Remuneration for charity staff: the CCA joins chorus of concern over Bill C-470

CCA Bul­letin 22/10

August 23, 2010

 

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.