Bill C-470: Transparency, salary capping or knee-capping for the charitable sector?
By Andy Levy-Ajzenkopf
April 19, 2010
Late last year, Liberal MP for Mississauga East-Cooksville, Albina Guarnieri, drafted a private member's bill into parliament titled C-470. It passed first reading in October and last month went through its second reading in the House of Commons. While the bill's numerical designation is innocuous-sounding enough, it's the content of the bill that could have serious ramifications for Canada's voluntary sector.
In essence, Bill C-470 An Act to amend the Income Tax Act (revocation of registration) is Guarnieri's call to arms against charities whose salary structures make "a mockery of the concept of a charity." Interested readers should read the full bill to see more of what Guarnieri is specifically proposing.
In her introductory remarks of the bill last year, Guarnieri said "Seven thousand years is how long it would take for a typical $30-a-month donor to the Sick Kids Foundation just to pay the salary and severance of its CEO," referring to a 2009 Toronto Star story about how the foundation's CEO earned $2.7 million in salary and severance. She said money that was "intended for sick children, was instead building a private fortune because of the lack of legislation."
The official summary in the bill's draft says it is an enactment which "amends the Income Tax Act to revoke the registration of a charitable organization, public foundation or private foundation if the annual compensation it pays to any single executive or employee exceeds $250,000."
Reaction from many who work in and for the sector ranged from mild annoyance to fear that Guarnieri's sweeping push for a salary cap on executive or employee compensation is tantamount to cutting sector job allure off at the knees.
Note: Guarnieri did not respond to CharityVillage's attempts to contact her prior to deadline.
Imagine that
It's unclear whether Guarnieri consulted any voluntary sector experts prior to drafting her bill. Don McCreesh, chair of Imagine Canada's board of directors, said as far as he knew, the MP definitely did not contact his organization or sector colleagues that he spoke with. He said a call for a $250,000 salary cap was "unreasonable" in certain circumstances.
Last week, Marcel Lauzière, president and CEO of Imagine Canada, wrote to his sector partners of an informal meeting Imagine recently had with Guarnieri and various parliamentarians from all parties. The rendezvous was an attempt to convey sector concerns about her bill.
"[Bill C-470] seeks to enhance transparency in the charitable sector by requiring registered charities to provide the name, job title and annual compensation of the five executives or employees with the highest compensation," he wrote. "It also proposes to provide the Minister of National Revenue with the discretion to deregister any charity, private foundation or public foundation that paid any employee more than $250,000 annually in total compensation. This would, in essence, impose a cap on the salaries of leaders of charities in Canada."
The fear then, according to Lauzière, is that the bill would "do a disservice to Canadian charities, and to all those who support and benefit from the engagement of these organizations" because the bill makes no distinction between small charities and massive foundations who wield huge budgets and employ hundreds of people. Lauzière told CharityVillage that he agreed in principle with Guarnieri's push for more transparency in the sector and with compensation disclosure, calling it "crucially important." However, he said any salary cap would "have an impact on the autonomous nature of voluntary boards across the country."
"A cap doesn't exist in other sectors. We're going into a tight labour market over the next few years and we need to bolster and attract people with skills and compensation. We see a cap as the wrong message to send at this time." |
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"A cap doesn't exist in other sectors," he said. "We're going into a tight labour market over the next few years and we need to bolster and attract people with skills and compensation. We see a cap as the wrong message to send at this time."
When asked if he felt Guarnieri and other parliamentarians who are supportive of her bill showed signs of being swayed by what they heard from Imagine in their meeting, Lauzière said: "It was a fruitful discussion. We got a sense that the parliamentarians were open to further discussion on this. I did not feel we were hitting a brick wall."
If Guarnieri has indeed softened her position about compensation amounts for sector employees, it would signify a dramatic change of perspective on her part.
Crying foul over nonprofits
During debates last month in the house, Guarnieri, in a preemptive strike on opposition to her bill, said she anticipated arguments such as those made by Imagine Canada.
"One can only expect a hail of complaints and cries of impending doom from charities that pay more than $.25 million [to employees]. They will say they need that money to attract top fundraising talent, people who know how to market a charitable cause," she said. "I would submit that they will not, because all 85,000 Canadian charities will be under the same rules competing for the same donor dollar. Therefore, charities would not need to keep upping the ante to keep the top people from going down the street because the charity down the street would have the same cap. The result would be that more money would end up where the donor actually intended it to go, not in the paycheques of executives but in the programs that the charity is there to serve."
Her bill was supported by the Bloc Quebecois, NDP, and Liberal parties.
The truth is in the details
But Guarnieri's painting of sector executives as nothing more than money-hungry profiteers has caused some to question her sincerity and knowledge of the sector.
