The uncooperative university Co-op: Now corporatised

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The national University Bookshop Co-operative has been surreptitiously corporatised at the expense of students. Duncan Wallace, Jesse Paris-Jourdan, Jeremy Nadel and Martin Ditmann investigate via Farrago Magazine.

IN 1958, TWO STUDENTS at the University of Sydney, Malcolm Broun and John Sharwood, set up the University Co-operative Bookshop, a student association that bought, swapped and sold books at low prices, operating out of a garage.

Now known as the Co-op, the organisation is one of Australia’s largest co-operatives in terms of members – there are almost two million of them – as well as one of Australia’s largest booksellers.

Co-operatives are different from investor-owned corporations. For one thing, they are supposed to be democratically controlled by their members rather than accountable to investor-owners.

But the Co-op has been taken out of its members’ control. The company bars students from joining its board of directors, doesn’t give members adequate notice of general meetings and misleads members about their rights under the Co-operatives (Adoption of National Law) Act, 2012.

Farrago investigation has revealed that the Co-op has come under the control of a corporate clique, moving further and further away from the principles of the co-operative movement.

In 2004, Ben Hollenstein and Stephen Coles were students at the University of Sydney. Like many students today, they were frustrated with the University Co-operative Bookshop, its high prices for textbooks and delays in deliveries to students. So they took a closer look at the company.

What they found was troubling. The original charter of the 1950s was slipping away as revenue dropped, administration costs rose and payments to board directors became increasingly large. There was also a lack of student representation on the board.

Hollenstein told The Sydney Morning Herald in 2004:

“The Department of Fair Trading stipulates that all members of a co-operative have the right to stand as director but the [Co-op] Rules dictate that directors must have a minimum of five years’ experience at a large company and/or a university degree. It’s like a farmer’s co-operative without farmers.”

Hollenstein and Coles presented the board of the Co-op with a petition for a special general meeting (SGM), at which they intended to argue for two positions on the board to be set aside for students. The board at the time, headed by chairman Alister Runge, rejected the petition.

In February of the same year, the co-operative scheduled its annual general meeting in Hobart, despite the fact that only two per cent of its members lived in Tasmania. The two students suspected the location was chosen to keep them off the board. At the meeting, which only 35 members out of a million attended, the board decided to increase the number of members needed to call an SGM from 200 to 1,000 people.

Hollenstein and Coles alleged that the board had circumvented democracy by making the meeting inaccessible to most students. If so, the trick had worked and the co-operative would do so again — the very next month, the board scheduled another general meeting in Hobart. The aim of this SGM, which cost members $100,000, was once again to increase the number of members needed to call an SGM, this time from 1,000 to 10,000 people.

Hollenstein said,

“Insisting on 10,000 signatures on a petition will make it impossible for anyone to force a special general meeting. It’s a ploy to block democracy, not save costs.”

This time, Hollenstein and Coles actually flew to Tasmania with a handful of supporters. The meeting opened at 3pm but was adjourned shortly afterwards — just as the students entered the room.

Coles said,

As soon as Benny opened the door into the room we heard the chairman, Alister Runge, declare the meeting closed. How can they pass 10 resolutions, verify the minutes of past meetings, take discussion from the floor and vote in 60 seconds? It epitomises the problems with the Co-op.

Runge admitted the meeting was short – “less than 10 minutes” – but told the Sydney Morning Herald that the students had “refused” to participate. Hollenstein and Coles made a complaint to the Department of Fair Trading but nothing came of it.

In October last year, during a Senate hearing into co-operatives, Senator Nick Xenophon asked Peter Knock, then CEO of the Co-op, about the barriers students face getting elected to the board of directors.

Knock said,

“Anybody can apply to be a director. Anybody can put their hand up — and you have to be a member to be a director as well.”

The Co-op’s Rules tell a different story. To qualify to be a director, members need to have both graduated from a tertiary institution and 'participated in the management and/or direction of a medium to large size business over not less than five years'.

Farrago asked Thorsten Wichtendahl, the current CEO of the Co-op, why the company bars students from the board. “There are postgrad business students that I think would qualify, technically,” said Wichtendahl.

When pressed on the fact that the average student or active Co-op member would not qualify, he said,

“Quite frankly, I wouldn’t want to be reporting to a 21-year-old, first-year uni student. I take my guidance, strategic direction, coaching and mentoring from our board of directors — experienced company directors.”

Farrago also asked Wichtendahl about the way the Co-op gives notice of general meetings. Under the Co-operatives Act, co-operatives need to give notice of an upcoming general meeting in writing.

Wichtendahl said,

“We publish it in major newspapers, we publish it on our website and our email campaigns.”

But Farrago’s investigation has revealed that the Co-op does not email notices to members. When asked to provide evidence that they email notice multiple times, the Co-op never responded.

The Co-operatives Act states that publishing notices in a newspaper may be enough but only if member whereabouts are unknown. However, most of the Co-op’s members provide their email and physical addresses when they sign up.

On 30 October 2011, Wichtendahl tweeted, 'Time to shut down unions for good! #qantas' — a strange sentiment from someone now heading a co-operative, a business structure whose history is linked with the union movement.

Wichtendahl said when we asked him about this tweet:

“I’m not here to discuss my personal views on unions. I think the member statistics of most unions are declining and that speaks for itself.”

The afternoon of Wichtendahl’s interview, he deleted this tweet from his Twitter, along with six others. Another tweet said, 'Burning issue for boards should be lack of productivity growth, not exec remuneration & gender diversity. Wake up, world has moved on!' (12 October 2012).

The Co-op effectively bars students from its board, seems to guard against their attendance at general meetings and does not engage with them democratically. Farrago asked Wichtendahl how the organisation is accountable to its members.

Wichtendahl told us:

“We have plenty of feedback mechanisms for members to provide their voice. My personal email address is published on the website. People are welcome to contact me any time … I believe we are very accessible.”

Yet Farrago contacted the organisation in January this year to ask to see its constitution and most recent financial report. Co-operatives are legally obliged to provide these documents to members on request.

But it took more than two months for the Co-op to complete the request, after six emails and over ten phone calls. And the constitution they sent was out of date.

Surprisingly, the Co-op does not include student welfare in its Rules’ objectives. The Rules do not mention the word “student”.

Yet according to the company’s website, the Co-op gives all profits back to students. The 'We Support' page lists five ways it gives back.

However, three of the examples – 'Involvement in Orientation Week', 'Advertising in student and university publications' and 'Hosting and attending book launches' – seem to be euphemisms for advertising.

When Wichtendahl was asked about the other two – 'Provision of scholarships and book bursaries to universities' and 'Donations to support a range of events organised by student societies' – he revealed that these also come with a price tag:

He said:

The university might give us a special deal on a property to let us operate from a store at more favourable terms — or not charge us a commercial rent, as some other universities do. And in return we agree to make a five or 10 grand scholarship available … or whatever cause is dear to the university’s heart.

Read more here.

This article by Duncan Wallace, Jesse Paris-Jourdan, Jeremy Nadel and Martin Ditmann investigate was first published in Farrago Magazine.

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