Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Thursday, June 20, 2013

C-377: A chance for the Senate to prove its worth

There's a hilarious piece in the National Post by Dean Beeby, who cleverly used an access to information request to ferret out a copy of the training manual they use for the summer students who guide tourists around Parliament Hill. Anticipating critical questions about the role of the Senate in our modern-day democracy, the students are primed to highlight its virtue as a site of sober second thought.

Consider these choice phrases, straight out of the manual:

"Senate investigations are usually of a higher standard than those by committees of the House of Commons," it exudes. "Senate investigations are usually non-partisan, in that they do not suffer from excessive media exposure… Senators have the time to dedicate themselves to exhaustive research and analysis."

In my experience, actually, this claim is largely true. In Commons committees, questions from both government and opposition benches are almost always transparently intended to score points on the other side. Senate hearings are more constructive and genuinely inquisitive. [I am not here stating any opinion on the validity of the Senate's status as an unelected body, only reporting on my personal experience appearing before committees of both chambers.]

This general conclusion was reinforced by my recent appearance before the Senate committee that investigated Bill C-377, the Conservative private member bill that would force labour organizations to publicly report any and all expenditures above a $5000 threshold. As I (and many others) have argued elsewhere, this bill is an attack on union organizing and union activity: it would burden unions with a costly and unprecedented bureaucratic requirement, and its attempt to distinguish between "bargaining" and "non-bargaining" functions of unions is clearly laying the groundwork for future prohibitions on union political activity (and flies in the face of the Supreme Court's Lavigne decision).

In my appearance before the Senate committee, it was clear that the architects of the bill were on the defensive against solid questions and concerns from both sides of the committee room. All but one of the witnesses in my session strongly oppose the bill, and argued (in response to questions) it could not be made acceptable through amendment. One included Lou Serafini Jr., President and CEO of an investment firm (Fengate Capital Management) who argued powerfully that the unprecedented information requirements under the bill would not only impose a substantial administrative burden on his clients (and hence on his firm), but would inevitably compromise competitive information regarding his firm's client base, fees, and other business matters. The only person on my panel in favour of the bill was John Mortimer of Labour Watch, whom I recently debated on BNN.

The Senate committee has since posted a concise and damning report, available here. There were 44 witnesses, the vast majority of them speaking against the bill, raising a whole raft of concerns: privacy, constitutionality, cost, precedent for other institutions in society, impact on collective bargaining, and more.

The members of this Committee have so far ratified the training brochure's constructive description of the Senate's role in Canadian policy-making, thanks to their hard work, persistent questions, and (especially for the critical-thinking Conservatives) independence. The role of Senator Hugh Segal should be especially acknowledged; here is his passionate speech on the matter.

Now let's see if the hopeful vision communicated to the summer students (and through them to hundreds of thousands of tourists visiting Parliament Hill this summer) can be underscored by the actions of the entire Senate. They now have a chance to change the conversation from expense accounts, to careful policy debate. Let's see if they can do the right thing and send this bill packing.

Here for posterity's sake are the speaking notes for my appearance before the Committee (due to time constraints I didn't get through the whole thing). Among other points, I reported the leadership and staff rep salaries of the CAW (which are public information), I challenged the notion that unions are "subsidized" by the tax system, and I described the impact on union organizing and collective bargaining of the fact that only one side of the labour-management relationship would need to disclose very fine details of its expenditure and activity. I also point out that since union members make higher wages, on average (thanks to the representation which their unions provide), they also pay higher taxes -- on average $3000 more in personal income tax per union member per year. In this regard, unions and collective bargaining are clearly beneficial for Canada's fiscal well-being.

Speaking Notes for Presentation to Senate of Canada, Standing Committee on Banking, Trade and Commerce

Regarding Bill C-377

By Jim Stanford, Ph.D., Economist, Canadian Auto Workers Union, May 30, 2013

Thank you Chair and Members of the Committee for the opportunity to discuss this issue today.

I am Economist with the Canadian Auto Workers union, representing about 200,000 workers in at least 16 definable sectors of the Canadian economy -- including manufacturing, resources, transportation, and both private and public services. Our union is presently engaged in a process to create a new Canadian union with our colleagues in the Communications Energy and Paperworkers union (CEP), which will come to fruition with a founding convention this August. The resulting new union will be even larger, over 300,000 members, representing workers in a broader scope of industries.

