that business any longer. So you need to have that base minimum amount of core members interacting with you to sustain your business. But one of the core differences between a co-op and a private company is that the members are the owners, and members are looking to make sure that they've got a place they can buy their hiking boots, or get their bike repaired. They're not investors that are looking for a 3.5% annual dividend.

So when you're in an investment oriented firm, you need to generate growth to satisfy the investors. But when you're in a co-op, you just need to make sure that member's needs are met, and you can de-link that growth imperative. There's dozens of credit unions across the country that are the core credit unions. Like employees' credit unions, Toronto Municipal Employees Credit Unions that used to exist. There's lots of these really awesome union backed credit unions, or community backed credit unions, where their growth is through patient capital, supporting their members who are blocked from other financial transactions because of things like gender, or where they live, or their personal economic history. And to them, growth is the success, and helping members succeed. And that's what co-ops can do as well.

But when you have a leadership team, or an executive team, at a retail co-op that doesn't understand that growth isn't actually the imperative for a co-op, as it is for a private business, then you get into this zone where you need aggressive expansion, expand your product selection massively and things like that. That's what co-ops really need to keep in mind, is that growth is something that you can plan for carefully, but that's not your core imperative as a co-operative business.

Dru Oja Jay: Yeah. And there are also different directions to grow in. I mean, obviously the Mountain Equipment Co-op was selling designer jeans, and doing all these things, and it wasn't even working, which is the ironic part of it. But yeah, coming back to the high drama that we were in the middle of before I started talking about growth. Yeah, with the you know- when you're at the B.C. Supreme Court is there- you know, B.C. has an NDP government at the moment, and I believe David Eby is the attorney general at that moment.

Kevin Harding: Yes, he was at that point in time.

Dru Oja Jay: So, is there nothing he can do? Or does he not want to do it?

Kevin Harding: This is one of these moments of complete and utter heartache, in what happened is that when the sale was announced and when the community, the members came together to start to organize, there were immediate connections to the provincial government in British Columbia. There are a number of cabinet ministers and elected MLAs at the moment, and even then, who had been on boards of credit unions, or boards of co-ops. And they know also know the history of the NDP as the Co-operative Commonwealth Federation that had a core plank of its philosophy being we need to replace the economy with cooperatives. So they get the idea. But unfortunately, three days after this started happening, the Premier called an election. And so at that point, literally nothing the province could do because, policy nerds will know, the government goes into this zone of like no commitments, no nothing, just maintain the ship of state.

So was there something the province could have done? The province— at that point we were at the height of COVID, all levels of government were throwing billions of dollars at businesses to sustain economies. This was like a $300 million loan that MEC needed to solve itself. And the the products that MEC makes, there's a lot of them that could be made in British Columbia, the home of the co-operative, that could have provided employment. This would have made a perfectly reasonable economic case at the height of COVID. But because that election was being called- we had literal lines of communication with Cabinet ministers, they all had to stop because the election was called, unfortunately, at that particular point.

Dru Oja Jay: What a timing situation. Wild. And in terms of that, I mean, that was one of the things that I ran on, not really knowing, just knowing that I thought it was a good idea. But the fact that you have a consumer co-op, that produces things and sell things, so why can't that consumer co-op then- you know, like they do in Japan, go upstream and say, "okay, let's start using this like $700 million in revenue that we have and channel some portion of that to worker co-ops that produce things and then put the things in the stores and sell to the consumers." And I'm curious what your take is on that. You sort of mentioned that there was a possibility of creating things in British Columbia, but can you expand on that a bit more?

Kevin Harding: Yeah, it takes me back- in 2013 through 2016, I was working in the co-op sector with co-op associations and I actually did a fair bit of work with MEC and it always was a fun adventure, because I'd hear from members and people organizing around the democracy in the co-op, and I was in the zone where they were a member of the organization I was in, and there was lines to be drawn. And I can remember being in Quebec City and going to the Met in Quebec City, and the staff members there, they had shirts and it said [indecipherable French], member and staff at the same time. And that was like: that's pretty awesome. You're a member of the co-op, and you're staff. Like, that's a really good way to reinforce this. And in English Canada, it was just staff. There was none of this dual terminology that the French language manages to bring in, and that connection to cooperativism.

