[JMEvensky]

I'm becoming more aware of old school member-owned clubs selling non-equity memberships.The non-equity privileges differ from club to club but are usually close to the privileges of a certificate holder.The only big difference seems to be the actual ownership that the certificate represents.

The reason for making these memberships available is,of course,the dues line.The big front-end initiation fee is frequently a deal breaker while the monthly dues nut is doable.
To more and more people,"equity" in a club is meaningless.

Anyone have any knowledge of what happens when the percentage of non-equity members gets too large to be controllable?Anyone know what percentage equals "too large"?

[Brent Hutto]

I belong to a member-owned club and after you've been a member for a few months, you get the opportunity to purchase a voting share of the club. There's an up-front initiation fee for everyone and then the share purchase is separate and later.

I'd say the club's about half and half between shareholders and non-shareholders. While the club would of course prefer everyone to take a voting stake in the running of the club, it is not seen as causing any particular problem that our proportion is pretty low.

What kinds of problems do you anticipate?

[JMEvensky]

Really don't know what may happen.Just trying to think through the possible outcomes.I guess a club could get so top heavy with non-equity members that,even without voting power,they could have a disproportionate say in club decisions/policies without having made an equal "investment".Kind of like the enemy within.

I'm thinking it might be similar to the owner/renter situation.The "renter"(non-equity member) might have more of a short term view than the "owner"(certificate member).This would seem to be a problem down the road.Too top heavy with "renters" and long range planning becomes a crap shoot.

[Bob_Huntley]

JM,

The equity member is the shareholder and that makes him an owner. Only owners should be able to opine on club policy, not someone who does not have the the financial risk of some bone-headed committee pusuing agendas to their detriment.

Bob

[Brent Hutto]

Either I'm underestimating the influence of non-voting members or perhaps you're overestimating it. Our shares are priced cheaply enough (and they are refundable to boot) that anyone with an idea as to how the club should be run has very little barrier to buying a share. Maybe that's not the model you're describing, maybe in some cases there are a fixed number of voting shares available.

Under our club's governance I can't really imagine any mechanism by which non-shareholders can influence the running of the club, no matter how many of them there might be. They don't get to vote for the Board and they don't get consulted in any decision. Even when the club put through an extremely controversial and expensive renovation (several years before I joined) resulting in the loss of nearly 1/3 of the membership, only the shareholders voted on that decision.

So is this nothing at all like the clubs you are asking about?

[cary lichtenstein]

JM,

The equity member is the shareholder and that makes him an owner. Only owners should be able to opine on club policy, not someone who does not have the the financial risk of some bone-headed committee pusuing agendas to their detriment.

Bob

agree 100%

[Matt MacIver]

We recently began conversion from an equity club to non- equity.  All existing equity members retained their equity and will receive it when they resign.  Any new members joining going forward must join as non- equity members.  There is no difference in access to facilities, dues or voting -- all members get one vote and are treated the same.  

Since we had a waiting list for resigned equity members to receive their equity back, we allowed (for a limited time) these resigned members to sell their membership in a free market transaction, at any price the buyer and seller could agree to.  The four month exercise allowed us to NOT pay $1.5mm out to resigned members AND added 150 dues paying members to the club.  

[JMEvensky]

JM,

The equity member is the shareholder and that makes him an owner. Only owners should be able to opine on club policy, not someone who does not have the the financial risk of some bone-headed committee pusuing agendas to their detriment.

Bob

agree 100%

I too agree 100%.However,if the reason for selling non-equity memberships in the first place was the dues line(revenue),wouldn't the implied threat of the loss of that revenue(mass resignation) cause some Board members to consider their opinions?

Granted,an extreme case,but that's why I'm curious as to how many is too many.

[Brent Hutto]

I too agree 100%.However,if the reason for selling non-equity memberships in the first place was the dues line(revenue),wouldn't the implied threat of the loss of that revenue(mass resignation) cause some Board members to consider their opinions?

OK, got it. I could imagine that being possible in some circumstances but thinking of our club, almost certainly never going to happen.

It would seem that scenario is only conceivable in a large majority (2/3? 3/4?) of the dues-paying members were non-equity. And even then there would have to be substantial agreement among the non-owners concerning a matter on which they substantially disagreed with the shareholders. I can't imagine any club letting themselves be hostage to the potential loss of even a hundred or so monthly dues checks.

[JMEvensky]

We recently began conversion from an equity club to non- equity.  All existing equity members retained their equity and will receive it when they resign.  Any new members joining going forward must join as non- equity members.  There is no difference in access to facilities, dues or voting -- all members get one vote and are treated the same.  

