Evidence of meeting #5 for Special Committee on Cooperatives in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cooperatives.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Brigitte Gagné  Executive Director, Conseil canadien de la coopération et de la mutualité
  • Réjean Laflamme  Assistant General Manager , President, Federation of Funeral Cooperatives of Québec, Conseil canadien de la coopération et de la mutualité
  • Kip Adams  Director, Education and Outreach, Quality Deer Management Association
  • Bernard Brun  Director, Government Relations, Desjardins Group
  • William Ravensbergen  Chairman, Board of Directors, Ag Energy Co-operative Ltd.
  • Rose Marie Gage  Chief Executive Officer, Ag Energy Co-operative Ltd.
  • Denis Richard  President, La Coop fédérée
  • Jean-François Harel  General Secretary, La Coop fédérée
  • Hélène Simard  Chief Executive Officer, Conseil québécois de la coopération et de la mutualité
  • John Lahey  President and Chief Executive Officer, Alterna Savings
  • Alan Diggins  President and General Manager, Excellence in Manufacturing Consortium
  • Lorraine Bédard  Corporate Secretary, Vice-President, Members Relations, Agropur cooperative
  • Francine Ferland  President, Fédération des coopératives de développement régional du Québec
  • Serge Riendeau  President, Board of Directors, Agropur cooperative

9:45 a.m.

Liberal

Mauril Bélanger Ottawa—Vanier, ON

Would you mind sending us a copy of that brief, Mr. Laflamme?

9:45 a.m.

Assistant General Manager , President, Federation of Funeral Cooperatives of Québec, Conseil canadien de la coopération et de la mutualité

9:45 a.m.

Liberal

Mauril Bélanger Ottawa—Vanier, ON

Ms. Gagné, where do you stand?

9:45 a.m.

Executive Director, Conseil canadien de la coopération et de la mutualité

Brigitte Gagné

We will definitely send you the Mallette study this afternoon.

As for business transfers, another study was done recently. We know this is a special challenge for the cooperative movement. While it is challenging for traditional businesses, it is quite serious for the cooperative movement. We are taking a hard look at the issue with the help of researchers in the field. We can definitely send you the study this afternoon.

9:45 a.m.

Liberal

Mauril Bélanger Ottawa—Vanier, ON

Thank you.

Mr. Brun, your thoughts?

9:45 a.m.

Director, Government Relations, Desjardins Group

Bernard Brun

In terms of business transfers, I believe other witnesses have already mentioned the Capital régional et coopératif Desjardins program, which was set up in partnership with the Government of Quebec. This tool not only provides access to capital, but also addresses the matter of business succession, especially as it pertains to the cooperative environment.

As regards demutualization, looking at the big picture is key. In other words, it still involves an adequate legislative or regulatory regime. Cooperatives are defined by the protection that a reserve affords. Previous witnesses have told you that cooperatives have a higher survival rate. Why do they have a better survival rate than other types of businesses? Because they are more stable. Perhaps they follow a more prudent management style. Over time, they accumulate surpluses and build up reserves stemming from market success. Those reserves are supposed to help them grow and should not serve as an incentive for demutualization. That means, then, that current members should not be entitled to that money.

In terms of demutualization, it is acceptable for a business to improve its structure. That being said, if its structure changes, it is not acceptable for that change in structure to generate undue wealth, whether for current members, or for the leadership of the mutual or the cooperative.

9:45 a.m.

Conservative

The Chair Blake Richards

Okay. Thank you very much.

We'll move to our second round of questioning now.

Up first I have Mr. Lemieux for five minutes.

9:45 a.m.

Conservative

Pierre Lemieux Glengarry—Prescott—Russell, ON

Thank you kindly.

I want to thank our witnesses for being here this morning.

Mr. Brun, since you represent Desjardins Group, I have a few financial questions for you.