But when we were looking at the economic picture and trying to make a case for things like government intervention, or why MEC- what about investment from foreign firms, what about Canadian interests, all of these weird sort of nationalist things. One of the criticisms that members had to organized around, and I think you probably were aware of it too, was that a lot of Mountain Equipment Co-op's, production had been moved overseas into potentially quite exploitative environments, and there had been a lot of push to change up, either to improve working conditions or to meet human rights standards. And MEC had been working, if you believe their reports, in that direction.

And also there was there was a lot of research into innovative product design, new ways of designing clothing, new fabrics that meet outdoor conditions. And there is a government program to support that kind of innovation in B.C., and there are in other provinces, and federally, and in that there are tax benefits and things like that. So there could have been an investment made to what was called at the time 'reshoring production,' bring production back to Canada to employ people who reside in Canada, to design and build these products and then sell them through a cooperative. There was a lot of potential there, and that was something that people in government had been interested in. But timing. Timing was our was our enemy here, because the board did all of this in secret and didn't ask anyone their opinion before they sold.

Dru Oja Jay: So you talked about the five days, that you did to save the co-op, but I'm just wondering if we go back a little further in time, when would have been the sort of ideal moment in MEC's history for some kind of critical mass of members to try to intervene to change it? Like, where was the fork in the road?

Kevin Harding: Yeah, it was- I mean, if I'm going to look back, it was probably around 2011 to 2013, which was when a lot of these structural changes started being made. Prior to 2013, and in that zone, the direction of the co-op had been that stepwise growth: meeting requirements of a critical mass of members, that are X number of hours away, and where is there a reasonable place to build a store, and things like that. But from about 2013 onwards there was that shift — the change of the logo, the hiring of people from large retail clothing stores — and then it was at that point that the co-op started its aggressive expansion platform.

Like in Montreal, they opened up that boutique yoga store on St. Denis, right? It wasn't a Mountain Equipment Co-op, it was the bottom of a storefront retail kind of place in Canada's huge shopping district. And it was this idea then, that everything had to grow in a certain standard retail direction. If members hadn't been locked out — because this was the same time that governance of the co-op had been changed, that members were no longer allowed to just run for the board. You had to meet this secretive list of qualifications that basically locked you out unless you were a multimillionaire, kind of thing. It's that nexus, that connection of events, the brand change, the aggressive growth, the retail orientation, and the governance changes that prevented members from being on the board, and instead focused on people who thought retail was the way to go. So, that's where I'd put my finger on it. That's the point that a difference needed to have started.

Dru Oja Jay: Well, that's personally validating, since I ran for the board in 2011, and then we started an organization after that, called MEC Members for a Democratic Co-op, and published two open letters that got like 700 signatures, or something. But clearly that wasn't enough. Clearly, there needed to be some kind of bigger institutional intervention and probably, frankly, legal, because when they snuck through those changes, they were like, "oh, we're going to modernize our governance." And then when the ballot came — because they had to get the members to vote for this, so they sent it up to their 4 million members or whatever — they said, "oh, would you like to modernize governance and update things so that they're cool?" And we're like, "No, don't do it." But obviously, if people like you have to click on the fine print and then read through it and understand all this legalese in order to be able to say, "oh no, that's actually a bad idea. Like, that's not modernization at all, that's just de-democratization." But obviously, it was you know- they had control of that. And so the only strategy that probably would have worked there is a legal one, or if there was an intense enough crew, some kind of direct action, which frankly, that was the only avenue that made sense to me at that time. But I wasn't able to get it going. But what's your take on that?

Kevin Harding: I can remember when Mountain Equipment Co-op proposed this modernization of their governance, the way that they described it was like making sure that we have the right experience around the table, and stuff like that. Really just sort of generic statements, that in general sound right, and you would have really had to delve deep into the fine print of the proposal to understand the potential implications of what was coming out of that. And even at that point and even now, the laws in this country that sort of create what a co-op is probably wouldn't have prevented those kinds of changes, because the law sort of takes a step back. It's a co-op, it's democratic. If the members choose to do something, unless it's against some other law, the courts aren't going to get involved.

