CCA Bulletin 22/10

August 23, 2010

Remuneration for charity staff:

the CCA joins chorus of concern over Bill C-470

Just the Facts

As reported in CCA Bulletin 16/10, Bill C-470 passed second reading in the House of Commons in April and is now on its way to hearings by the Standing Committee on Finance. Introduced by the Hon. Albina Guarnieri, Liberal MP for Mississauga East – Cooksville, this bill would allow the Minister of National Revenue to deregister any charitable organization, public foundation or private foundation that paid any employee $250,000 or more in total compensation (including salary, paid benefits and unpaid benefits). Effectively, this would put a compensation cap on charitable organizations and foundations. It would also allow the Minister to publish the names and compensation details of a charitable organization’s or a foundation’s five most highly paid employees, regardless of their compensation level.

While many cultural workers in Canada need not lose sleep over having their salaries capped at a quarter million dollars, Bill C-470 has important consequences not only for a number of major arts organizations, but also for the smaller ones. This is why the Canadian Conference of the Arts (CCA), along with 66 other charitable organizations in Canada, has recently signed a letter authored by Imagine Canada and sent to the four federal party leaders. The letter outlines why Bill C-470 is flawed in terms of capping compensation and disclosure of earnings.

Tell me more

Private members’ bills rarely make much progress in the legislative process, but this one has benefited from populist and politically correct reflexes on the part of all political parties in the House. Like other Canadian charities, the CCA supports the goal of increased transparency and accountability that motivated Bill C-470. It is in charities' interest to encourage high levels of public trust and for potential donors to have all of the information they need to make decisions regarding which causes to support. Having said this, the bill as it stands will bring about severe and unintended consequences that could have been avoided had there been consultation with the sector before it was presented to Parliament.

Imagine Canada has prepared a thorough brief as well as a Q&A sheet outlining its main concerns with the bill. The essential problem with this piece of legislation is that it fails to recognize the complexity of charitable organizations within Canada. Non-profit arts organizations registered as charities may operate on small budgets, meaning their management will not receive large payment packages. However, there are a number of foundations and arts organizations which operate on large budgets with complex and competitive operating models. For example, a symphony may need to attract a top-rated conductor and artistic director. These organizations must be allowed to attract strong and creative managerial talent using appealing compensation packages. As it stands, C-470 would impose yet another administrative roadblock within the arts sector.

As of last year, of more than 80,000 charities across Canada, approximately 1,800 had one or more employees earning more than $120,000 a year. The number of charities that have any staff earning more than $250,000 would be much smaller. Many of these are hospitals, universities and other very large charities, and at most, a handful in the cultural sector. However, because the maximum compensation level of $250,000 contained in Bill C-470 has no provision to account for inflation or potential future changes in global compensation standards, the cap will become increasingly onerous and affect more individuals with each passing year.

All charities and small charities in particular, should be concerned about another provision of Bill C-470, namely the disclosure of the compensation for the five most highly paid employees. As it stands now, the bill establishes no threshold for disclosure: for many small charities, this could mean that the compensation level of all employees, regardless of their role or compensation level would be disclosed publicly. This is an unwarranted intrusion on Canadians’ right to privacy and a much greater intrusion than the alleged one regarding the long-form census. One would expect that MPs on the government’s benches will object to it!

As far as we know, there is no equivalent piece of legislation anywhere in the world attempting to dictate how much publicly supported charities executives should be paid. In the arts, culture and heritage non-profit sector, the most significant compensation issue that needs to be addressed is not that of high executive salaries but rather low salaries and poor overall benefits, including pensions. The sector is a significant driver of economic activity and employment across Canada – far larger than, for example, the automobile industry – but the vast majority of charities and non-profits in Canada are smaller community-based organizations. Many have difficulty recruiting and retaining staff, the main reason being the lower salaries and fewer benefits they can offer given their limited financial resources. From the sector’s perspective, this is a more pressing issue which should preoccupy our elected officials!

The CCA highlights several points which it opposes in the bill in its current form:

The premise of the bill suggests that because charitable organizations receive tax-credited dollars to support their public good activities, the government has a responsibility to direct the uses of all charitable funds, particularly for salaries. Yet several other sectors of the economy also benefit from substantial public investment and tax breaks, such as the high-technology sector (i.e. through the research and development tax credit, worth more than $3 billion annually), and do not face the prospect of government intervention in their compensation practices. C-470 is therefore inequitable to charities of all kinds and all sizes.

Apart from being inequitable, the bill as it now stands is intrusive and interferes with the autonomy and responsibility of the Boards of charitable organizations. The bill would see the federal government limit the autonomy of those Boards in a way that no other sector faces – even sectors that receive far more public funding both in absolute terms, and as a proportion of their revenue.

There is no escalator for the compensation cap, meaning that its real value will decline over time. Salaries rise with inflation, meaning that over time, more and more people will fall into the $250,000+ category.

The prospect of a cap would make recruitment difficult, while the enforcement of a cap would likely result in a brain drain from the charitable sector to other unrestricted sectors of the Canadian economy and indeed to the international scene, where highly-skilled administrators are in demand.

The cap is inconsistent with other Government of Canada policies, such as the Science and Technology Strategy that is recruiting the most sought after researchers in the world to come to Canada – with appropriate compensation.

What can I do?

Please read the full letter, of which the CCA is a signatory. Using the arguments presented, write to your MP, to the Hon. Albina Guarneri and to Party leaders to express your concern with Bill C-470 as it currently stands.

What are your thoughts on Bill C-470 and its impact on the charitable sector? Let us know on our blog.