Changes to our co-op’s Bylaws and adoption of independence standards
Sound Consumer May 2019
As stewards of the co-op, the PCC Board of Trustees is responsible for periodically reviewing the co-op’s Articles of Incorporation and Bylaws to ensure they meet the evolving needs of the business and the ever-changing competitive landscape in which PCC operates.
Over the past several months, the Board began reviewing and evaluating PCC’s Bylaws to ensure they position PCC for long-term success. At the February 2019 Board meeting, within the authority granted to it under state law and the Bylaws, the Board adopted several Bylaw amendments and one new standard, all of which will become effective June 27, 2019, unless otherwise noted.
Future Bylaw Amendments. A new section (Section 7) will be added to the Bylaws to clarify that the Bylaws can be amended by the Board and by members in accordance with Section 2.2.3 of the Bylaws.
Flexibility in Board Size. The Articles provide that the Board’s size may be modified as specified in the Bylaws. However, the Bylaws don’t provide guidance on this topic. Flexibility in Board size is important to allow for the addition of unique expertise as needed, and to account for unexpected changes, such as the departure of a Trustee. As a result, Section 3.2 of the Bylaws will be amended to support the desired flexibility such that no less than seven and no more than 13 Trustees may sit on the Board. This amendment eliminates the need for the two current appointed trustee positions, so that provision will be deleted.
Patronage Dividend. PCC’s Bylaws as originally written allow the Board to declare patronage dividends from surplus funds. A new section (Section 6) will be added to the Bylaws to detail how the Board declares a dividend, in what form the dividend may be issued, what happens if the dividend is unused under certain circumstances, and to ensure compliance with current tax laws.
Ex Officio Board Member. Historically, PCC’s CEO has not been a member of the Board. While this is a common practice at smaller co-ops, it is not the case at businesses of PCC’s scale, including larger co-ops, like REI, and other companies of PCC’s size. Considering the CEO’s role in managing the growing business, the decision was made to make the CEO a member of the Board. Accordingly, a new section (Section 3.16) will be added to the Bylaws providing that the CEO is an ex officio member of the Board, meaning the CEO serves as a trustee by virtue of the position, not by election.
Nominating Committee. As the co-op evolves, there is a growing need for Board members who have industry expertise in a diverse range of topics pertinent to PCC’s operations, industry dynamics, governance and growth potential. To recruit productive and effective candidates who bring the right dynamic to the Board, it is necessary to alter the current vetting process.
Historically, PCC relied upon a Nominating Committee elected by members to identify and recruit candidates for open Board positions. This committee was made up primarily of individuals who were not Board members or otherwise familiar with PCC’s business.
Recruiting the best Board candidates requires a deep understanding of the Board makeup, how it operates and what the needs are to move PCC forward. Trustees are intimately familiar with PCC’s operations, business environment, governance issues and triple bottom line, making them best able to identify, recruit and recommend qualified Board candidates to the membership. The Bylaws will be amended after this year’s Annual Members Meeting to eliminate the Nominating Committee. In the future, the nominating process will be handled by a Board committee, as is commonly done at companies of PCC’s size. A slate of Board candidates will still be presented to members, and members will vote to elect Trustees to the Board as always.
Independence Standards. It is vitally important to PCC that Trustees form their own objective judgments and not be influenced by outside entities about what actions are in the best interest of the co-op. Section 3.3 of the Bylaws provides that to be eligible to serve as a trustee, a person must satisfy certain independence, noncompetition and other reasonable eligibility requirements adopted by the Board.
To help ensure that Board decision-making is not influenced by considerations other than what is in the best interest of PCC and our members, and to reduce the possibility of the appearance of impropriety in Board deliberations, the Governance and Membership Committee of the Board recommended, and the Board adopted at the February meeting, a series of independence, noncompetition and other eligibility criteria (the “Independence Standards”), to be effective immediately.
The changes above were made by the Board to support the co-op’s future success. Equally important to the co-op’s vitality is continuing to inspire democratic participation among members. This is possible in several ways.
Members vote for Trustees in the annual election, which begins June 1, 2019. Look for candidate information in the June Sound Consumer. Additionally, members can share their thoughts with the Board by sending emails to firstname.lastname@example.org, by attending in-store events throughout the year, and by making Board nominations through the initiative process (Section 3.4.3(b) of the Bylaws). To read the full Bylaws, please visit pccmarkets.com/about/bylaws/.