First up

Tak­ing the co-op view; it’s not easy be­ing rich

The Australian - The Deal - - News - Paul Cleary

LIS­TEN to Monique Ler­oux ex­plain her phi­los­o­phy in run­ning one of Canada’s fi­nan­cial gi­ants and you’d think you were talk­ing to a trea­surer or cen­tral banker.

Ler­oux be­came pres­i­dent of the cen­tury-old co-op­er­a­tive Des­jardins Group in March 2008 on the eve of the global fi­nan­cial cri­sis. In tur­bu­lent times, she has helped to re­in­force its po­si­tion as one of the world’s strong­est fi­nan­cial en­ter­prises. In­stead of fo­cus­ing on de­liv­er­ing higher prof­its and re­turns to share­hold­ers alone, Ler­oux ex­plains how her co-op­er­a­tive and many oth­ers take a long-term view that is based on achiev­ing steady in­come and a rock-solid bal­ance sheet.

Ler­oux is so con­vinced of what this hy­brid model has to of­fer that she ran a spir­ited cam­paign to be­come pres­i­dent of the In­ter­na­tional Co-op­er­a­tive Al­liance. Af­ter be­com­ing the first woman to head a fi­nan­cial in­sti­tu­tion in Canada when she be­came pres­i­dent of Des­jardins, Ler­oux be­came the ICA’s first fe­male head, win­ning 55 per cent of the vote.

While co-op­er­a­tives re­main strong in Canada, the US and Europe, in part re­flect­ing Catholic tra­di­tion, they have been in de­cline in Aus­tralia af­ter a se­ries of de­mu­tu­al­i­sa­tions. Ler­oux ob­vi­ously likes a chal­lenge, which is why she and her board chose Syd­ney for their an­nual over­seas meet­ing this month.

Her core ar­gu­ment is that in a more volatile world, broader so­cial and fi­nan­cial ob­jec­tives can help to achieve more sus­tain­able busi­ness per­for­mance as well.

“At Des­jardins my phi­los­o­phy is let’s build a very solid cap­i­tal base be­cause we want to be able to face the volatil­ity in the mar­ket and be there for the long term. At the same time, we will be build­ing steady growth in earn­ings. We don’t want a lot of growth to push up the re­turn on equity, we want to have steady busi­ness that will be good for the econ­omy and the com­mu­nity,” she ex­plains.

At a time when large parts of re­gional Aus­tralia have seen banks and other lenders with­draw their pres­ence, the con­trast with Des­jardins’ role in ru­ral Canada is stark. While it has $C229 bil­lion ($236bn) in as­sets, one-third of its busi­ness is gen­er­ated in sparsely pop­u­lated ar­eas, de­fined as mu­nic­i­pal­i­ties with 2000 res­i­dents or fewer. This com­pares with the 2 per cent of as­sets that Cana­dian banks have in th­ese ar­eas.

Ler­oux con­tends that there is more to any busi­ness than share­holder re­turns. Based on the tremen­dous good­will that Des­jardins has gar­nered from its re­gional pres­ence, she ar­gues that suc­cess­ful busi­ness is more com­plex than the bot­tom line.

“A co-op­er­a­tive does not just make money for the sake of mak­ing money. It means that mak­ing a de­ci­sion in a co-op­er­a­tive is much more dif­fi­cult, [but] in a cor­po­ra­tion you say, ‘this is the fi­nan­cial con­se­quence’, you don’t con­sider other is­sues. The re­al­ity of the world is much more com­plex.

“If you look at the most re­silient and suc­cess­ful co-op­er­a­tives in the world, if we take the top 300, you will see that they can be pro­duc­tive, they can be solid, they can be in­no­va­tive, they can grow their busi­ness but they will not have the phi­los­o­phy of say­ing ‘I want to max­imise re­turn on equity’,” she says.

In a nut­shell, the co-op­er­a­tive model is about peo­ple and profit. “It’s a com­bi­na­tion of be­ing an in­sti­tu­tion of peo­ple, and at the same time a busi­ness,” she says.

Ler­oux con­tends that there is more to any busi­ness than share­holder re­turns. “In a cor­po­ra­tion you say, ‘this is the fi­nan­cial con­se­quence’, you don’t con­sider other is­sues. The re­al­ity of the world is much more com­plex.”

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