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