Jack Shand, president of Leader Quest — The Association Experts, an executive recruiting and HR consulting service for the voluntary sector, suggests Guarnieri set her sights upon her own workplace.
"...the bill's supporters should as actively seek to have the individual salaries of every employee in government a matter of public record...The government is just as tax-exempt as any charity." |
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"If in the interest of [salary] transparency Bill C-470 is beneficial, then the bill's supporters should as actively seek to have the individual salaries of every employee in government a matter of public record; and not just salary ranges by level. The government is just as tax-exempt as any charity," he stated, adding that before the public gets too swayed with Guarnieri's hyperbole about compensation practices in the sector, they should inform themselves about the responsibilities shouldered by the vast majority of well-compensated employees.
"[C]ertain charities are large, complex and sophisticated operations requiring highly trained executives, such as the Red Cross. Many of the senior staff of these organizations transition from careers in business and government to lead charities. While in my experience they may not be compensated at a level comparable to similar jobs in the private and public sectors, charities need to be able to attract and retain effective leadership through competitive compensation practices," he said.
While the bill is currently in debates during second reading, it is possible that it will be referred to committee for review later today (April 19, 2010). If it is referred, Lauzière said Imagine Canada and other sector organizations will apply to present their cases.
Bill C-470 would not profit nonprofits
In Toronto, Mark Blumberg, a charity lawyer with the law firm Blumberg Segal LLP, has been vigorously posting against Guarnieri's bill on his blog, Globalphilanthropy.ca. On it, he has taken the bill to task and dissected it section by section, calling it an "unhelpful" document and exposing Guarnieri's attempts at enforcing salary transparency as ignorant of the sector and what measures are already in place by the Canada Revenue Agency (CRA).
Blumberg encouraged CharityVillage to quote him from his entries for the purposes of this story. Some highlights include:
- "Many universities and hospitals would potentially be deregistered if Bill C-470 is passed and enforced; as presumably some of them pay over $250,000 to their most senior executive or researcher or other employees. If a Canadian charity such as a hospital or research foundation manages to convince a top US researcher to come to Canada to work here and they pay them say $300,000, I don't think this is necessarily a problem, especially if the person is important for the program and was earning substantially more in the US."
- The CRA's form T3010 already requires Canadian registered charities to disclose "the 10 highest compensated, permanent, full-time positions [and] enter the number falling within each of the following annual compensation categories. $1 - $39, 999, $40,000 - $79,999 $80,000 - $119,999 $120,000 - $159,999 $160,000 - $199,999, $200,000 - $249,999, $250,000 - $299,999 $300,000 - $349,999, $350,000 and over". The T3010 already provides a donor with sufficient information with respect to compensation amounts. If a donor wants to decide how to donate based on this one criterion then he/she is free to do so - no matter how poor criteria it is to decide whether or not a charity should receive a donation. Registered charities are required to file the T3010 annually. Failure to file will result in a charity losing its registered charity status within a few months of the required filing date
- Excessive compensation, although talked about by the media occasionally, is not a big problem in the Canadian charitable sector - I can think of only a few examples over the last few years. The private members bill is a distraction from bigger issues. 2/3 of charities have total revenue under $100,000 and many of them do not even have a single paid employee. Helping these charities with governance is more important than dealing with compensation issues of a few charities. When there are a few cases of egregious salaries it is not only the charity that deserves scrutiny; it is the board of directors of the charity that should be held accountable. The buck stops with the board. Are they asleep? It is more important, but perhaps politically not as beneficial, to focus on the hundreds of thousands of underpaid charity employees.
- This bill requires the disclosure of the top five salaries. For many organizations, this will be one or more people paid between $10,000 - $40,000. Is this what we need to know? It is a bit of an invasion of privacy that just because you work for a registered charity (which may get no government money and may not even issue tax receipts) your salary gets disclosed. On the bright side, despite the unwelcome attention of many lower income employees, if all these underpaid peoples' salaries are disclosed, it may be a bit of a wake up call that many in the charity sector are not getting paid fairly for their skills and commitment.
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Blumberg goes on at length criticizing Guarnieri's bill and makes a point of hammering home his perceived flaws in its creation.
To refer or not to refer
As stated earlier, on April 19, 2010, Bill C-470 will be up for debate one last time in the House before ultimately dying on the table or getting referred for a committee review process. If the latter happens, sector organizations and interested parties will lobby for their chance to counter, or at least have the bill amended drastically.
CharityVillage will continue to monitor this story in the event the bill goes to committee.
Andy Levy-Ajzenkopf is president of WordLaunch professional writing services in Toronto. He can be reached at andy@wordlaunch.com.
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