Promoting a Flourishing Society
 

Boosting Civic Fitness

From the Archived "Cardus Policy in Public" Series

November 20, 2009

These remarks were delivered at the launch of the Cardus report, “A Canadian Culture of Generosity,” on October 1, 2009 at the Rideau Club (Ottawa).

These remarks were delivered at the launch of the Cardus report, “A Canadian Culture of Generosity,” on October 1, 2009 at the Rideau Club (Ottawa).

The Canadian Council of Chief Executives has devoted a degree of time and attention to the issues the paper raises that might surprise many people.  We have talked about the importance of social attitudes in driving entrepreneurship and innovation. We have talked about the importance of ethics and values in corporate and public governance. And we have talked about the critical role of informal networks and the non-profit sector in addressing economic and social issues.

We have engaged on all these issues for one very simple reason: the quality of life in our communities has a direct impact on our country’s ability to attract investment, create jobs and compete in the global market.

As we try to build a more prosperous country, we have recognized that some of the most important issues cannot be addressed by either the public or private sectors alone. To take one example, we know that the size and capability of our future labour force will depend on our ability to continue attracting immigrants and to enable them to make the most of their skills. But the most effective work being done to attract and integrate immigrants is done at the community level by non-profit and charitable organizations staffed largely by volunteers. Governments have an important role to play in enabling this community dynamism, but they cannot and should not direct it.
The reality is that on many fronts, organizations based in our communities and reliant on donations and volunteers can do far more with far less than any direct intervention by governments. Let me illustrate by putting on my hat as the volunteer Vice Chair of the Canadian Youth Business Foundation (CYBF), a national charity that provides financing, mentoring and other support to enable young Canadians to start their own businesses.

Since 1996, when CYBF was founded by the Royal Bank and CIBC, it has funded almost 2,000 start-ups.  In rough numbers, for a total of $26 million in loans, those businesses have generated more than 9,000 jobs, $376 million in revenue and $83 million in taxes.

Thanks to an infusion of $10 million from the federal government in the 2009 budget, we have enabled young Canadians to start almost 500 new businesses in the past 12 months alone - and in the teeth of what has been called the worst recession since the Second World War, our annual loan loss rate has edged up only slightly—from 6 percent to 7 percent.

To put this another way, for an average loan of about $13,000, 93 percent of which is being repaid with interest, our

young entrepreneurs are creating an average of five jobs.

That’s creating hope and immediate economic stimulus in our communities; it is laying the foundation for long-term growth; and more fundamentally, it is shaping a more entrepreneurial attitude in our communities. And it is doing all this far more efficiently than any government could hope to do directly.

Now, to turn to the Cardus discussion paper, the most striking observation is the small size of what it calls the civic core. 

There are two ways to read the finding that just 5 percent of Canadian adults provide two thirds of all volunteer hours, and 10 percent the same two thirds of charitable donations. On the one hand, the small size of that civic core is dismaying, especially given the evidence that it may be shrinking rather than growing. On the other, it suggests that there is immense potential to waken a sleeping beast in the heart of our communities, to unleash the potential that lies within all of us.

There are, as the paper suggests, two dimensions to addressing this issue.  The first is to enable the existing core to tap into more resources; the second is to expand the core. While the paper makes recommendations about the role of every sector of our society, I would like to focus on the two I know best, business and government.

Within the paper’s recommendations to government, two elements stand out.  The first has to do with the role of government in driving social behaviours.  These can and do change, but making them change takes a long time and requires sustained effort.

If we think back to what drove changing attitudes to smoking, drunk driving and recycling, it is clear that government leadership was critical.  Some of this required new laws and regulations to discourage the bad and encourage the good. But there also was a consistent element of the bully pulpit.

If we want to inspire and challenge Canadians to volunteer more and give more, perhaps the Participaction campaign needs to go charitable, to challenge what the paper calls “civic slackers” to boost their “civic fitness.”