We, the committee members, have repeatedly heard from a number of witnesses that cooperatives are up against numerous challenges when seeking financing for project development. We were told that the reason they have trouble getting the financing they need may be a lack of education in the financial sector. As I see it, the problem is a bit more complicated than that, just as complicated as the matter of demutualization. Perhaps it is also unique to cooperatives.

Can you describe the challenges that arise when a cooperative is looking for financing to grow its operations?

Is a lack of education to blame? Is it a poor understanding of cooperatives? Is it a legal barrier? What happens to the guarantees if the cooperative fails to make a payment?

Since financial cooperatives are more familiar with the reality that cooperatives face, is it easier for cooperatives to work with a financial cooperative when they need money?

9:50 a.m.

Director, Government Relations, Desjardins Group

Bernard Brun

Thank you, Mr. Lemieux.

That's an excellent question. As you mentioned, the matter is rather complicated. I will try to stick to the main points. But if you need additional information on the more technical aspects or other elements, I want to say right off the bat that we would be delighted to provide the entire committee with those details.

When we talk about financing, I think we need to distinguish between financing for small cooperatives, in other words, seed money, and financing, or access to capital, for large cooperatives.

9:50 a.m.

Conservative

Pierre Lemieux Glengarry—Prescott—Russell, ON

That's what I wanted to discuss.

9:50 a.m.

Director, Government Relations, Desjardins Group

Bernard Brun

Small cooperatives, of course, have the challenge of acquiring a small amount of financing in the beginning, because they can't always use their equity or property as a traditional business would.

When it comes to large cooperative enterprises, it is true that all financial institutions do not necessarily have a good understanding of cooperative structures or an awareness of that model. We are probably better informed at Desjardins. So there are educational challenges, but there are legal ones as well.

If we look at the legal challenges, I can use Desjardins Group as an example. This past spring, we were able to launch an issue of capital shares worth over a billion dollars. To make that happen, however, we had to work hand in hand with both levels of government, just to be able to structure that capital share issue, which will mean permanent shares in the cooperative and will generate some dividends.

So a capital share issue can happen, but only after close coordination with the authorities in order to comply with requirements. When done right, the results can be tremendous. Just consider the fact that this cooperative-issued capital is Tier 1-ranked under the requirements of what is commonly called the Basel III reform, for financial capitalization.

Cooperatives also enjoy greater stability because of their structure. They have a more loyal following and deeper roots in the community, but they have more trouble accessing capital quickly because they cannot issue shares. Therefore, they often maintain an extra cushion. This capitalization is much more secure. As a result, Desjardins has a capitalization rate of over 17%, which is considerably higher than that of Canada's other major banks.

What is necessary, then, is a very close working relationship with the government to make adjustments possible and to adapt legislation, not simply to the traditional business model, but also to the cooperative enterprise structure.

Is there any information you would like in more detail?

9:50 a.m.

Conservative

Pierre Lemieux Glengarry—Prescott—Russell, ON

That's fine. Thank you.

9:50 a.m.

Assistant General Manager , President, Federation of Funeral Cooperatives of Québec, Conseil canadien de la coopération et de la mutualité

Réjean Laflamme

I just want to add one thing. Mr. Bélanger mentioned the Federation of Funeral Cooperatives of Québec, which I am the president of. All of the funeral cooperatives are Desjardins caisse customers. So the caisses agreed to finance our network and the individual funeral cooperatives. Desjardins' credit cooperatives are doing their part when it comes to financing existing small and medium-size businesses.

9:55 a.m.

Conservative

The Chair Blake Richards

Thank you very much.

We'll now move to Madame Brosseau, for five minutes.

July 25th, 2012 / 9:55 a.m.

NDP

Ruth Ellen Brosseau Berthier—Maskinongé, QC

Thank you, everyone.

I just have a brief question for Mr. Brun.

Obviously, Desjardins Group has been a shining light in the rich and dynamic history of Quebec's cooperative movement. Can you describe what Quebec is doing to allow its cooperative movement to flourish? Could the government adopt similar measures to stimulate the cooperative movement outside Quebec?