Desjardins CEO slams short-termism
More firms urged to take into account deeper issues like climate for projects My main focus was my members, my members, my members. How do I reassure them? How do I protect them?
The sight of 181 U.S. chief executives pledging to invest in employees, deal fairly with suppliers and support their communities — as they did last month by backing a new mission statement for corporations proposed by the Business Roundtable, a major lobby group — was good news in the eyes of Guy Cormier.
But Cormier, the president and CEO of Desjardins Group, the largest financial co-operative in Canada, says there needs to be more than just a positive-sounding message to alter the relationship between business and society.
Desjardins, he said, has declined to finance a quarter of the projects offered to them since they implemented environmental, social and governance investment criteria in 2018, because the deals did not meet that criteria.
“Even if their results were good, they were making money,” Cormier said in an interview. “We felt that the impact on the environment, social and governance weren’t OK. We said no.”
The scrutiny comes as Cormier has decided to sound the alarm about short-term thinking, which he says is contributing to issues such as trade tension, climate change and income inequality. On Wednesday, he delivered that message to an audience at the Toronto Global Forum, and then again in an interview with the Financial Post.
“These are not the real problems, they are more symptoms of the real problems,” Cormier said. “And when we go deeper, we can see that … one of the real problems with our system is the fact that we are too focused on short-term gains.”
More energy is being spent on those gains: the next quarter, the next year, the next election, he said.
The CEO unsurprisingly extolled the co-op model of doing business, saying he would like to more firms adopt a longer-term perspective — his rhetoric is similar to that of Business Roundtable, which has called for a pivot away from “shareholder primacy” — in which returns to investors are considered alongside the effect on other stakeholders.
To be sure, Cormier doesn’t face the same sort of pressures as do the CEOs of JPMorgan Chase & Co. or Apple Inc., two signatories to the Business Roundtable statement. Nor are the incentives for a co-op exactly the same as those of Capital One Financial Corp., which, like Lévis, Que.-headquartered Desjardins, recently endured a high-profile data breach.
Desjardins said the breach, which affected personal information of nearly three million members, was caused by an “ill-intentioned” and since-fired employee. The incident, revealed in June, forced the co-op to set aside $70 million in expenses and provisions for the second quarter of 2019, including the cost of providing members with automatic identity-theft protection.
Cormier credited Desjardins’s business model with helping in the aftermath of the breach, as members were trusting and there were no shareholders to placate. He also said the co-op has actually added 15,000 new members since the incident.
“My main focus was my members, my members, my members. How do I reassure them? How do I protect them?” Cormier said. “And I think who we are as a co-op was really helpful to manage the situation.”
Cormier said Desjardins had made other decisions that were motivated by more than profit, such as supporting regional development by decentralizing some of its operations, and putting call centres in smaller communities — a more expensive option that he wasn’t sure competitors would make.
“I feel that when you’re really serious about the long-term perspective, sometimes it means that you’ll take real decisions that will affect your bottom-line,” Cormier said.
Not that Desjardins is avoiding making a profit; as of the end of June, the cooperative reported surplus earnings of more than $1 billion for 2019, and total assets of more than $310 billion. It also paid out $157 million in dividends to its members, as well as $38 million for sponsorships, donations and bursaries.