Frequently Asked Questions Regarding the Seminary Co-op’s Proposed Governance Transition

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Seminary Co-op Bookstores, Inc


Frequently Asked Questions Regarding the Seminary Co-op’s Proposed Governance Transition

Summary

After 58 years incorporated as a DC cooperative, we are proposing that the Seminary Co-op transition to an Illinois non-profit corporation in order to better serve the bookstores’ needs and help ensure their long-term viability. Effectively, we have not been a co-op for a long time. Although the co-op structure made sense for the time in which it was established, given changes in the market and the way the bookstores operate, the co-op model does not confer any benefit today and in fact creates additional burdens that do not serve our mission. The new governance structure presents an opportunity to codify our mission and strengthen our bookstore community.

What is the Seminary Co-op?

The Seminary Co-op is a both physical space and a community of booklovers. Its primary purpose is to stock and sell a wide inventory of books that provide cultural, literary, and intellectual value to its world-wide community of readers. It does this by maintaining an eclectic inventory of titles not readily available elsewhere and by promoting a culture of informed book-buying through an array of events and vibrant discussions.

What is the current legal structure of the Seminary Co-op?

The Seminary Co-op is incorporated as a co-operative under Washington, D.C. law with over 5,000 members.

Why are we proposing a change of structure?

We are proposing that the Seminary Co-op transition to an Illinois non-profit corporation in order to better serve the bookstores’ needs and help ensure their long-term viability. Although the co-op structure might have made sense for the time in which it was established, given changes in the market and the way the bookstores operate, the co-op model does not confer any benefit today and in fact creates additional burdens that do not serve our mission. The new governance structure presents an opportunity to codify our mission and strengthen our bookstore community.

Why is it better to operate as an Illinois entity?

It is more efficient to operate under Illinois law only rather than the current situation, which requires compliance with D.C. law for some purposes and Illinois law for others. Considering that there is no compelling reason to operate under laws of foreign jurisdiction (D.C.), it’s time to finally bring the Co-op to Illinois to simplify our legal and reporting requirements.

What model best supports the mission of the Seminary Co-op?

Considering the nature of the work of cultural bookselling, the non-profit corporation model is best suited to the needs of our bookstores and our book-reading community. We can, moreover, codify our mission in the by-laws of the new non-profit, ensuring the bookstores remain dedicated to this unique purpose.

What are the challenges of being a co-operative?

The business of bookselling has become less profitable over the last six decades, and the business of academic bookselling that minimizes non-book items is decidedly unprofitable. Any hope of shares yielding dividends is unrealistic.

One share in the Seminary Co-op was established at a $10 par value in 1961, with no annual financial commitment. This was intended to provide the store capital with which to stock its shelves. Even if we were to factor in inflation and begin charging $85 per share($10 in 1961 is, according to the Bureau of Labor Statistics, equivalent in purchasing power to $85), the par value of a Seminary Co-op share is significantly lower than what would be needed to provide working capital.

Engagement in governance has never been the primary driver for the majority of shareholders, as evidenced by the consistently low turnout for annual shareholder meetings and other governance sessions. Attendance at governance sessions over the last 30 years has ranged from .1% to .8% of total shareholders. This history, combined with growing book sales and attendance at events, is evidence that our community is more interested in participating in the co-op’s intellectual community than in participating in its governance.

The co-op model does not provide any benefits for the bookselling industry in terms of business operations, sourcing, logistics, and other industry practices—a fact which distinguishes the industry from other traditional retail co-op models like grocery stores.

When was the last time Seminary Co-op paid shareholders a dividend?

Based on our best understanding of the history, it has been at least a quarter-century since the Seminary Co-op has paid any dividends to its members. During this period the bookselling industry has undergone dramatic shifts, with many academic and commercial bookstores closing across the country and around the world. The Seminary Co-op has been able to buck this trend thanks to the dedication of our book-buying community, ongoing support from the University of Chicago, and donations from our board and our members. We expect the bookstores to remain viable, but we do not expect to turn a profit in the future.

What is the current value of a share?