However much governments may hector, the reality is that most people respond more readily to real and measurable incentives.  This is why I believe the paper’s recommendation on improving the tax treatment of donations is so important. Various people have put forward ideas for improvements on this front over the years:

The relentless and continuing campaign led by Don Johnson to expand the capital gains exemption for donations of various forms of appreciated property is aimed at spurring even more of the major legacy donations that can take a charity off the fundraising treadmill.

Imagine Canada’s proposal for encouraging “stretch” donations would provide extra rewards that primarily would help the existing core of donors to do more.

Our Council’s proposal early this year to enhance temporarily the tax credit for small donations to match that given for donations to political parties is an idea aimed entirely at expanding the civic core.

This paper’s proposal for increasing the tax credit on cash donations beyond the minimum tries to bridge both goals.

What is important here is that there seems to be a growing consensus that improving the tax treatment of charitable donations is good public policy—that it will enable our community-based organizations to do more in meeting a wide range of policy goals in ways that would make highly efficient use of tax dollars (whether through tax expenditures such as the donations credit or through direct grants and contributions).

All of which leads me to a question that, in the context of political events of the past year, might be seen as mischievous: What do you think would happen if Parliament were presented with a bill—as a matter of conscience and not of confidence—that proposed to give charitable contributions tax treatment equivalent to that of political donations, with the extra fiscal cost to be covered at least in part through elimination of the per-vote subsidy to political parties?

I will leave you to ponder that thought while turning to the role of the business community in addressing the issues raised in the paper.  The fact is that many businesses already engage in the kind of practices recommended in the paper.  As with individuals, there is a strong civic core, and the long-term challenge is to expand that core.  But in business, I would suggest that there are powerful market forces at work.

More than a decade ago, we conducted an extensive survey of our member CEOs, probing their company policies on community investment.  In particular, we asked what causes were attracting their investment and why and where these causes were shifting.

A striking finding was that the single most important factor driving community investment choices was not corporate reputation but human resources.  Investing in communities was seen above all as a vital tool for recruiting, retaining, developing and motivating employees.  And as a result, employee preferences had become key drivers of what causes and organizations companies chose to support.

In the years ahead, current recession notwithstanding, the competition for skilled employees is going to become fiercer than ever.  That will put even more pressure on companies to adopt policies and practices that reflect the values and priorities of their employees.

There is one aspect of business engagement that does worry me, and it is connected to the renewed debate over corporate governance. Back in 2002, in the wake of the Enron and WorldCom scandals, our Council engaged in an extensive internal discussion of corporate governance.  Later that year, we published a detailed consensus paper on good governance practices.

We talked about the importance of values in driving good governance, and described good corporate citizenship as the external expression of those values. We also recommended, among many other measures, that CEO compensation should reflect an appropriate balance between short-term and long-term performance.

But consider this.  When we launched our governance project, I received a letter from a senior executive at the Ontario Teachers Pension Plan.  The letter said, in effect, that CEOs had no business pronouncing on governance issues and that they should simply do what they were told by their boards.

Yet when we surveyed our members as part of that exercise, they not only reported a significant increase in influence on boards by institutional investors, they also reported that these institutions, mutual funds in particular, were the major force pushing for short-term results rather than long-term growth.
I have, on a number of occasions since, asked fund executives whether they truly believe that doing what is right does in fact add to shareholder value, and whether they therefore encourage companies to expand their corporate citizenship activities.  I have yet to receive a straight answer.

So as we contemplate the latest market failures and criticism of executives being excessively rewarded for short-term performance that proved unsustainable, I would ask you to think beyond the standard governance question of whether management is being sufficiently responsible to shareholders.  Instead, I ask you, what is the responsibility of shareholders, as individuals and as institutions, in strengthening our civic core as well as our economy?

Let me conclude with that thought, and thank Cardus for producing such a provocative and interesting paper on a subject that deserves greater discussion.