Per Curious -> "To join our coop, you must run for election to the board one year out of every five, or else pay a $500 fee in lieu of your year of service"

That doesn't encourage participation, that requires it. I assume by joining the coop you mean buying into it. You'll lose buyers if board service is a condition of purchase, and not everyone has the time/interest to serve on a board. You also run the risk of getting board members who aren't qualified/capable and may manage things badly and do your coop great harm. That's always possible but moreso here.

And why make Shs pay $500 in lieu of board service? Help us run the coop or if you won't do it, pay us money - one has nothing to do with the other.

Forcing Shs to serve on the board won't foster cooperation or enthusiasm for the task. Shs will resent the demand, and those who don't want to will serve halfheartedly and not do a good job. It's also very unlikely you'd ever get your Shs to vote in an amendment to the by-laws that requires board service or paying a fee. I can't see that happening.

You want to encourage more Shs to run for the board? Get to know your Shs. Keep lines of communication with them open. Search out those with particular skills (accounting, mgmt, marketing) and tell them what an asset they'd be for the coop if they were on the board. Let Shs know that you want their ideas and welcome their participation in making your coop a stable, secure, desirable place to live for all.