So really, the work for the members, for a democratic co-op that was inspiring, and that created the core organizing principles that the members who tried to stop the sale built on, was what needed to be done. It's just there's all kinds of like weird little policy wonky things like this 6 million members that MEC says no one's really sure. How many of those members were still, I don't know, alive because it was a $5 thing. MEC could throw all kinds of things at you, like you needed 10% of the members to make sure that there was a special general meeting, but then they would say that's 600,000, but they wouldn't let you verify things. They had all of these little student union kind of Robert's Rules of Order tools. They could shut down organizing. And so it probably would have been that mass membership organizing that would have needed to occur. But because because MEC had taken this corporate retail growth approach, $5 membership, you can go in and buy your shoes and never interact with us again. They were able to create this mass number of members that would never engage, and then they'd have a smaller number of members that would actively vote for things. If the board told them that it was what they should do. And yeah, failure of engagement, failure of democracy. It was really sad.

Dru Oja Jay: It's interesting. I mean, I feel like in hindsight I actually go back quite a bit further than 2011. I mean, obviously there was a turning point there, but it seemed like the deck was stacked against us. Like if once you're in control of a co-op that's that big, with that little civil society layer, there's nothing anyone can do, really. Except unless there's a legal avenue which you just seemed to be suggesting there was not. So I would go back to, I don't know, the eighties or nineties when it's like, "okay, you're growing now, you're opening stores in different cities.".

At that point, do you adapt your structure and say, "okay, we're not just going to one national board, but we'll have a national board, but we'll also have a board for each store" and they're going to have- yeah, let's create more of a federated model where it's like, "oh, this local board is going to have control over X, Y, and Z at this store, even if there's even if some of the company-wide or cooperative-wide policy is set at the national level. And then you would get that layer of organization, and civil society, and consultation, and organic connection with members that you just don't have when you have five people who sort of happened to get on the board somehow.

Kevin Harding: Yeah, I agree with you completely. And this was something that I can remember. I can remember a lot of people talking about in the early 2000s, and pointing at MEC's growth over time. Like, when they first moved out of British Columbia into another province, there was a similar concept of a co-op that was existing in Calgary. And rather than forming a federation with a central buying entity, and then separate stores, they amalgamated instead. They took this choice. And so that's maybe, if you're going to apply a historical materialist or something, they made a choice at this point to amalgamate rather than to democratize. And that might have been one of the key decision points.

If we look at- I mean, all co-ops of great scale have this problem to some degree, of disengagement in the civic relationship. But if we look at other successful cooperatives in Canada, that despite their warts and their ugly bits, still exist and still make differences in communities. You've got Desjardins in Quebec, and in some parts of Franco-Ontario, and Atlantic Canada, where they have local boards for the local branches of the credit union. So that way you might have a labor union oriented credit union that's member of the Desjardins movement. You might have a Catholic credit union that's a member of the Desjardins movement. You might have one in a certain area that's a certain socio-cultural background. And that keeps the the individual branches of the credit union responsive to the community in the domain that they can be responsive. And then you have a delegation system.

So that way the movement in Quebec and in Montreal, the large, the core central financial management, is done in a removed but still accountable way. Federated Co-ops Limited in the prairies: again, warts and ugly bits. They own a refinery and maybe there's some improvements that they could make around there, like a lot of improvements in some governance structures there. But still Federated Co-ops, in a large part of the rural and the more prairie parts of this country, is the only thing that keeps communities alive. And they invest in, they employ in local communities, and they are transformative in the prairies in terms of the economic solidity. Even just being able to buy food at an accessible location that's affordable, private businesses won't go there. Jimmy Pattison Save-On-Foods that's slowly colonizing the rest of the grocery store landscape in Canada won't go into these parts of the country, but a co-op will. And they do that in that decentralized but coordinated way where there's a corporate buying, that is owned by all the co-ops, but then the local stores are still managed democratically. So yeah.

Dru Oja Jay: Yeah, that's one of the reasons it's such a fascinating example. I mean, the way somebody put it was like, "oh, well, they have a $1,000,000,000 tar sands refinery, but the revenues from that refinery are holding together these rural communities in like Manitoba and Saskatchewan, right?

