Presentation to the JVS Strictly Business Awards luncheon

An address by Richard E. Waugh
President and Chief Executive Officer,
Scotiabank

May 19, 2004
Toronto, Ontario

Check Against Delivery

Good afternoon, ladies and gentlemen. Thank you, Bill (Davis, former Premier of Ontario), for that kind introduction – and thank you everyone for joining us today and welcome.

On behalf of Scotiabank, I want to congratulate today’s honourees on their success and commitment to making our community more open to the gifts everyone in our society can share through their employment.

And I’d like also to commend JVS – and all those who work so tirelessly in the organization to ensure that each individual has a chance to contribute. I’m proud of the partnership Scotiabank has with JVS and the work we’re doing together – and I want to thank them for giving me this opportunity to speak to all of you today.

I recall late last summer when Ernie Rubenstein – who lives in my neighbourhood – leaned over my fence to have a talk.

I thought he was coming over to admire my lawn!

But the conversation went quickly from “Is that Kentucky-blue grass?” to “Will you be the key note speaker and sponsor of the JVS luncheon?”

I think I said both ‘no’ and ‘yes’ – but I don’t recall to which question!

But here I am today – and very pleased that Scotiabank can play a part in this tremendous event.

I want to talk with you this afternoon about businesses and the important role we play in our communities. In particular, the increasing expectations that various stakeholder groups have of business – of our need to think more broadly in how we measure success in terms that include a greater sense of corporate social responsibility – and measures that go beyond those solely of shareholder returns.

I’m here today to tell you that I am making a renewed commitment to work towards a greater leadership role for Scotiabank in corporate social responsibility. We define corporate social responsibility as the way we interact with our stakeholders to meet our social, economic, environmental and ethical responsibilities. We do this by setting goals and measuring our performance, not only in terms of creating value for our shareholders, but also by our success in building customer and employee satisfaction and supporting the well-being of the communities where we operate. We also do this by believing in our core values of integrity, respect, commitment, along with a balanced work ethic – what we call insight and spirit.

Today, I want to talk about why I think this kind of approach is the way to go – not only because it’s the right thing to do, but because it’s also good business. About why the expectations of each of these stakeholders are higher than ever – and growing. And how the effort to meet these expectations will ultimately ensure our ability to deliver shareholder value.

Let’s start by looking at shareholders. There has been a clear and steady rise in shareholder demands over the past few decades. One reason for this is that there has been a tremendous shift in the actual make up of the Canadian shareholder population.

Twenty or thirty-years ago, relatively few Canadians participated in equity markets. Today, you’d be hard pressed to find someone who doesn’t own shares in one form or another.

The advent mutual funds and RRSPs helped to democratize the markets making them accessible to more people and to encourage broader participation, while a low interest rate environment helped drive Canadians into equities. But likely a bigger part of the equation was demographic. Aging ‘baby boomers’ – about 9 million Canadians – had to seriously begin planning for retirement.

Today our average shareholder is part of a very diverse group. A group that is more representative of the Canadian population on the whole than ever before. Most Canadians are shareholders either directly or indirectly through mutual funds and pension plans, not only of Scotiabank but most major Canadian companies. For instance, one in two working Canadians own shares directly or indirectly in Canada’s banks.

And these people have expectations that go beyond the desire for higher returns on their investments to expectations about how those businesses are run. Shareholders are now holding management and boards to higher standards of corporate social responsibility – whether it’s related to the environment, economics, or especially in light of recent events, corporate governance and ethical behaviour.

In the financial sector, the rise of ethical funds is the most obvious expression of this desire of a different standard of performance from business that went beyond the purely financial.

At the same time, customers are demanding more. They expect not only the highest standard of service and quality products – and they expect companies to provide these without compromising their values.

At Scotiabank, we serve 3.5 million households in Canada. And we know that Canadians have a very clear sense about what’s important beyond the bottom line.

In fact, research by IPSOS Reid in its 2003 Canadian Reputation Monitor shows that the first two and most highly rated factors influencing a corporation’s reputation – the bread butter of every business – are customer service and quality of products.

But the next two are management and ethical business practices. Quality of the work place and the environment are the two after that.

Profits to shareholders placed among the attributes Canadians ranked as least important to reputation. Having said that, without profits you wouldn’t have an organization, and you wouldn’t have any reputation or corporate social responsibility to worry about!

Let me turn now to employees. Companies must aspire to be great employers because the competition for talent is fierce – and because talented employees have become a key differentiator. Competitiveness in the 21st century will be based on the caliber of your workforce. I believe for a bank, at least Scotiabank, this is the case and will be why we are one of the best at what we do.

The combination of the ‘baby boomer’ retirement wave, fewer people entering the labor force, and an increasing demand for better-educated, more highly skilled workers are coming together to drive a labor shortage. At our Bank, increasing retirement rates and normal rates of attrition will mean that within five years close to 30% of our senior management (VPs and over) will be leaving. And in ten years the number will be nearly 60%. We’re already well along our way to managing this – but it’s a very real challenge.

Power will continue to shift from companies to the individual. Talented individuals are gaining leverage and businesses have to work much harder to attract and keep them. Facilitated by the Internet and globalization, people now have worldwide access to job opportunities.

Individuals with marketable skills are highly mobile, their commitment is more short term and they demand much more. Employees have more options, are more discriminating and have higher demands of us as employers. That’s the challenge – but for me it also an opportunity – ensuring Scotiabank is a great place to work.
We also know the importance of satisfied employees. We’ve proven in our organization that there is a strong link between employee satisfaction and customer satisfaction. And independent research has shown that we are leaders in customer satisfaction for the last four years – and the reason is because we have very strong employee satisfaction.

Now, what about communities?

Well, those very same customers and employees we want to attract and keep just happen to live in the communities where we do business.

During the ‘90s there has been tremendous pressure on communities in part due to a growing gap left by various levels of governments that have had to struggle to balance budgets. This has led to a mini-boom in the growth of the giving sector – as various charities have stepped in to fill the void. Our bank alone increased its corporate giving five fold in the past decade as the demand for financial support by charities has increased.

But being a part of the community is more than just about the money you donate, it’s about how you do business, how you treat your employees and customers and how you interact with the community. It’s also about personal commitment.

In our charitable giving, we look to our employees to help guide us in the choices we make and the things we should support. There are so many deserving and needing charities. Unfortunately we have to choose. So, we have focused on education and healthcare – things that are important to the community – as well as social services, arts and culture.

We consider the programs and areas that our employees are supporting and contributing to – their personal community commitments – both in terms of time and money – and we try to follow their example.

And all of this, our Bank’s goals and our employees’ goals bring us to why we are here today with JVS.

Our involvement with JVS – I am sorry Ernie, but this is the real reason I am here today – beyond today’s event – our partnership with JVS is also about finding opportunities for people with disabilities to work at Scotiabank. We have a good record of this – and have had great experiences with the employees that have been placed. It’s cliché to say this – but it truly is a win, win situation. Talented people, contributing positively in the workplace, to our Bank and to our community.

In closing, and as I said at the outset, for Scotiabank, corporate social responsibility makes perfect sense, when we think about our priorities as an organization. For all businesses, I think it’s important to recognize that the expectations of various stakeholders have increased dramatically. That is reality.

At Scotiabank, we not only think about our shareholders, we also think about our customers, our employees and the communities where we live and work. We do this because it makes sense – business sense. We do it because it’s right. And we do it because it fits with our values as organization – and we think for many Canadian companies this is the direction we all need to go.

Ladies and gentlemen, it’s been a pleasure. Thank you for your time – thank you for supporting JVS and I hope you enjoy the rest of today’s luncheon.