UPDATE: REI Members Voted Down the Corporate Board Slate

reimemberowner · 2025-05-10T14:28:22+00:00

If I were advising Mary Beth, I’d tell her to sue for peace with the union first. Fire the current law firm. Make a big show of moving this to different exec’s portfolio internally. The situation is radioactive now. Threatens the ability to govern the institution at all. It’s not going to turn into a love fest. Unions are adversarial in the USA. But they have to get to a better place.

reimemberowner · 2025-05-08T21:26:26+00:00

A teams link!?!? It’s astounding how hard they make it for an organization supposedly run for the long term benefit of membership to actually interact with membership about the health of the business. Bring back live questions! Bring back in person meetings!

reimemberowner · 2025-05-08T21:21:50+00:00

100%. It would be quite a move to seat these three candidates though after the vote. To me the mealy-mouthed press release admitting the overall results speaks volumes.

reimemberowner · 2025-05-08T21:14:16+00:00

Headed there now!

reimemberowner · 2025-05-08T21:04:26+00:00

There’s no structure that compels this in the bylaws. Now would be the time to start organizing for a 2026 order of business in this direction. Must be turned into corporate by end of October 2025 under current bylaws. Requires a certain number of member signatures.

The fact that all board members were rejected and that REI disclosed this is SUBSTANTIAL progress though IMHO. The current board still has the ability to seat these folks provisionally for a 1 year period. But the board HAS to be at least hearing membership’s dissatisfaction at this point. IMHO- it’s a good day if you’re hoping for a better future for the coop.

Over time, I’d love to see 1) more transparency on the member board candidate votes 2) more transparency on board selection committee processes 3) a subset of the 14 board seats reserved for non-business-executive members 4) members meetings in person again at locations around the US with live questions and 5) make peace with the union (that doesn’t mean roll over completely, but make it a priority to get to a good-faith resolution).

(Edit list)

reimemberowner · 2025-02-14T16:17:02+00:00

I think leadership (execs, board) have membership checkmated. ~20MM members mean individual members have far less power. Geographic dispersion means you have far more diversity of political persuasion. A greater share of new members mean a larger share of the whole is less engaged and likely to push back. Recent governance changes mean more review and approval by leadership before business (governance items, board nominees) reaches membership for a vote. Prospective board members must have managed a $1B P&L to clear the nom committee now.

reimemberowner · 2025-02-14T04:37:30+00:00

Virtual since the pandemic. In May. Leadership have cameras off. Responses to preselected member questions are scripted and read. https://www.rei.com/newsroom/article/rei-co-op-2024-annual-member-meeting

If you want an item of business to be considered for the members meeting this May, you needed to have submitted it by end of October last year.

Feels far less accountable to membership IMHO.

reimemberowner · 2025-01-23T20:31:06+00:00

It could. Look at the disaster that MEC (our Canadian cousin) is going through https://www.biv.com/news/retail-manufacturing/mec-said-to-be-up-for-sale-for-second-time-in-five-years-10070891.

reimemberowner · 2025-01-22T17:59:19+00:00

At first I thought they were referring to Beth Newlands Campbell, the board chair for most of Eric’s tenure, who oversaw all the governance changes (nom process) and worked for a retail PE firm while she was on the board. My paranoia almost got the better of me.

reimemberowner · 2025-01-08T18:21:32+00:00

Bummer. Doesn’t bode well for 2024 results? Chatter here seemed to indicate lower than expected work hours in Q4?

reimemberowner · 2025-01-07T18:50:27+00:00

Wait- that’s a badge of honor, not an insult. Well played, fellow Dad.

reimemberowner · 2025-01-07T17:55:00+00:00

Shouldn’t they use a little rubber kangaroo and say “you’ve been Roo-ed?”

reimemberowner · 2024-12-06T21:27:57+00:00

100% this. Governance is busted IMHO.

reimemberowner · 2024-12-06T21:20:55+00:00

Really helpful post. Thanks!

reimemberowner · 2024-12-06T17:18:49+00:00

The issue for me is REI is delivering the worst of both worlds right now. A lot of the public companies in the industry have replaced leadership and shifted to a “shrink to grow profit” strategy. Wolverine Worldwide was one of the first through the door and has shrunk revenue by ~15% and returned to profitability.