Kevin Harding: That's exactly it, yeah. I mean, we all have hope, in terms of large corporate changes and recognition that we need to get away from from oil, but at the same time, this refinery keeps communities alive through the way that the revenue is because you know, it's a co-op. There aren't shareholders profiting off of this refinery, it's going back in to subsidize the food, and the retail operations that keep communities alive. It's a mix of evil and good in one business.

Dru Oja Jay: I mean and that's the thing. Obviously democracy is in no way a panacea, it just gives you a fighting chance to make the right thing happen. But it's ultimately like- with Desjardins it's the same thing. It's like, yeah, you know, you can do things like get- I don't know, like 30 branches of Desjardin and have like Greenpeace came and got them to sign a thing being like, "we're going to divest from the tar sands." And I think they just didn't do it. But it's obviously full of contradictions because it's like these are people who are- they're not- just being part of a co-op doesn't make them, have the same motivations as we would like them to, or to have the same values. Like there probably is a lot of CAQ voters in there, there's a lot of-

Kevin Harding: Like with, you know, members of other retail co-ops, there's conservative members that are on boards, right?

Dru Oja Jay: Exactly, right. But it does give you that sort of social fabric. And it was interesting, I — just another anecdote — I was like 20, must have been around 29 or something, I was at a big co-op conference in Quebec City in one of these big fancy hotels and stuff. And it was like, you know, we're in this big, just giant hotel ballroom. You know, the CEO of Desjardins gets up to give this big speech and she's like, "Capitalism isn't working." You know, to a room full with like, I don't know, 600 people in it or something, all from these different co-operative businesses. And it's like, wow, this is just this alternate universe. I mean, even if she doesn't- she only believes that on a certain level, it's stuff you would never hear the CEO of a major bank say that, right? Like, and this is one of the major banks in Canada, so-

Kevin Harding: No, exactly. I mean, what you just mentioned there, that idea of a social fabric. In my time in the sector — and I still work with the sector, I study it at my PhD program — one of my favorite things is that you do get this eclectic combination of people with different political orientations and political backgrounds, but they are also personally involved in an alternate form of economic organization. And they might be the most, you know, right wing Albertan person in a farm — not that Alberta's necessarily the be all and end all — but they might be super conservative, super right wing, but they also know that this way of doing business is better for them, their families and their communities, because it takes this profit motive, this exploitation out of things.

And so you do get these weird scenarios where you're in a room with hundreds of people from around the world that are heads of multibillion dollar organizations. And they all will agree with you that capitalism, as it is right now, is not working. And it is just- it's cognitively dissonant. But it's amazing to see how an economic organization can change people's minds at that level while maybe not changing their hearts at the political level.

Dru Oja Jay: Yeah, exactly. I mean, it's like just having the space to say that is one of the many, mostly invisible, benefits of a co-operative structure, because yeah. You don't have to hew to the same ideology.

Kevin Harding: You can point to an existing alternative, right? It's prefigurative of politics in a sense, as you can say, "look, there is another way of doing things." They exist in capitalism — they have to right now because of the way that the economy is structured — but they are also proof that there's another way to do it.

Dru Oja Jay: And in some ways it's like that ideological layer that's somehow is missing, because co-ops are just focused on such a- in some ways focused on the mandate that you were talking about at the beginning. It's like, "okay, you meet the needs of your members." And so when you're in rural Saskatchewan, even though everybody is voting for Stephen Harper or whoever, or the Saskatchewan Party, they understand and appreciate the benefits of the immediate structure, of whether it's the Federated Co-op or Saskatel which is provincially owned, or whatever. They understand those things, but there's no ideological structure for them to make that make sense in a political sense. And so they're like, "Oh, we'll just keep voting conservative," even though conservatives are very actively tearing up that social and economic fabric that's been carefully created.

Kevin Harding: Yeah, no, exactly. And I mean, this is maybe one of the biggest strategic errors the co-op movement has ever made in its life, is to stick out of the politics and focus on the policy. You know, co-ops are always focused on, "let's adjust regulations here, let's change this word in this piece of legislation." But ever since the CCF went the way of the NDP, no one's been making the case for the bridge between the economic and the social in Quebec. There's a little bit more of that because there's this fascinating confluence of cultural preservation and nationalistic sentiments that can go into the co-op form, and this uniquely Quebec form of doing business. That's special, and if that could translate into Anglo-Canada, maybe there'd be hints of changes in other places, too.