Since we had a waiting list for resigned equity members to receive their equity back, we allowed (for a limited time) these resigned members to sell their membership in a free market transaction, at any price the buyer and seller could agree to.  The four month exercise allowed us to NOT pay $1.5mm out to resigned members AND added 150 dues paying members to the club.  

Matt,did your club act as market maker in these sales?Did your club allow any buyer in without retaining any rights as to approval or could any certificate buyer join-no questions asked?

[Matt MacIver]

Right now we're probably 75-25% equity-to-nonequity.  Since we're not selling anymore equity memberships, my guess is in 5-7 with resignations it will be 50-50, and at some point non- equity members will be the larger percentage.  

But the view (hope) is that since all members are equal, aside from the equity component, all interests will be aligned -- as much as 800 peoples can be.... Our club sits squarely in the middle of a residential neighborhood, and even though the club and neighborhood are different entities, our futures are inexorably linked.  

[Bob_Huntley]

We recently began conversion from an equity club to non- equity.  All existing equity members retained their equity and will receive it when they resign.  Any new members joining going forward must join as non- equity members.  There is no difference in access to facilities, dues or voting -- all members get one vote and are treated the same.  

Since we had a waiting list for resigned equity members to receive their equity back, we allowed (for a limited time) these resigned members to sell their membership in a free market transaction, at any price the buyer and seller could agree to.  The four month exercise allowed us to NOT pay $1.5mm out to resigned members AND added 150 dues paying members to the club.  

Matt,

No matter how many dues-only members a club has, it is only a matter if time before some capital expenditure will have to be made. If no Capital Reserve Acount is funded you will live and die by Assessments. I know of a club where some $30,000,000.00 has been spent on course and infrastructure improvements over the last seven years, with all the money coming from the transfer fees of departing members, with nary a thought of assessments.  

Bob

[Matt MacIver]

Bob --

You are exactly correct, we had two assessments in the early 2000's as new membership and initiation fees dwindled to near nil.  We are in the process of building a cap ex reserve fund for the next "rainy" day, and trying to balance that with giving people what they want -- new everything all the time.  

Future assessments of, say, $10k, can be voted on by the Board.  Anything more requires a membership vote.  I hope we never get close to another assessment again -- no fun.  

Matt

[Jon Wiggett]

JME,

its maybe all to do with the market. If there are enough people willing to buy in then you will only have equity members. If a club has more non eqity than equity then equity is the wrong product for most of its customers and you know what they say 'the customer is king'!

[JMEvensky]

JME,

its maybe all to do with the market. If there are enough people willing to buy in then you will only have equity members. If a club has more non eqity than equity then equity is the wrong product for most of its customers and you know what they say 'the customer is king'!

I agree that it's definitely market driven.I think the part with which I disagree is allowing the customer to be king.If the non-equity customer is king today,what happens tomorrow?Just seems like that situation is a recipe for disaster at some point.

There must be some happy medium of equity/non-equity.I just wish like hell I could figure it out.

[Doug Siebert]

I'm curious about the clubs converting from equity to non equity.  Who owns them once all the equity members are converted?  Is it owned by a group of founding members or their descendants, or some sort of trust that the club's members have some control over?

If I were member of such a club, especially in an area where its real estate value may be considerably greater than the equity share value, I'd be concerned that whoever retains ownership is clearing the path towards selling out for personal gain.

[Steve_ Shaffer]

There is a prominent club in the Philadelphia area that recently celebrated its centennial but is in need of members. They recently advertised-the founders would turn over in their graves- for a "try us,you'll like us" day at the club for $125. Previously, they tried the "Gillette" approach- very low initiation to attract members and then hit the members with assessments to already high dues. There is now talk of them selling off land-they have 36 holes- to finance their operations. What else can they do but to offer non-equity memberships or even annual memberships or weekday only memberships?

[Dan Herrmann]

There aren't many clubs in need of more members.  It's tough business today - the "soccer parent" has become the predominant philosophy in the USA today.

Nothing wrong with that, of course.  It's just that the club doesn't fit into the culture of many families today.

Unfortunately, I think you'll see a retraction in the number of private clubs that continue to hold onto a 1950's phillsophy.  Of course, this doesn't pertain to world-class golf clubs!  (at least I don't think it does).  

There's a local club out in my county that is seriously in need of more members, but they won't change their thinking on male/female tee times (the tee sheet is open for hours on every weekend AM, but they won't change), family accomodation, and how to handle single golfers.     I can't tell you how many young families we've picked up from clubs such as this (and we're thrilled to have them).  

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