Please note that your committee will hear another presentation later in your process from the CAW Legal Services Plan, which is a non-profit legal services provider funded through contributions negotiated by CAW locals. That submission will highlight an important administrative problem regarding the definition of exempt union benefit plans. My comments, in contrast, will focus on the broader substantive effects of the proposed legislation.

I will start by summarizing our union's current practice of financial accountability and transparency. Then I will briefly list several of our concerns with the proposed measures contained in this Bill.

Comprehensive audited financial statements for the national CAW are prepared semi-annually under the leadership of our Secretary-Treasurer, and distributed in print to all members of the National Executive Board and to all of the CAW's over 300 local unions. They are also made available to any individual CAW member who requests one.

Local unions must also have their books audited by a Chartered Accountant twice per year, and file the audit report with the national Secretary-Treasurer of the union. Local financial statements must be reported to duly constituted local membership meetings.

Regarding compensation, the annual salaries of the 3 top officers of the union are determined by delegate vote at our triennial constitutional convention, and specified in the Constitution, in Article 12. The President earns $156,017.92. The Secretary-Treasurer earns $143,906.19. And the Quebec Director earns $135,906.81.

The salary of staff representatives is also approved by delegates and specified in the constitution, also in Article 12. The base salary is currently $121,182.61. Staff rep salaries have followed the trend of wages earned by skilled trade workers in the auto assembly sector.

The CAW Constitution specifying these salaries is posted on-line at this link: http://www.caw.ca/en/about-the-caw-caw-constitution-english-version-pdf.htm.

The proposed constitution for our new union (formed with our partners in the CEP) will maintain these high standards of reporting and accountability. Regular independent audits, quarterly local financial reports, and mandated disclosure of financial statements to national executives, Canada Council delegates, and local unions will continue. And financial statements will continue to be made available to any member who requests them.

Regarding the measures proposed in Bill C-377, I would make the following points:

1. The level of reporting detail proposed in this legislation (requiring the disclosure of every expense over $5000) is unique, discriminatory, and burdensome. There is no other sector or institution in society (businesses, charities, governments) required to publicly disclose its financial affairs in such arbitrary detail.

2. This reporting will constitute a major administrative burden on unions. Remember, it seems that every union organization, including the smallest local, would have to complete the returns. Most of our smaller locals rely on volunteer financial secretaries; this reporting will constitute a substantial increase in the workload and cost of financial reporting for local unions.

3. It will also create a new administrative burden for government. Published estimates have suggested the cost of the new bureaucracy required to receive, compile, and distribute the masses of information received from national and local unions could exceed $30 million per year. The deadweight cost of this unique and burdensome system will reduce the effectiveness of unions, the collective bargaining process, and government, for no obvious public policy purpose.

4. The bill's requirement that unions separately catalogue all expenses related to matters other than direct collective bargaining and workplace representation is unjustified. Our union considers its mandate to be to facilitate collective action by working people to improve their economic and social prospects. We view our participation in broader social and political causes and debates, motivated by the goal of enhancing the economic and social well-being of our members and all working people, to be a core function. The legitimate right of unions to engage in these broader activities was affirmed clearly by the Supreme Court in the 1991 Lavigne case. Other stakeholders in the Canadian economy (including individual businesses, business associations, professional bodies, etc.) also engage in these types of activity, without associated disclosure requirements or sanction.

5. The requirement that unions disclose the detail and nature of any financial expense over $5000, in contrast with the absence of comparable financial disclosure by businesses, creates a significant and distorting asymmetry in information between unions and businesses. Unions engage with individual businesses around organizing, representing, and bargaining on behalf of workers. When one side in that relationship must disclose every significant expense, and the other side discloses nothing, the side which discloses can be placed at considerable strategic disadvantage. Consider the situation of CAW support for workers seeking to organize a new bargaining unit in a non-union workplace. The union must disclose the cost and nature of any significant expense related to that organizing drive; this provides the employer with valuable intelligence regarding the union's plans and strategies, with no reciprocal disclosure required on its part. The balance between labour and business in this crucial relationship is distorted accordingly.

6. It is important to note that we bargain with many privately owned corporations in Canada that are not required to publicly disclose any financial information whatsoever.