Dru Oja Jay: Yeah, I feel like it needs to be embedded in- I mean, in some ways it's the advantage that it has right now is that it's not embedded in a political project, and so it doesn't-it evades the culture war. But then that's also the downside, in the sense that that lived experience of "oh, this co-op is benefiting my family and this business model is better than this other one," doesn't translate into any bigger political anything, it just is there, until it's torn up by some conservative hack- or NDP, as the case may be.

Kevin Harding: Exactly.

Dru Oja Jay: But yeah, I want to come back to MEC. So that was a good digression, but I'm really curious about, just to nerd out on the specifics of it. Like I'm curious about the member list. What was the legal basis? Because this co-op still exists, they just hold all its assets, but it's still a co-op. It still has like a number on it. I don't know, it's like the 12345 Canada Co-operative or something. It's still exists there, but what happened to all the members? Like it must have — if it still exists, it should still have its member list — but tell me what happened.

Kevin Harding: This is this weird zone where they're actually have been some legal changes to try to solve some of this problem, if it ever comes up again, and let's all hope that it never comes up again. But what we've got, a scenario here is that there was a corporate entity, a co-op that had 6 million members and there was a member list, and there was this weird problem because the member list was in this retail software thing that they used at the cash registers. And as part of the sale arrangement, the company that bought Mountain Equipment Co-op didn't get the member list. And what we tried to do was, use our rights as members under the Cooperative Act of British Columbia to access that member list, to organize people to get emails, get phone numbers, organize people. Maybe we could build something out of this.

And the the lawyers for the co-op, when we had made an application saying, "give us the member list," the lawyers for the co-op went to the judge in the bankruptcy case and made up a whole bunch of stuff. Like at one point, the lawyer said that I was a danger to the public because there's got to be judges that have membership at Mountain Equipment Co-op. And do you really want Kevin to have your home address? And I found that personally very insulting because I wasn't going to do anything other than try to help members organize.

But it's this disconnect, because we had the right. It was in the law. And what the judge ended up doing, was very carefully, the judge did not rule and say that the law was wrong, and that members couldn't have access to the membership list. The judge just said that under this bankruptcy legislation that exists in Canada, making the co-op produce the member list right now would take up too much time. So I'm just going to say "no" to that. And she has the right, it's federal law. And federal law trumps provincial on this case. And our lawyers pushed hard on it. And the judge probably sensing that she would have been overturned if we had appealed it, wrote it in a way that it was pretty much un-appealable because it was under the bankruptcy legislation and just that "not enough time.".

Now, since then, the sale concluded and all of the directors from Mountain Equipment Co-op resigned. And we're in this bizarre legal zone where there's no directors to call an Annual General Meeting. And because no directors can call the Annual General Meeting, there can't be an Annual General Meeting, and therefore there can't be elections. So it's a black hole in the law. Since then, the legislature in British Columbia changed a core part of the Co-operative Act that says that if members are in the situation where they're demanding these records, and the co-op says no, then they've given power to a government official to step in and demand that the records be published. So that's good.

But in the MEC case, we don't know where the member list is. The computers might have been deleted, the company says they don't have it. There's- it's gone. And it breaks my heart because there's 50 years worth of history of building a co-op that might have ended up in a recycling bin in Kitsilano somewhere, and nobody preserved it. Because the company didn't have the right to preserve it, but also there was no money left to even pay for an archivist. We had archives, the Vancouver archives, there was the British Columbia archives, that was interested in even just preserving under seal these records, because maybe in 100 years they'd be valuable. But I don't know, US equity investment firms don't care about history, don't care about organizing, they just care about money.

Dru Oja Jay: How much of the lesson of this is applicable to other co-ops? Like, do you think that there's a threat of this happening to other co-ops? And where do you see that sort of threat happening, or eventually happening in the near future?

