Special Committee on Cooperatives Committee on July 24th, 2012

[Jeff Malloy]

I have been there since 1997, 16 years, and six years ago we spent $5.5 million completely redoing the plant. At that time we borrowed most of the money. The province contributed somewhere in the area of $900,000. We did get an ACOA loan for $500,000, which is obviously still on the books and we're still paying it off. All the rest was paid for by the co-op itself. A lot of that money we received from the province was through special projects for equipment that we bought within the province and so on. But that's the only help we've received.

[LaVar Payne, Conservative, Medicine Hat, AB]

So there is an outstanding amount on the ACOA loan?

[Jeff Malloy]

Yes, to ACOA.

[LaVar Payne, Conservative, Medicine Hat, AB]

You did talk a bit about the recession, and that has obviously hurt your industry and your cooperative.

If we go back a bit further, I think you did talk about some successes, and I'm wondering about a couple of things. First of all, I believe you mentioned something about the investment of $40,000, and I didn't quite catch what that was. Could you just clarify that for me?

[Jeff Malloy]

Our member shareholders—because of the last three years—can't take their shares out, even if they sell their gear or whatever, until they become 65. At that time they retire and we release the shares.

We've had a great deal of investment. Over the last several months we've had members who've retired and have had as much as $40,000 worth of shares. To be honest with you, that's all some of them have as a retirement package from the industry, so it makes it very difficult for them.

For somebody who's maybe clearing $25,000 a year, $40,000 is a lot of money, but our struggle is to try to keep that money, from somebody who's only making $25,000 a year, there and growing.

[LaVar Payne, Conservative, Medicine Hat, AB]

Obviously you've had some better times, and you did talk a bit about those. In terms of investment and dividends, what did that look like for investment back into your industry and potential dividends to the shareholders?

[Jeff Malloy]

During our good times...probably seven years back, for instance, we had a year that we had profits of $1.3 million. What we did at that time—because of the regulations that exist within P.E.I.—is we paid 9% interest on their shares. If somebody had $10,000 in shares, we paid 9% interest on that.

At the time I think we kept $400,000 or $500,000 within the company and the remainder was divided amongst the fishermen. It was divided up depending on what they sold or what they bought from us. They got a share of it, so each member might have received 1.5% of the remaining money. If that amount of money was, say, $10,000, our members voted that half of that would go out in the form of a cheque, as a dividend to the fishermen, and the other half would go into their shares.

During the good times it's obviously a lot easier for them to keep their money in the co-op. Now that things are tough, they're sort of forced to keep it in there to keep the plant going.

[The Chair, Conservative, Blake Richards]

I'm sorry, Mr. Payne, your time has expired.

[LaVar Payne, Conservative, Medicine Hat, AB]

Oh, I had one more question to go.

[The Chair, Conservative, Blake Richards]

You'll have to get another round.

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you.

Thank you, Chair.

[The Chair, Conservative, Blake Richards]

We'll move next to Madam Brosseau.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Thank you.

I'd like to thank you all for being with us. It's very informative. I always find that we're just scratching the surface on the issues in committee and we don't seem to have enough time.

I'd like to ask Mr. Webb a few questions.

Recently we had cuts of nearly $4 million from the CDI and the rural secretariat. How do you see these cuts hurting the co-op sector?

[J. Tom Webb]

The two main cuts are to the CDI, which I think is just a tremendous loss. We were seeing the start-up of lots of new co-ops through the CDI initiative. I think it was solid cooperative development and job creation.

With regard to the other cuts to the co-op secretariat, it will take some time to see whether we will be able to have access to the kind of information about cooperatives that we have had in the past. There are all kinds of sources of information about business and the economy, but this was one of the main sources, and perhaps the most reliable source, of information about cooperatives: how many people work in them; their sales; their surpluses; and their losses, if they had losses. This could be a tremendous loss to cooperatives generally because it will give us less and less ability to understand the role that cooperatives play in the Canadian economy.

I'm hoping we will see a refocusing, perhaps in the Department of Industry, which may have been in some ways a more appropriate home, but there needs to be a home somewhere for a focus on cooperatives in the federal government.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

I really like that you say we need to find a new home for it. I do think we need to foster and nurture cooperatives, because we know how good this is for the economy and how much they give back to communities. We know how important co-ops are for job creation for young people, who currently face an unemployment rate of 15% across the country. How does your program prepare young people to work on job placement opportunities for co-ops?