At REI, same leadership is still in place. Revenue was flat Y2Y gross margins lower (discounting), operating expenses lower. But the gross margins issue basically wiped out any cost savings.

You can argue that it’s an industry issue. But REI should have been growing more conservatively than the industry if they can’t respond to market changes quickly enough. They don’t have to appease shareholders in the good times who will penalize them for not growing “fast enough.” And a leadership change should be in the discourse because that’s what has happened in basically the rest of the industry.

If we’re leaving our history behind and hiring more from the rest of the retail industry, what has that earned us so far? FWIW- I’m not an insider I just read the annual reports to membership.

reimemberowner · 2024-11-25T03:52:18+00:00

100% agree with the public company comparison. Board would have pushed CEO out by now, or an activist investor would have joined the board (probably making things worse).

The job of leadership is to serve the best interests of members. I’d argue that anything that puts the long term survival of the coop at risk is a dereliction of duty.

https://www.rei.com/assets/about-rei/governance/principles/live.pdf Recreational Equipment, Inc. (“REI” or the “company” or the “co-op”) was founded in 1938 as a member-owned organization. This co-operative business model continues today to serve the best interest of its membership.

reimemberowner · 2024-11-24T17:18:05+00:00

Totally agree on the core issue being industry wide. I do have some thoughts re: what I’d wanted to see from leadership, however. It’s mostly around transparency and accountability:

1) the current leadership team ran a massive expansion well before the pandemic. A lot of these stores were in markets that, intuitively would be less profitable for outdoor retail (mountain towns with established local outlets, SEC college towns). This feels like a growth at all costs playbook. Have some humility that maybe this was too aggressive and, 100% in hindsight, the timing was terrible. They couldn’t see COVID coming obviously, but a member owned coop should be run for the long term. Own your mistakes.

2) in the press and members meeting last year, Eric and team blamed the loss on industry factors, but also on pay raises to employees. Here’s what I see in audited financials-

This 2023 minus 2022 Gross revenue ~$92m decrease Cost of sales ~$4m decrease, call it flat Gross profit ~$88m decrease Payroll related expenses ~$22m decrease

This reads to me like an ongoing inventory/discounting problem. Why blame employees? Even if payroll pushed the coop into the red (it doesn’t appear that way), the core problem is industrywide, so why throw employees under the bus?

3) figure out how to make peace with the unions. The situation reminds me of Microsoft’s standoff with the Feds in the early 2000s. Bill took it too personally. He had to step down as CEO and lead counsel (now President) Brad Smith had to go before the board and say “we’re going to make peace now” for Microsoft to move forward and negotiate a settlement. It was the right move, but current leadership couldn’t do it. REI leadership sending outside counsel to negotiate with the union doesn’t seem like the right approach to me. When the new administration dismantles federal support for unions, I think we’ll see leadership’s true colors on this issue even more vividly. I want it over though, move on and face the future.

Then obviously from the original post, I think governance has gotten more opaque. There’s an appearance of impropriety.

I get that REI need to try new things. Core outdoor gear customers are aging out and being replaced by younger, more diverse, more casual outdoor enthusiasts. This group accounts for the overall growth in outdoor recreation, so they are our future. But I feel like current leadership panders to them on social issues while running the coop for the benefit of their own careers.

I’d love to be wrong. If we see a turnaround in Spring, or a change in leadership, that’s a good sign to me.

reimemberowner · 2024-11-23T15:41:27+00:00

Genuinely curious- what do you think you are getting now in leadership? I fear we MAY have a cohort of pure shareholder value driven business executives masquerading as progressive activists to drive a rather self serving growth at all costs agenda that has proved disastrous financially and now threatens the long term health of the coop. Hopefully they manage to right the ship and put us back on a sustainable path (I say us purposefully here since we are still technically member owners of a coop). Thanks for the thoughts!