Kevin Harding: Yeah, there absolutely is a threat of this for other co-ops. There's a lot of co-ops that are positioned to weather it relatively well. Like if I'm looking at the big financial credit unions, they were paying attention throughout all of this. They've learned lessons, but they're also big enough that they're probably not going to run into the very specific, "too much loan, not enough money" problem. That's probably not going to happen to credit unions. Also, because there's a lot of protection, insurance and things like that.

But there's other places in Canada and in the world where this is becoming a problem. In New Zealand — it's a very random country — but in New Zealand, there's a lot of dairy cooperatives that are being bought out by multinational dairy companies because of this problem. They can come in and they can offer farmers a huge amount of money to buy their co-op from them. But it's a one-time payment, and then the farmers are in the position of, the co-op — which gave them access to markets, which paid for transportation of goods, which made their businesses function — that's no longer theirs. And this international dairy concern can now jack up the prices and reduce the payments. It's kind of like how Uber comes in and destroys taxi companies.

We put a lot of money in, and we make the product good, and then we jack up the prices afterwards. In Canada, there is some hints that in some places there are potential challenges for some grocery or food cooperatives. Federated in Calgary, the Calgary Co-op moved away from Federated Co-op Limited's buying arm, and instead they're now purchasing their bulk goods, like their supply from Save-On-Foods, which is something that the local members are maybe okay with tacitly, maybe not. It's not super clear in terms of the elections. But Calgary Co-op is the largest retail co-op in the Federated network, and that starts to put some challenge into Federated's broad business model too, because now that idea of stores banding together and getting economies-of-scale discounts is weakened a little bit. And, you know, those are hints: you're going to see that in other places. And so co-ops need to reconnect with their members to prevent that from happening.

Dru Oja Jay: And the deal that capital can offer is always going to look better in the short term. I remember talking to some folks in my hometown who who are part of a home heating co-op. Very successful, you know, built up a nice little business. They all- the whole generation of guys, or people, retired — mostly guys. But they- and then there was no one to hand it off to, so they were like- they got a really nice offer from some regional company to buy them out, and they were like, oh yeah, we promise we'll keep it like this. We'll do this. We'll do all these things now. And of course they're going to do that for like, I don't know, one, two, three, maybe even five years. But then, "oh, they got sold to another big conglomerate of home heating," you know, whatever, mega corp. And all of a sudden that's gutted, right? And it's like, "oh, no, that's too bad," you know? A generation of building relationships and value is just like fsssst.

Kevin Harding: Yeah, exactly.

Dru Oja Jay: So it can really be tragic, and really the only thing that can carry you through that is an ideological understanding — in some ways to be like, "okay, you know, we know how this plays out." Even though the deal looks really good in the short term.

Kevin Harding: Yeah, no, that's exactly it. I mean, the farmers who are part of demutualized dairy co-operatives, that are now just selling to some kind of Italian dairy concern, they realize now that they're getting paid less for the product that they used to sell, but the price that's going out to consumers is more. And so who is pocketing the difference? Right?

Like, that's something, that you get $100,000 for your share to buy out the co-op, but then amortize that over the rest of the years that you or your family want to have your farm producing. Maybe this wasn't a good benefit. And there are some parts of the country that are recognizing that they need to go in the other direction and rebuild these pieces of cooperative infrastructure to keep their communities. Like rural Alberta has got a lot of these rural economic cooperatives to reinvest locally. But if you can't connect the two disparate sides of this equation — people who have experienced what it's like to demutualize, and the people who are remutualizing because they need to meet the community's needs — then the story, you only get half of it at one point in time.

And you're right, capital tells you a really good deal. "Give you $150,000 for your share right now." You know, like imagine in Vancouver where you got to work three jobs to afford a place to live. You can't afford a car. So we've got this really amazing auto co-op MODO, the car co-op. It's got places across the province, connections with co-ops and other in other provinces. You know, if a car rental agency came in and offered members, you know, a good deal — "we'll buy out" — and then suddenly you had $16 worth of fuel surcharges, you can only book them for an hour, and all of these things, you'd have a little bit of money, but the thing that kept you going to work, or taking vacations would be gone. And, yeah-

Dru Oja Jay: I mean, that's the thing about having capital. If you have a big pile of money, you can you can always amortize it over time, or you can be like, "we'll give you 150 grand now, but, we'll call that back, and then some, over the next ten years," or whatever.