7. Publicly-traded corporations are required to disclose composite annual and quarterly financial reports, management discussion and analysis of those reports, and the compensation of the top 5 officers in the firm. However, that requirement is imposed not through the Canada Revenue Agency or our tax laws, but rather by securities regulators. The goal is to ensure that individual shareholders have sufficient information to inform their personal investment decisions.

8. The equivalent requirement for unions would be for labour boards or labour ministries (not the tax system) to require disclosure and accountability mechanisms, as a way of ensuring that unions operate according to the preferences of their members. If a genuine problem existed regarding financial disclosure by unions operating in the federal sphere (and in my view that is not the case), the matter should be referred to the Minister of Labour or to the CIRB for appropriate legislative or regulatory remedy. This is not an issue that should be addressed through the tax system.

9. In most jurisdictions in Canada, industrial relations regulations already require that unions make composite financial statements available to members who request it. In our case, that requirement is redundant, since that is our practice anyway.

10. Indeed, there is no obvious or logical relationship between union financial accountability and the Canada Revenue Agency in the first place. Unions are not generally subsidized by government, and unions do not receive preferential tax treatment (compared to any other non-profit organization). Hence unions do not "owe" financial disclosure of their activities to government or to the broader population. They are and must remain accountable to their own members.

11. The fact that individual union members are allowed to deduct the cost of their dues from gross income in calculating their taxes owed is often misinterpreted as a tax subsidy for unions. It is no such thing. The deductibility of union dues for income tax purposes reflects the same tax principle that is applied to other categories of income and expense: "if you spend money to make money, then you pay tax on the difference."

12. Union dues are clearly an economic investment on the part of union members. Collective voice and legal bargaining rights allow union members to negotiate higher wages and better pensions and benefits from their employers. Most recent Statistics Canada data (from the monthly Labour Fore Survey, CANSIM Table 282-0074) indicates that hourly wages for union members, on average, were $5 per hour (or 23 percent) higher in 2012 than for non-union workers ($27 per hour versus $22 per hour).

13. Union members therefore pay higher taxes, on average, than non-union workers. Indeed, the average full-time union member pays about $3000 more in personal income tax (federal and provincial) than the typical non-union worker. Far from being "subsidized," union members pay more in tax than non-union members -- and we recognize this is a fair contribution for the value of public services and infrastructure which our taxes pay for, given our higher incomes.

14. The extra taxes paid by union members are modestly and fairly adjusted for the dues which they pay to their organization, in order to allow them to successfully attain those higher wages and pensions. Of course, this principle also applies in all other areas of the tax code. For example, every supplier of safety deposit box services in Canada, presumably, or every investment fund manager, should be held to the same standard of financial transparency as would be imposed on unions under this bill -- since their costs are also deducted, for tax purposes, against the income generated by the corresponding investments.

15. If the rationale of C-377 is that unions must disclose their financial affairs (in unique and disproportionate detail) because union members can deduct the cost of dues against the higher incomes they enjoy as a result of union membership, then a strong precedent is set that the suppliers of any other good or service that can be legally deducted against income should disclose their finances in equivalent detail. This would include any firm which supplies an individual or business who in turn deducts that cost as an input expense against their income for tax purposes. That is a very wide net indeed (and would cover any firm which counted at least one tax-paying business among its customer base). Perhaps the authors of C-377 might consider the precedent that is potentially set, and the unintended consequences of that precedent; the uneven application of the principle (requiring some suppliers of tax-deductible services to disclose financial affairs in detail, but not others) would likely spark important legal challenges.

16. Many legal experts have suggested that the provisions of Bill C-377 would likely violate one or more aspects of the Constitution and the Charter of Rights, potentially including personal privacy rights, Charter rights to protected freedoms, and provincial jurisdiction over labour relations policy in most sectors of the economy. I am not expert in these matters, but these concerns would seem to have merit.

17. It is not apparent how this proposed legislation serves any concrete public policy function. CAW financial statements are available, in the same detail as financial statements of other public institutions, to any member who asks for them, and the CAW's internal democratic processes provide members with full authority over how the union receives and spends its money. We have not encountered complaints from members who are somehow prevented from accessing this normal financial transparency or accountability.

With that I thank you for your attention and would be pleased to entertain your questions and comments. Thank you.

Original Article
Source: rabble.ca
Author: Jim Stanford

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