Special Committee on Cooperatives Committee on July 27th, 2012

[Merv Rockel]

You fill out the little form, or whatever you had.

They said, “Thank God we don't have to do this any more. It was well worth the—”

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

But I bet there was some resistance to change when you first brought it out: “Are you going to read my meter by an airplane?”

[Merv Rockel]

Well, we did the airplane afterwards. It was going to be a drive-by.

The other thing was Corridor Communications. We got involved in that. We had annual meetings and we had people who were mad because they couldn't get it because they lived in a valley or a subdivision in the valley. They were really mad: “Why don't I have it? You have it.”

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Tell them to get a shovel and we'll take the hills down.

[Dan Astner]

I think it's also a matter of the level of due diligence that the board has demonstrated over the years. We'll get the members saying, “If the board has looked at it, and you've done a business case study on it and it's a good move, we trust you. That's why you're there.”

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

I was going to move to that one next.

Mr. Rockel, you talked about that leadership training, how you train the next person. Well, I bet I'm looking at three people who've done a lot of training with the next set of board members, or the next group of persons in an associated co-op or on boards of directors—on governance and that type of thing.

I know that's how it happens in rural Ontario, whether it's the manager of my local credit union and the other boards he may sit on, and the training that happens—because it happens.

I bet I'm looking at three of you who have done a fair bit of that. It may not be organized, but I bet in some cases it is. I know we have mentoring programs for business and for not-for-profit boards, and I bet you've done the same thing.

Would that be true?

[Robert Marshall]

In our situation, we have an excellent resource with Canadian Central. I think they have a very good program for a director that's coming into our system.

I really commend them for the effort they've put into developing that program over the last 10 to 15 years.

[Merv Rockel]

Rural Utilities in Alberta has taken a leadership role. They have brought in a guy by the name of Jim Brown.

Have you ever read The Imperfect Board Member? It's one of the best selling books on board governance. He's done workshops. He comes to our AGM, and he'll spend a number of hours talking.

Rural Utilities is the one that has really.... We've had workshops all the way across the province, and we get a number of people. I really commend Rural Utilities for doing that.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

I commend all of you for what you do. I'm sure the knowledge that's shared is invaluable.

[Merv Rockel]

It's our job to make sure that our board members and directors go to these meetings.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

That's exactly right.

[The Chair, Conservative, Blake Richards]

Thank you very much.

We did start a couple of minutes late, so I think we have time for one more round of questioning.

That will go to Mr. Allen for five minutes.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair.

I want to go back to Mr. Marshall and the FCC. One of the things you said that has not been said before referred to the other pieces about FCC and credit unions and the competing part. One thing that you said that struck me was that because of the competition in some of the areas where you have a branch and where you're the only institution in that particular town, you may actually have to leave because of the lending going away.

If memory serves me right, when FCC was here they stated they don't do other financial products. In other words, they're in the business of lending in the agricultural field, so they're not a service provider; they don't take chequing accounts.

I am paraphrasing, but they said they don't poach your customers. They said if it was your customer and you offered them a deal, they wouldn't undercut you. Is there truth to that?

Farmers are a pretty cagey bunch. If they know the FCC offers a better deal and they know that if they ask you first, FCC won't give them a better deal, they'll go to the FCC first, even though they might be your customer, as a member.

Is there any truth to any of any of that, or is it completely different from that?

[Robert Marshall]

I'd suggest there is some truth to that. To give you a for instance—farmers are very astute business people, absolutely—in our rural community, there are no businesses. There are some streets that have three businesses on them and that's it. There's the local petroleum dealer, a restaurant, and maybe a hardware store and a grocery store, if they're lucky. That's not enough to sustain our business model. We need small business and agricultural lending.

What will happen in the farming community or the agricultural sector is that a farmer will approach two or three institutions, including Farm Credit, at the same time. In that situation, we're competing with a number of institutions where we always come up short. The deal is competing on rate or that we require an appraisal to validate the value of the security. FCC always beats us on the rate and it doesn't require an appraisal. They use their own land value system, which is an average across the province.

I can certainly say there is risk to anyone, if you're using an average. One section of land adjacent to another section of land can be completely different in value.

They tend to always win the business based on rate, on term, 100% lending value, and no appraisal requirements. We can't do that in our world—our regulators will not allow it—and I don't think prudent business would dictate that either.

[Malcolm Allen, NDP, Welland, ON]

You also talked about how when there is a bit of a downturn in the general economy, quite often folks will move to you as a lender because their traditional lender, if they've been using a traditional bank for a long period of time, might now be saying no. I agree with your comment that you're not the lender of last resort. Folks just ask, “Oh, where else can I go?” Then they finally find you.

Do you have any sense of how many of them you keep after that? Do you keep that client longer term after they have seen how much they like your service or appreciate what you've done for them, and now want to become a longer-term client?

[Robert Marshall]

Absolutely, that's exactly the case. In those situations they're actually a really good ambassador for their credit union because they're out there telling people of their situation and then we'll have others who will come in as a result. It's not necessarily within a month or two, but over time it pays dividends in that regard.

