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Restricting executive salaries to a maximum of $250,000 lures talent away and gives every advantage to the for-profit sector (© Corbis)
Restricting executive salaries to a maximum of $250,000 lures talent away and gives every advantage to the for-profit sector (© Corbis)

Dan Pallotta

Salary caps would cripple Canada's charities Add to ...

Bill C-470, a private member's bill introduced by Albina Guarnieri, would impose a suffocating $250,000 cap on executive salaries at charities. The bill, which has gone through second reading, is nothing short of ridiculous. If it ever passed, the leadership exodus that would eventually ensue would cripple Canada's charitable sector. So much for being charitable. Our whole outlook on compensation in charity is in need of a serious re-imagination.

Do we wish to see the end of breast cancer in our lifetime? Would we like to see homelessness conquered in perhaps one of our major cities before we die? Would we like to see the day when no child has to worry about dying of leukemia? I know the perfect way to prevent any of these things from happening: Maintain our antiquated ideas about charity compensation.



But what if, in fact, we're actually hurting the needy by restricting charity salaries?


On first blush, limits sound like a good idea, right? Keep those mercenaries from siphoning money away from good causes with their fat-cat salaries. That's the populist spin the media throws on it. And it makes us feel good to think we're defending all of the needy people who would otherwise get the money these greedy executives are being paid.

But what if, in fact, we're actually hurting the needy by restricting charity salaries? What if it is the case - as it is with most of the rest of the economic world - that when you increase the amount of money you are willing to pay, you can recruit from a better talent pool, and if you recruit from a better talent pool, you can get leaders who can increase the amount of money being raised for the needy?

What we don't realize is that the kinds of restrictions being proposed have a powerful negative effect. They create stark, mutually exclusive choices between doing well and doing good for the brightest young minds coming out of our best universities, law schools and business schools. As a result, tens of thousands of them - any one of whom might have made an enormous difference fighting social problems - march directly into the for-profit sector each year without even considering a career in charity, because they are unwilling to make the kind of lifelong economic sacrifice that the charity ethic requires of them. Their talents are lost to the needy forever and gained for a lifetime by the marketers of Budweiser, BMW and Botox. How is that smart?

And it's not just bright young students we are keeping away. We think we are simply saying that any more than $250,000 is off limits to charity leaders. What we're really saying is that any great leader who can command a salary in excess of $250,000 a year is off-limits to charity itself. It is nothing less than an economic apartheid that ends up giving every advantage to the for-profit sector.

Why, if we want to address the world's most urgent suffering, would we remove financial incentive - the force that drives all economic activity in the world - from our toolbox? Are we to leave the eradication of suffering to saints? And what if there aren't enough of them? Are we prepared to allow millions of people to go on suffering and dying because it offends our ethical sensibilities to pay people money to address these issues? What kind of ethic is that? Do we really believe it is of some comfort to a mother who just lost her son to starvation to know that at least no one made a million dollars in the failed effort to save him?

Meanwhile, we are paying Canadian hockey coaches $2-million a year. We are paying U.S. college football coaches $4.4-million a year. David Beckham makes $50-million a year from soccer and endorsements. But woe to the head of a charity trying to cure cancer if he or she commands a tenth of these salaries. What does that say about our society's priorities?

We've tried the deprivation strategy with executive pay in charities for a few hundred years. It isn't working. We are not moving the needle on social problems. Global malnutrition has gone from affecting 824 million people in 1992 to more than a billion people today. Breast cancer deaths in Canada have remained relatively unchanged for 10 years - 5,400 funerals in 1999, 5,300 funerals in 2008. Poverty in the United States, where the same "ethic" prevails, has remained stuck at 12 per cent for decades.

Ms. Guarnieri stated that the bill will "replace doubt and cynicism about the management of charities with the confidence that the personal financial sacrifice of donors is managed by people who are paid well but not so well as to make a mockery of the concept of charity."

First of all, a person's occasional sacrificial donation to charity does not entitle them to mandate a lifetime of economic sacrifice on the part of others.

Second, we could replace our doubt and cynicism about charities by taking a look at how hard they work to keep society's problems from getting any worse.

Last, and most important, what makes a mockery of the concept of charity is the abject lack of progress that derives from our dysfunctional ethic. We don't donate to charity in the hope that charity salaries will never rise above a certain threshold. We give because we want a better world. And if we want a better world, we'd better start seeking out the world's greatest talents, and paying them whatever the for-profit sector is paying to lure them away to the more pressing needs of humanity. Any bill that would prohibit that is nothing short of a danger to human life and a distortion of human morality. The word charity comes from the Greek charis, for "grace." God give us the grace to keep our sanctimonies from killing people.

Dan Pallotta is the author of Uncharitable .

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