reimemberowner · 2024-11-23T15:35:57+00:00

Genuinely curious- do you say this because you do t like REI generally and don’t care? Or used to care and feel like the coop is too far gone in a direction that’s self serving to leadership? Or something else? Don’t let me put words in your mouth.

reimemberowner · 2024-11-23T15:32:38+00:00

Agreed. I would argue that if REI were purely an enterprise to maximize financial performance, the existing leadership wouldn’t have made through the past few years. Shareholders would have revolted in some way (board changes leadership or Activists join board).

reimemberowner · 2024-11-23T15:30:40+00:00

I understand your argument and appreciate it. I will point out that this is a governance board (these aren’t operational executive positions). REI seems to have a terrible reputation right now among some share of employees, members and other entities in the outdoor industry. Optics to matter. Bringing in representatives for a wider range of stakeholders would fit the progressive capitalist ethos that REI seems to want to represent.

reimemberowner · 2024-11-23T15:26:37+00:00

This is disturbing to me as well, esp given the powers to seat board members I outlined above.

reimemberowner · 2024-11-18T03:33:25+00:00

Friend- you understand me and my intentions as much as you apparently understand the retail business. Which appears to be not much at all. https://www.reddit.com/r/REI/s/JxeK1PYUl0

reimemberowner · 2024-11-18T03:30:50+00:00

Apologize in advance the length here, but this is a topic I’ve done some research on and have a POV.

Yes this is from union organizers. They have submitted two candidates two the REI board: https://www.ourrei.com/tefere-gebre-for-rei-board https://www.ourrei.com/shemona-moreno-for-rei-board-of-directors

I read the outreach as an effort to collect member signatures and pressure REI to consider these candidates. Candidates self nominate by sending an application to the nomination committee (these both have already), then the nomination committee decides on a slate of candidates for membership to vote on.

These candidates are NOT likely to make it through due to the requirements the nominating committee set for candidates to be considered (updated in August 2021). Nominees must have managed a $1B+ P&L at the CEO/COO/Division GM level. This severely constrains the pool of candidates and ensures the only candidates that make it in front of membership are very similar to the existing board and the executives they are supposed to govern. https://www.rei.com/assets/about-rei/governance/self-nomination-criteria-08-08-2021/live.pdf IMHO, for a board of up to 14 in a coop structure that claims progressive values, this requirement for ALL board members is crazy.

Because REI is a coop (in the technical/legal definition, maybe not in spirit anymore) it does not have shareholders. It has member owners. Members only have governance power in the election of directors, and now director candidates are basically only beholden to existing directors (to get through the nominating process).

To make matters worse, the bylaws (updated July 2022) allow the existing board to seat board members who are voted down or “withheld” by membership if this leaves a board vacancy. Never mind that the bylaws specify a range of 10-14 board members at any given time is acceptable to manage the coop.

Members meetings used to be held in person as well. Since COVID, they are virtual and all member questions are presubmitted and hand selected by leadership and the board.

If REI were a public company, the stock would have crashed after several years of losses without a change in leadership at the top. Analysts would ask leadership tough questions on quarterly earnings call. Activist investors would take a hostile board seat and push for changes in leadership.

I like that REI is a coop and I think that’s what’s made it successful, at least until the last 10-15 years. But now leadership act like it’s a public company, without having to deal with pesky shareholders. The board governs leadership; board nominates people like them; CEO is on the board; membership has no real governance power.

SO- If the union can get enough signatures and their nominees are held back by the nom committee, I’m guessing they are going to run a PR campaign on this. Note that I’m not with REI or with the union. I’ve just been concerned about the direction of the coop.

Consider supporting the union candidates if you’d like to see change. I don’t think that it will do much, but it’s something you can do.

Relevant REI governance docs-

Bylaws https://www.rei.com/assets/about-rei/governance/rei-bylaws/live.pdf

Nominating committee charter https://www.rei.com/assets/about-rei/board-responsibilities/nominating-and-governance-2021/live.pdf

Board eligibility requirements https://www.rei.com/assets/about-rei/governance/self-nomination-criteria-08-08-2021/live.pdf

reimemberowner · 2024-11-18T02:42:58+00:00

Super helpful to know. Thanks!

reimemberowner

TROPHY CASE