Kevin Harding: It's exactly what the American company that bought MEC is doing. They came in, they bought the assets. And really what that meant is that they deducted the loan, and then they got the stores, the land, the goods in the stores, for pennies on the dollar. And then one of the first things they did was they sold the land under the stores, they sold the stores and they rented it back. Classic private equity move, because then the companies pocketed hundreds of millions from the land, and the company that they really don't necessarily care a huge amount about, "it just going to pay the rent, it's all going to be fine." And then people are now saying, hey, there's not as much selection as there used to be. There's not as many good products. You just opened up a "store-in-the-store" in one of the bay shops in Canada and it's like, "okay, great." So now the cost of these pants that used to be $15 is going to be $45, because you've got this next to a Levi's booth where the jeans are $200 for a pair of jeans. All of that's going to slowly go away, and it's just going to be this fancy logo that is expensive, and doesn't mean anything anymore.

Dru Oja Jay: Yeah, I made the mistake of buying some stuff from the post-fire sale MEC. I just bought some gloves that were on sale, and they fell apart within like, I don't know, a month. I was just like, "okay well I learned my lesson."

Kevin Harding: I've got a backpack with the old moutain logo on it, yeah.

Dru Oja Jay: Yeah exactly. I'm curious, there was some talk of- because there's a significant amount of energy that got sort of mobilized, and obviously a lot of people got involved, and interested, and excited. Where are the next steps at? Like, there was talk of creating a new co-op, potentially sort of a phoenix project of sorts. Has there been any movement on that, or any- yeah, where's that at?

Kevin Harding: Yeah, there was a lot of excitement and energy in the final days of this whole process. And there was a lot of people who are really interested in building something new. And then the end of the co-op came, it was clear it was done. And there was a core group of people who were interested in it. We started doing things like business modeling, and looking through products, and stuff like that. And the magic of MEC was that it started when there were no competitors in the country, that there was nowhere else anyone could go, and they built it on, at first bulk ordering, smuggling shoes across the border, kind of model to keep costs low. And we quickly came to the conclusion it was next to impossible to rebuild that magic in 2021.

And so where people have gone from there, is that there were a lot of people who started to get involved in their own local co-ops and credit unions. There's still an active chat in the mostly dormant Facebook group about gear swapping, and repairing, and alternative sourcing. If there is an organic level of cooperation that people are still doing through the network that was built, even if formal organizing is branched out into different directions with people pursuing passions in different directions. People are trying to figure out how to repair their MEC backpacks, or skis, because they've never found anything better than the co-op product. And that's really inspiring. But I think that what I walk away from the experience with the most hope, is that a lot of people explored what co-ops meant, got connected to local co-ops in different ways, and I'm hoping that if there is a positive benefit at the end of it, it's that other co-ops are strengthened because people saw what was at risk with what was in their community and got more involved there.

Dru Oja Jay: All right. Well, that seems like a great note to wrap it up on. Thanks so much for taking the time, Kevin, and for bearing with the delays here. And is there anything you'd like to to plug, or anything you think people should go look at next?

Kevin Harding: One is that I would say is take a look at the Canadian Center for the Study of Co-operatives at the University of Saskatchewan, in Canada. We have a Francophone cooperative sector and we have an Anglophone cooperative sector, and we're building bridges between the two of them. And for folks who aren't lucky enough to be as conversant in French as they are in English, the Canadian Center for Study of Co-operatives at University of Saskatchewan does a lot of active community building, but also a study of cooperatives and trying to spread the knowledge and the form. And they've supported the development of a nonprofit organization called Cooperatives First that goes out into local communities and helps people start cooperatives, in particular rural and indigenous communities. And there's some really amazing stuff coming out of that.

So that's one core plug that I'd give for people to check out. And then beyond that is figure out where the co-ops are in your community, take membership out in them, and then don't let them go the way that Mountain Equipment Co-op went. Stand up, get involved, vote, and redirect your purchases to places that are democratic and member-owned.

This transcript has been lightly edited for readability.