Indecent Disclosure: Why are unions not required to be transparent?

It seems the mood in Ottawa these days is one of increased transparency and accountability. Two private member’s bills making their way through the House and Senate are aimed at increasing the transparency of First Nations reserves and Canadian charities. Before the mood changes, the federal government should consider greater disclosure for a sector that severely lacks it: Canadian unions.

The current push for greater transparency

The push for greater transparency on First Nations reserves gained traction with Canadian politicians over the past year. In the fall of 2010, Kelly Block, a Conservative Member of Parliament, tabled a private member’s bill (Bill C-575: Reserve Politicians’ Pay Transparency Bill) that would require public disclosure of the salaries and reimbursement of expenses for First Nations chiefs and council members across Canada. The bill passed second reading in the House of Commons with 151 MPs voting for it and 128 against.

Similar developments occurred in the charitable sector. Albina Guarnieri, a Liberal Member of Parliament, drafted a bill (Bill C-470: An Act to amend the Income Tax Act [disclosure of compensation – registered charities]) that proposes public disclosure of the annual compensation of any executive or employee of a registered charity who is paid more than $100,000. The bill passed in the House of Commons, and it passed the first reading in the Senate.

Of course, greater transparency and accountability are goals most Canadians would support. Canadian taxpayers, after all, provide billions of dollars to First Nations reserves, and therefore they should have access to information on how their money is spent.

Registered charities, on the other hand, are exempt from taxes and can issue receipts that provide their donors with tax credits. Many charities also receive direct funding from the government. Partially for these reasons, registered charities are already required to supply financial information including staff compensation to the Canada Revenue Agency, which publishes it on its Web site.

The benefits of transparency and accountability

Public disclosure of financial information allows interested parties to gauge the financial health and performance of organizations. In addition, transparency leads to, and is essential for, accountability. The public disclosure of financial information allows taxpayers to determine the appropriateness and effectiveness of spending. Empirical research found that the benefits of greater transparency include improved governance and reduced corruption.

Indecent union disclosure in Canada

While public companies, charities and, hopefully soon, First Nations reserves need to supply significant disclosure, little is asked of unions in terms of disclosing financial information. Neither the federal government nor provincial labour laws demand public disclosure of union financial information. This special treatment is striking given that unions receive funding from tax-deductible union dues.

In addition, the lack of transparency holds true for public sector unions that have a monopoly (or near monopoly) on government-service provision, e.g., education and health care.

Workers in Canada can be forced to join a union as a condition of employment, and they have no choice but to remit union dues. Union leaders are able to use these mandatory and tax-deductible union dues to fight political battles that their “members” may not support.

No provincial or federal labour law requires public disclosure, and while unions in most jurisdictions (save for Alberta, Prince Edward Island and Saskatchewan) are required to make financial statements available to their members, the members must formally request the information. This means the requests are not anonymous. Without anonymity, a worker’s confidentiality and ability to make conclusions without influence from union representatives are seriously compromised.

What’s more, no province or the federal government prescribes or mandates a particular amount of detail in the financial statements. For instance, unions do not have to delineate expenses by type of activity. Most importantly, there is no requirement that financial statements indicate a breakdown of money spent on activities directly related to representing workers and money spent on activities unrelated to representation, such as political activities.

Public access to information in the United States

In comparison, the United States insists upon significantly more disclosure from unions. To counter corruption and mismanagement and to increase the transparency of union operations, the U.S. government enacted new financial disclosure requirements in 2004. This legislation requires all unions to submit detailed financial statements to the United States Department of Labor (DOL). Large unions – those that spend over $250,000 per year – must provide information for 47 financial items and 21 non-financial items that are organized into two financial statements and 20 supporting schedules. Smaller unions – those that spend less than $250,000 – have less onerous requirements. Critically, all unions in the United States must specify the breakdown of spending on collective representation and spending not related to representation.

Another important aspect of union financial disclosure in the United States is that union members and the public have equal access to all this information on the DOL Web site (http://www.dol.gov/olms/regs/compliance/rrlo/lmrda.htm#1). This allows anonymous access, and, therefore, union representatives are less likely to influence a worker’s decisions.

The provision of publically disclosed information about the financial status of unions enables workers to assess more accurately the financial position, activities and performance of their representatives. The public disclosure of financial information allows workers and interested parties to determine the appropriateness and effectiveness of union spending. The increased transparency that comes from public disclosure is also essential for accountability and provides an incentive for union leaders to manage membership dues properly.

Despite its depth and coverage, there is room for improvement when it comes to union disclosure in the United States. For example, the data lack simplicity, making it difficult for an average person to get a true picture of the unions’ finances. Unfortunately, many additional disclosure requirements that would have made union disclosure more comprehensive were stalled or rescinded by the Obama Administration.

Coerced union membership

The differences in union disclosure laws in Canada and the United States are magnified by the differences in the laws regarding union membership and the payment of union dues. As noted, workers in Canada can be forced to join a union as a condition of employment, and they are compelled to pay full union dues.

This stands in stark contrast to the United States where workers cannot be made to join a union or to maintain membership in a union to retain their jobs. In addition, federal laws in the United States allow workers a choice when it comes to financially supporting union activities that are not directly linked with worker representation, such as political activities.

Put another way, U.S. workers have a choice regarding union membership and full dues payment, and they have anonymous access to detailed information on union finances. Canadian workers have neither.

End the special treatment of unions

Canadian politicians should be applauded for encouraging increased transparency and accountability. Public disclosure of financial information allows interested parties to gauge the financial health and performance of organizations, and the transparency created by disclosure laws serves to improve the governance of those organizations. Given the disclosure requirements already in place for public companies, charities and other public organizations, it is time to end the special treatment of unions. At a minimum, Canadian unions should have the same level of financial disclosure as their counterparts in the United States. As the saying goes, a little information would go a long way.

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