Disclosure could come knocking on charities' doors

Tuesday, December 20, 2005

Only required to provide salary ranges


Faye Wightman is always eager to talk about the charity she runs and the fine work it does. But there's one thing Ms. Wightman is reluctant to discuss -- how much she's paid.

"I guess there are mixed feelings about it," said Ms. Wightman, who is chief executive officer of the Vancouver Foundation, one of Canada's largest charitable foundations with more than $600-million in assets. "The problem is if it's not put in perspective sometimes it can be taken out of context."

It's not just Ms. Wightman or the Vancouver Foundation that are touchy about commenting on compensation. Very few Canadian charities will tell anyone how much they pay their senior officials and they don't have to.

Unlike every publicly traded company in Canada and every non-profit group in the United States, Canadian charities are not required by federal regulators to disclose compensation. They only have to provide some salary ranges, and even then the names of senior officials are excluded.

So, while American donors can easily find out that Marsha Evans, who just resigned as CEO of the American Red Cross, earned $450,000 (U.S.) last year, Canadian donors have no idea how much Dr. Pierre Duplessis, CEO of the Canadian Red Cross, earned. The organization only discloses that five unnamed employees were paid more than $119,000 (Canadian) last year.

"It's considered private information," said Alice D'Anjou, a spokeswoman for the Canadian Red Cross. She added that the organization meets all federal disclosure requirements.

A spokeswoman for the Canada Revenue Agency, which regulates charities, said there are no plans to require charities to reveal salaries. However, she said the CRA is in the process of reviewing reporting rules.

Many observers say it's time charities disclosed executive compensation since they receive indirect taxpayer support and some operate almost like large corporations, paying their CEOs six-figure salaries plus bonuses and other allowances.

"There is no excuse whatsoever," said John Bryden, a former member of Parliament who spent years pushing for changes to disclosure rules. "In my view there is even more obligation on the part of charities to disclose the compensation given to their senior executives because people like to think that there is still a spirit of generosity attached to charities even though they are a big business."

Georgina Steinsky Schwartz, CEO of Imagine Canada, which represents Canada's charitable sector, acknowledged that more salary disclosure is needed. "If you are collecting public money then the public is entitled to information and I think we all need to prepare ourselves for it," she said.

However, Ms. Steinsky Schwartz said most Canadian charities have few if any paid employees and requiring all charities to report salaries could be a burden for thousands of small organizations. She said the sector should work with the CRA to come up with reporting rules that are fair and practical.

One charity that isn't waiting for new rules is Care Canada. Its board of directors is expected to approve a resolution next month to disclose executive salaries. "I think the fact that public companies have to do this means that we should do it too because we ask the public for money and we get it from them," said Nancy Gordon, a senior vice-president at the organization. "We think this is professional work and that it requires professionals to do it."

Some charities have been forced to reveal salaries because of provincial legislation, but even there the rules are haphazard. The Ontario government, for example, publishes an annual list of all public sector employees earning $100,000 or more. Charities are exempt unless they receive direct provincial funding. That has left wide discrepancies over who must disclose. For instance, under Ontario's rules the Canadian National Institute for the Blind (CNIB) has to disclose its salaries and, last year, CEO Jim Sanders earned $206,860, up 21 per cent from the previous year. However, the Hospital for Sick Children's Foundation is exempt, although its CEO, Michael O'Mahoney, is believed to earn far more than Mr. Sanders.

Here's another twist. Ontario's law requires universities to report people earning $100,000 or more and often the fundraising positions are among the best-paid jobs on campus. For example, George Hood, vice-principal of advancement at Queen's University who oversees fundraising, earned $442,127 last year, more than anyone else at the university. While Mr. Hood's salary is disclosed and can be debated, his counterpart at York University, Paul Marcus, is shielded from similar scrutiny because he is paid by the York University Foundation, which is exempt from the reporting rules because it is considered a charity.

The inconsistency in reporting infuriates Craig Lillico, chief financial officer at the CNIB, who says all charities should be required to report compensation. "What the public lacks is that ability to compare on a consistent basis across the entire sector," he said.

Mr. Lillico added that Ontario's rules provide a misleading picture of salaries at the agencies that do report because they only report total compensation without breaking out how much is salary, bonus or other compensation. Mr. Sanders' pay, for example, increased from 2003 because he received some deferred one-time bonuses in 2004. His actual salary is closer to $170,000, Mr. Lillico said.

Bill McGinly, who heads a U.S. organization of hospital foundations, says charities have a duty to educate the public about their compensation. "The more transparency you can provide, I think, the better you are protecting the integrity of the organization," said Mr. McGinly, president and CEO of the Virginia-based Association for Healthcare Philanthropy. Disclosure statements for some U.S. charities run 90 pages long and all non-profit groups must release detailed compensation reports for their executives.

Mr. McGinly questioned Canada's system of providing only salary ranges. "I think people pay more attention when individual names are attached to specific amounts," he said.

Kerry Longpre of the Calgary Foundation said running a large charitable organization these days requires special and well-paid skills, something the public doesn't always understand. "This notion of altruism and that we should love it so much that we should work for very little, I find that a very antiquated notion and I'll be the first one to say that some of the most effective people I know are working in charities and not for enough money," Ms. Longpre said. She added that with donors demanding more control over how their money is spent, charities will have to start releasing this kind of information. "I think we are certainly moving in that direction."

But others say disclosing salaries would make it difficult for non-profit groups to attract private sector managers. "I think salary disclosure would be a big problem," said Nick Offord, former president of the Mount Sinai Hospital Foundation in Toronto who is now a charity consultant. "Greater disclosure of compensation can be discouraging for people who are seeking careers and maybe moving from the private sector to the not-for-profit sector if they suddenly realize even if they're working for a small charity their salary is open to public disclosure."

Bob Wyatt, who co-chaired a task force on charity regulations, said Canada shouldn't follow the U.S. model. "I don't believe that people going to work for a charity should be required to relinquish their privacy rights simply because they work for a charity," said Mr. Wyatt, who is executive director of the Muttart Foundation in Edmonton.

However, Mr. Wyatt said the CRA should boost the number of salary ranges that are disclosed. The top band now is "$119,000 or over."

"There is a significant difference between a salary of $120,000 and a salary of $400,000," Mr. Wyatt said.

Mr. Wyatt added that there is one other benefit to more salary disclosure: "It might also help focus attention on people who are receiving pitiful salaries."

Full disclosure

Canadian charities are not required to say how much they pay their top executives.

Here is a sample of some of Canada's largest charitable organizations and the salary ranges they do disclose.

Name of charityAssetsPeople with salaries between $80-$119kPeople with salaries over $119k
Salvation Army$1,166,816,045 23
Vancouver Foundation602,795,97222
Hospital for Sick Children Foundation461,206,742--5
The Calgary Foundation265,216,95511
Ducks Unlimited Canada96,422,000--5
Care Canada52,677,19141
World Vision Canada45,759,73114
Canadian National Institute for the Blind43,544,336--5
Unicef Canada31,395,16614
Multiple Sclerosis Society of Canada15,436,92423


Second in a series. Tomorrow:

The growth of private foundations