[Malcolm Allen, NDP, Welland, ON]

From your perspective, you'd like to see us take a look at the FCC in whatever committee it happens to be, whether it be the ag committee or another one. And you want us to do it from the perspective not just of the damage it's doing to your institution—because you could probably pull back a bit and still do okay.... In fact, by being forced you out of a place you might actually be better off in some sense, because there's an inherent cost to being in a small place beyond the fact that your members want you to do it.

That is different from what I'm hearing from the others. So do you suggest that we do that?

[The Chair, Conservative, Blake Richards]

Make the response brief if you can.

[Robert Marshall]

To reiterate what Canadian Central is saying, what we'd like to see is a parliamentary review of the FCC's mandate on a regular basis, similar to the BDC and Export Development Canada, and that the FCC complement our business rather than compete with it. I think we exist well with those other two crown corporations. I guess the message we'd like to send is that we'd like to see the FCC in the same aspect.

[The Chair, Conservative, Blake Richards]

Thank you very much.

With that we will now conclude this panel. Thank you all very much for your testimony today and for taking the questions from members. It's very much appreciated. You were very helpful to the committee in our work, so we thank you all very much.

I will now suspend the meeting until 3:30 p.m.

[The Chair, Conservative, Blake Richards]

I'll call the meeting back to order.

We have a fairly full panel down there, I see, for our last panel of the day. We're looking forward to that.

We have with us, from the United Farmers of Alberta, Mr. Bob Nelson, the president and CEO, and Mr. Bill Dobson, who's one of the directors. We have the Canadian Worker Co-operative Federation. Ms. Hazel Corcoran is executive director, and Mr. Peter Hough is the financial officer. And then we have with us from the Manitoba Cooperative Association, Vera Goussaert.

[Vera Goussaert, Executive Director, Manitoba Cooperative Association]

In French, it is pronounced “Goussart”

and in English it is “Goussard”.

[The Chair, Conservative, Blake Richards]

Thank you.

What we'll do is give each of you an opportunity to present opening remarks for 10 minutes. Because we have a full panel, I'll try to signal to you when you have about one minute remaining, and as such, when it's time to wrap up.

I will give it first to the United Farmers of Alberta.

Mr. Dobson, you have 10 minutes to make your opening remarks.

[Bill Dobson, Director, United Farmers of Alberta]

Good afternoon, Mr. Chairman, and members of the special committee on cooperatives.

My name is Bill Dobson, and I am a member of the board of directors of United Farmers of Alberta Co-operative Limited, also known as UFA. With me is Bob Nelson, president and chief executive officer of UFA. I will be skipping over some of the things in the original brief that may have been sent to you, so it will cut some of the fluff out to make the timeline.

Thank you very much for the opportunity to address this special committee. We consider your work critical, and we both look forward to answering your questions after our presentation.

The Government of Canada has always taken a keen interest in the role of cooperatives. Co-ops are supported and utilized by people from all parts of Canada, regardless of their political interests or economic status. Those of us who spend a lot of our time in the cooperative sector greatly appreciate the relationship that has existed for so many years.

This year has been a time to celebrate and showcase cooperatives and credit unions around the world, as the United Nations has designated 2012 as the International Year of Cooperatives. It has also been a time of reflection and self assessment. It is very appropriate that the federal government also take this opportunity to examine their role in assisting the cooperative sector to flourish. Cooperatives and credit unions provide economic activity and employment throughout all of Canada. Having the most effective and efficient business environment ensures the financial health of the sector.

Today, UFA is a well-established cooperative that serves nearly 120,000 members through an extensive network of 113 petroleum agencies, 35 farm and ranch supply stores, and 25 outdoor adventure stores operating under the wholesale sports banner. We have grown from a small-scale local cooperative into a comprehensive enterprise, with $2.1 billion in sales in 2011.

Improving the economic and social well-being of our agricultural owners and their communities is our core purpose. Every day we work toward enabling rural success by supplying agricultural products and services, by protecting our members' investments in the cooperative, and by championing and supporting local causes, rural programs, and job development.

Currently, UFA proudly employs almost 1,200 people, and 65 independent petroleum agents. Approximately 500 people are further employed by the UFA petroleum agents.

UFA probably has the most interesting evolution story of any business in Canada. A look at our history provides living proof of the agility and the endurance of a cooperative enterprise. We take great pride in learning from our heritage, but we are cognizant that we will only be viable in the future if we are relevant to the needs of our owners and customers.

We say that we have been around for over 100 years, which is true, but we have not actually been a cooperative for over 100 years. Formed in 1909, UFA’s core purpose was to improve the livelihood of farmers in the province of Alberta. That purpose remains much the same today, although it is met in a much different manner than at that time.

Originally, UFA was a rural social and lobby organization. In 1918, UFA began to purchase farm supplies collectively, to distribute to community locals. As a farm organization, United Farmers of Alberta was seeking the most effective way to lobby the provincial government. They felt it would be a good idea to elect some members of the legislature to have direct access to the governing Liberals.

Thus, in 1921, UFA ran candidates in 45 out of 61 ridings. Before they realized what had happened, they had elected 38 MLAs and formed a majority government. I'm sure everyone would like to get a hold of their campaign manager.

[Voices]

Oh, oh!