[J. Tom Webb]

Basically, we take into the program managers who are already working in cooperatives. It's very useful to do that, first of all, because most of them have come through standard business schools, where for the most part we don't even teach cooperatives as a business model. In business schools in Canada it's absent, and only 30% of the text books used in business schools talk about cooperatives as a form of business. And fully half of those references refer to co-ops as...well, if you are kind of out of your mind, you might look at this cooperative model. This is not very productive. So we have many, many managers in cooperatives whom we have hired from outside the co-ops, who have standard business degrees, standard training in economics, and what they don't have is a good understanding of the dynamics of the cooperative business model.

What our program does is give them an understanding of how the cooperative business model is significantly different and how the dynamics of that model are significantly different, and how they, as managers, have a much more difficult job. They don't have just one bottom line; they have multiple bottom lines. People in the community have strong expectations about how their credit unions and cooperatives will function, much stronger expectations than they have about how the banks will function. They're different expectations. The purpose of the business is significantly different. What our program does is prepare them to run successful cooperative businesses, which is, as I said, a much more difficult job.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Do you find it very important to have the federal government work in a partnership, supporting cooperatives? It has a role. Can you explain your opinion on federal government, what role it should have?

[The Chair, Conservative, Blake Richards]

Sorry, time has expired on this one as well. I'll allow you to respond, but again, I'll ask you to keep it very brief.

Thank you.

[J. Tom Webb]

It would be very interesting for the federal government to look at how cooperatives are treated in other countries where they're much more successful than in Canada. Our cooperatives are successful, but not to the degree they are in, for example, northern Italy and in the Basque Country in Spain. It would be very, very instructive to look at how those countries deal with cooperatives and cooperative development, because we really don't have a supportive relationship with the federal government for cooperatives in Canada, and I don't think we've ever had one.

[The Chair, Conservative, Blake Richards]

Thank you.

We'll now move to Mr. Boughen for five minutes.

[Ray Boughen, Conservative, Palliser, SK]

Thank you, Chair.

Let me extend a welcome to our panellists here this morning.

We talked about public benefits that support co-ops and that the government should come up with a regulatory framework. I guess I'm wondering what our panel members think of that. Certainly Bryan's operation is highly successful, with big dollars in play in supporting projects, and Jeff's operation is smaller. How do you see the government's role in this? Right now, we have a diversity of success stories, some dependent upon things we can't control—for example, if the cod dries up, you're not going to fish any cod. You have that to deal with.

Which of the panel members would like to start that off?

[Bryan Inglis]

Co-op Atlantic is successful. We've been around for 85 years. I've been working there for more than 25 now, dealing a lot with agriculture and development. I've dealt a lot with agricultural producer cooperatives.

It's not the big ones that are the concern, although they do have their own issues. It's the small cooperatives. It's the blueberry cooperative. It's the hay cooperative. It's the carrot cooperatives. It's the farmers who are trying to get together to create cooperatives to find niche markets in Atlantic Canada. I believe that's the opportunity for the federal government to work with these groups, through the CEDIFs, through the economic development, through ACOA. It's not the big guys. It's trying to put some seed money into these small cooperatives to strengthen rural communities in Atlantic Canada.

I deal a lot with developing new membership in Co-op Atlantic, so we can grow our total business, because we're a supplier to the small cooperatives. Around Atlantic Canada, in these rural communities, everybody is pulling out, so communities or members are getting together. They're forming cooperatives to provide senior housing, to provide a grocery store, or to provide maybe a small farm supply business within their community. It's a great opportunity to stimulate the rural economy of Atlantic Canada, by developing policies to capitalize those co-ops.

[Ray Boughen, Conservative, Palliser, SK]

What are other members' thoughts on that?

[Jeff Malloy]

I can't speak on the co-ops in general, the co-op movement. Other than the co-op I'm working at, I haven't had a whole lot of experience. I'm probably the prime example of what Mr. Webb mentioned. I came from larger companies within the corporate structure. So it was a complete shock to the system when I arrived the first time at the co-op to take over. It certainly takes a lot of learning to get your head around the whole concept of it.

But in general, for the fishery itself, the co-op model is very important for a number of fisheries. A lot of the fisheries are controlled by bigger companies. A lot of the smaller ones, though, that are individual fish, like lobster, like crab, could be very well served by pushing more towards a co-op model, giving some power to the individual fishermen so they would have some control.

What I found most impressive is that.... For instance, I have 12 members who make up my board. I hear all kinds of arguing and complaining and all that, until I put them on the board. As soon as I put them on the board and they see behind the scenes of the actual business, because I bring them in once a month to get approvals for everything I'm doing.... Once they get to see that and get the understanding of the business itself, it's much easier. I even find it makes discussions with government agencies, such as DFO, run much smoother, because they have a better understanding of the whole business and not just what happens on the boat or on the wharf. So whatever we can do to foster that would be a good thing.

[Ray Boughen, Conservative, Palliser, SK]

How are we doing for time, Mr. Chair?