Boisaco, Inc. Breaks the Cycle of Boom and Bust
Not many tourists or urban Quebecers venture more than 3 hours north of Quebec City, to the northern banks of the St. Lawrence River and the wooded regions beyond. One town of about 2,000 people in this northern region, Sacré-Coeur, has found a way to weather the disruptive forces of the forest products boom-and-bust cycle.
The town has long depended on forestry, but by 1984, in the wake of one of the cyclical slumps, and after the third bankruptcy in 10 years, the town’s sawmill lay idle for 2.5 years. “We had a reputation as the [forestry] plant that had lost the most money in Quebec,” recalls Marc Gilbert, who was an employee at the sawmill at the time. “Nobody wanted to touch us.”
Photo by Guillaume Roy, Boisaco, Inc.
When the bank that owned the plant sought to liquidate it, the community collaborated with the provincial credit union and government to buy the mill for $1.2 million. After studying various models, the community created Boisaco, Inc. (“bois” means “wood” in French), a company owned in three equal parts by these three entities:
- COFOR – a worker co-op of 60 loggers harvesting wood in the forests, with 3 members on Boisaco’s board.
- UNISACO – a worker co-op of 142 millworkers in the processing plant, with 3 members on Boisaco’s board.
- INVESTRA – a community investor group comprised of 432 small shareholders in the region (local merchants, mayor, business community, and other workers). No family may own more than 5% of shares (to avoid a single family from holding a majority of shares). INVESTRA holds 3 board member seats.
A final board seat is reserved for Desjardins Capital de Risqué (the investment tool of Desjardins for venture capital). Desjardin is a powerhouse credit union system throughout Quebec.
An advantage of this ownership and governance structure, according to Marc Gilbert, one of the project’s founders and a former company president, is that it allows the workers, as majority shareholders, to benefit from the management experience of the members of the business consortium. Decision-making is rarely adversarial. "We adopted a shareholder's charter that gave everyone [all three parties] a veto right on all big decisions," says Gilbert. "This forced us [to seek] a working consensus."
Three months after its reopening in 1985, the combined advantages of a market recovery and the new management allowed Boisaco to generate enough revenue to pay off all its debts. Since then, they have implemented a forward-looking policy for distribution of surplus (profits):
- 27% shared equally as dividends among the three shareholder groups (COFOR, UNISACO, and INVESTRA)
- 18% as bonuses to the workers in the logger and millworkers co-ops
- 55% (after taxes) to a research and development and rainy-day fund
Since the mid-90s, that development fund has allowed Boisaco to modernize equipment and to undergo a second transformation by creating or acquiring five other regional companies that buy Boisaco’s products or by-products, about one every three years. This foresight helped Boisaco diversify and ride out the boom-and-bust cycles typical in the wood products industry, for example with home renovation products that pick up when home construction flags. Together, Boisaco and the five other companies (a granite cutter, a forestry company, and manufacturers of stove pellets, molded decorative panels and horse bedding) employ 600 people in the region.
Also key to Boisaco’s success is the long history of transparency, participatory management (30% of workers have at some time served on a board), solidarity, and fairness. Workers are highly motivated to avoid waste and look for cost savings. Before Boisaco was organized, the mill went through three ownerships and was closed for 30 months. People remember those times and realize how dependent the isolated community of 2,000 is upon this mill. There is also a strong desire to create good jobs to keep young people in the region.
With the 2008 crisis in the US housing market and the depressed prices for wood products, all involved in Boisaco reached an agreement to freeze wages and to implement 5-10% wage cuts when industry indicators fall below certain thresholds. This type of belt tightening has been done with an eye to avoiding lay-offs and what they would do to families. Management sees this decision as rooted both in sound business sense as well as in Boisaco’s original social mandate.
“If we had stopped, we would have lost our best workers,” said Marc Gilbert. “All those folks couldn't have waited four years... And when we wanted to start up again, how much would it have cost us to recreate all of it, and all that expertise.”
[Based on “Boisaco, Inc., a Community Owned Industry in Remote Quebec” by Margaret M. Bau, Cooperative Development Specialist, USDA Rural Development, June, 2012 and “Weathering the Storm: Cooperative Quebec sawmill thrives despite forestry crisis” by Chris Scott, The Dominion, August 6, 2010.]