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Mountain Equipment Co-op eases board-applicant rules

A Mountain Equipment Co-op store in downtown Toronto is seen in Oct, 2015.

Fred Lum/The Globe and Mail

Bowing to pressure from critics, sporting-goods chain Mountain Equipment Co-op has dropped a controversial requirement that severely limited who could qualify to be on its board of directors and help set the direction for one of Canada's most trusted retailers.

The move addresses long-simmering tensions as the retailer's leaders have tried to navigate its dual roles as both a democratic co-op, owned by and accountable to its members, as well as a commercial operator in an increasingly heated outdoor-sports retail field.

Vancouver-based MEC recently ditched minimum criteria, which were added over the past few years, that candidates for its board needed in order to put their names forward for election. They were required to have experience serving on another board or senior management in an organization of comparable complexity to MEC, in size, scale and reach.

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That requirement had prompted strong pushback from some long-time MEC loyalists, including founding members and former directors, along with governance experts, although MEC chief executive officer David Labistour characterized opponents as "a few disgruntled members."

Now that the board has relaxed the criteria, "I think it's a really positive step," said Steven Jones, a MEC member and software executive in Vancouver who tried to run for a spot on the board two years ago, but didn't get far. He is planning to run again this year. "The organization is clearly adapting, they're trying different things out," he said.

The victory for the MEC loyalists highlights the struggle at the iconic chain, which emerged as the most trusted brand in this year's Peter B. Gustavson School of Business rankings and the best brand in the Canadian Business scoring. Over the past few years, MEC had made it increasingly difficult for members to put their names and resolutions to a vote in a bid to set the course for the 45-year-old co-op.

At the same time MEC, with 18 stores across the country and $365.6-million in sales last year, is grappling with a growing array of rivals that tout similar outdoor equipment and sporting goods while taking a page from the MEC playbook of backing social responsibility and environmental causes.

"The balance is between the need to stay true to the co-op member-driven roots while acknowledging the leadership required to successfully guide a multichannel retailer enterprise of this size and complexity," said David Ian Gray of Vancouver-based retail consultancy Dig360, which has done work for MEC in the past. "It's a really healthy tension that unfortunately other organizations are missing in some cases."

Shona McGlashan, MEC's chief governance officer, said the board made the change after the backlash from critics. "We did hear from members a year ago that a small number of them , I would say, who were engaged in this issue did not agree with the minimum criteria the board had come up with."

She acknowledged that among would-be nominees who didn't make it onto the ballot last year "there were some candidates that would have been interesting to put forward to the membership," she said.

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She emphasized the board had already filled gaps in an array of criteria, such as retail and governance experience. The board eliminated seven nominees from its past election because they didn't meet the minimum requirements. The board excluded seven potential nominees from the ballot the previous year and three the year before that.

"I wouldn't characterize this as mass disquiet among MEC members," she said.

The governance changes come as MEC pushes into an array of new offerings in a bid to broaden its customer base. It has added such categories as bicycles, downhill skis, snowboards and yoga wear as it tries to draw younger, female and non-Canadian shoppers to take on rivals ranging from Lululemon Athletica Inc. to Nike Inc. But the moves also shift MEC from its backcountry roots of activities such as hiking and camping.

MEC's 2015 sales climbed to $365.6-million from $336.1-million a year earlier, but its operating profit tumbled to $3.3-million from $8-million in 2014.

Vancouver-based governance expert Mark Latham said the recent board nominee revision "makes MEC director elections significantly more democratic than they were."

But he said more reform is needed to restore democratic member control. "The MEC board can still effectively determine who gets elected, by continuing to control the information conveniently available to members when they vote."

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