Here is a copy of a letter I am told was sent from The Hon. Albina Guarnieri, M.P.. The letter is in italics. I have placed in bold italics the parts that I find most objectionable and at the end of each paragraph in brackets and bold my comments. I have previously written on this issue at http://www.canadiancharitylaw.ca
Millions of Canadians dig deep into their pockets to donate billions of dollars to charity every year. Many of these donors live on very modest incomes yet choose to sacrifice in order to support a worthy cause. They have every right to expect that their sacrifice reaches its’ intended purpose with a minimum being lost to administration or exorbitant salaries along the way. [MB. Canadians have high expectations from charities - money spent on administration is not lost - it is a vital part of the transparency we need. You might find this note that I wrote interesting http://www.globalphilanthropy.ca/index.php/blog/comments/how_much_should_canadian_charity_spend_on_overhead/]
Last summer, it was revealed that large sums collected for charity end up being paid to the executives of these charities. It was reported that the head of one Toronto charity received $2.7 million dollars in a single year. It would take 7000 years for a typical monthly donor to contribute enough to cover the compensation and severance of its chief fundraiser. [This is one case that was reported by the Toronto Star. I am not aware that overcompensation is a big problem in the Canadian charity sector. Making such a broad rule that no charity can pay over $250,000 to anyone is overkill to deal with this issue.]
Research then revealed that charities do not have to reveal the amounts they pay their top executives, just the number that earn more than $120,000. It turns out that over 2,000 people earn more than this amount at charities in Canada. [The part in bold is plainly wrong. Clearly this member has not even looked at the T3010B which has been available since February 2009 and has been completed by tens of thousands of charities. Check out the T3010B and specifically Schedule 3 on compensation which is on page 6: http://www.canadiancharitylaw.ca/index.php/blog/comments/t3010b_new_cra_charity_information_return_for_2009/. Canadian charities have to disclose in their T3010B “For the ten (10) highest compensated, permanent, full-time positions 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.”]
Private Members BiII C·470 aims to add a small measure of transparency and charity to our nations charities. It would require charities to disclose the salaries of their five highest paid employees, as all publicly traded companies are obliged to do. As well, it would give the Minister of National Revenue the power to deregister a charity if it continued to pay individual employees more than $250,000 per annum, starting in 2011. [There is transparency about registered charities in Canada. I am an advocate for greater transparency but ignoring the extensive transparency requirements that currently exist to ostensibly “add a small measure of transparency” is not helpful to having an informed debate about whether greater transparency is required. We have already much improved transparency on the issue of compensation and almost no transparency on much more important issues like programming and evaluation of programs. If providing exact salary information is a poor idea then deregistering a “charity” for paying over $250,000 is an even worse idea. If a hospital lures a top neurosurgeon from the US where he is earning $1.5 million per year and the hospital pays him$360,000 well then that hospital is going to be deregistered! By the way CRA only claims jurisdiction over “registered charities” under the Income Tax Act and not just any “charities” in Canada. It should be self-evident that regulation that applies to publicly traded companies may not be appropriate for charities. Has the disclosure requirement for publicly traded companies resulted in appropriate compensation for those executives? If not, why use it for registered charities? Also, it was the US rules that limited salaries to $1 million that has resulted in the provision of stock options and other forms of compensation that have dramatically increased compensation of US executives and resulted in them being encouraged to take very dangerous risks. I wrote an article on this point many years ago.]
This Bill aims to restore the trust of donors by limiting the amount of their money that gets siphoned off to support the lavish lifestyles of those who ask others to sacrifice. The threshold of $250,000 is more than a Deputy Minister or Minister earn to run a federal department and should be more than enough to attract talent to a charitable cause, especially as all charities would be under the same cap. [Before talking about restoring the trust of donors please check out the Muttart Foundation polling which indicates that there is far more trust in charities than in politicians. The idea that paying a salary is money that is “siphoned off” is outrageous. This is precisely the argument espoused by some who oppose transparency - it takes away resources that would have ostensibly been spent on charitable activities. I like the model of the “all volunteer” Canadian charity that meet around the kitchen table with very limited expenses and no employees. Canadians are free to support those charities. However it is certainly not the only model and in some cases not the best model. I would not want to go to a “hospital” to be treated where the total staff is 5 volunteers and they have no administration expenses. I would not want a university degree from a university that is all volunteer. The use of terms such as “lavish lifestyles” is I believe what is called an emotive argument. I guess it is ok to pay excessive salaries as long as the person receiving the funds does not lead a “lavish lifestyle”. If you work for a charity and get paid $25,000 per year and your spouse is wealthy - watch out - your salary is helping support a lavish lifestyle. “Should be more than enough” - yes but what if you are wrong on this point as you have been on a number of other points. I would be happy to work for a charity for $250,000 but many charities need people who are a lot more talented than me and even the average MP or cabinet minister. Do MPs or even cabinet ministers need a high school education? I assume there is no formal educational requirements for those positions but would be happy to hear otherwise. This particular proposal will put Canadian charities at a comparative disadvantage especially in certain areas of competition for specialized skills in research etc.]
I encourage you to support Bill C·470 and support an important step toward restoring trust in our nation’s charities. [As discussed above this proposal is not helpful in “restoring trust” and there are many other ideas that would be more helpful to build on the trust that registered charities currently enjoy.]
The Hon. Albina Guarnieri, M.P.
Here is my main note of Bill C-470 http://www.globalphilanthropy.ca/index.php/blog/comments/private_members_bill_on_salary_disclosure_not_helpful/
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.