Because of the bookstores’ accumulated losses over many years, the outstanding shares do not have any current value. The bookstores stopped redeeming shares some time ago in recognition of this fact.

What happens to shares after the transition?

Since the shares no longer have value, they will be retired when this governance change is approved.

What changes will current shareholders experience under the new governance model?

After the governance change, there will no longer be shareholders, only stakeholders.

Shareholders will no longer be eligible to receive dividends (a prospect that is highly unlikely given our current retained losses). In addition they will no longer vote to elect Board members or to change the bylaws—those activities will be handled by the Board of Directors going forward.

In practical terms, little will change. Our engaged, book-buying community will continue to receive perks such as rebates, will be invited to participate in annual meetings where bookstore performance is reported, will receive regular communications and updates from the bookstore leadership, and will be invited to participate in the full range of events offered to our community. Community members will be able to nominate candidates for the Seminary Co-op Board, and those nominations will be considered and elected by the Board.

How will you maintain a commitment to community engagement and continue to create a sense of ownership?

The articles of incorporation and the by-laws of the new Seminary Co-op Bookstores will include the following:

  • A commitment to bookselling as its primary purpose

  • A Statement of Purpose such as,  

“Our primary purpose is to stock and sell a wide inventory of books that provide cultural, literary, and intellectual value to its distinctive and engaged worldwide community of readers. We do this by maintaining an eclectic inventory of titles not readily available elsewhere and by promoting a culture of informed book-buying through an array of events and vibrant discussions.”

  • A commitment to an annual meeting which presents the financial and cultural results

  • A community nominating process for board elections which includes a commitment to review all community-submitted nominations

  • A commitment to create ad hoc committees that involve community members when issues of significance arise

How will you ensure that the store does not lose its character?

The by-laws will clearly and explicitly state the spirit and purpose of the stores, aligning our stated goals with our mission and aspirational principles. Our current governance documents are outdated and were never updated to reflect our shift from operating as a student-run textbook store supporting the Chicago Theological Seminary to an international destination for bibliophiles, scholars, and general readers.

How will the new structure help improve its finances and ensure long-term viability?

Establishing the store as a non-profit will more accurately place the work of the Seminary Co-op in the realm of a cultural institution, as opposed to a strict retail operation. This will allow for more collaborative conversations with other cultural institutions and various business partners, including publishers, vendors, and landlords, and will acknowledge the financial realities of an unprofitable business model, allowing the Seminary Co-op to focus on its decidedly valuable cultural model.

What was the process for engaging community in this decision?

The director and board of the Seminary Co-op began engaging the shareholders about governance struggles in 2016.This was communicated in a shareholder meeting, a letter distributed widely to shareholders, and two town hall meetings to which all shareholders were invited. Updates were communicated at subsequent shareholder meetings in 2017 and 2018.

In addition to dozens of informal meetings with shareholders, two formal meetings were held in the spring of 2019 with shareholder focus groups created to generate community feedback on how best to transition our governance structure.

A public meeting was scheduled for May 22nd to vote on amendments to the by-laws that would allow initiation of the transition by the current board of the Seminary Co-op.

Will the Seminary Co-op’s non-profit governance structure give it 501c(3) status?

No, the Seminary Co-op is primarily a bookseller and does not meet the standards of charitable purpose and community benefit in a way that meets the 501c(3) requirements. This means that while donations to the bookstores continue to be welcome, they will continue to be taxable, not tax-deductible, donations.

The 501c(3) option was thoroughly explored. While there are bookstores that operate as 501c(3) organizations, they do so on behalf of causes unrelated to bookselling. We are adamant that bookselling itself is our cultural contribution, and are relatively certain that the IRS will not distinguish between the browsing experience we create and that of our fellow booksellers who operate as a more traditional – and yet noble – business.

Should the bookstore become profitable again, what would happen to the profits?

While it is unlikely that the bookstores would make a significant profit, the new non-profit governance structure would dictate that any future profits would be reinvested to support the bookstores’ mission.

How can I get involved?

We will continue to consider community engagement one of our most significant strengths. Please continue to support us in the following ways: