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Q&A on Corporate and Union Donations

Why should corporate and union donations be banned?

There are numerous reasons why banning corporate and union donations would make elections in Toronto more fair and democratic.

Reason 1: Corporate donations create an unfair system.

Corporate donations allow business owners and executives to donate money two ways, through both corporate and individual donations, while other citizens can only donate as individuals. This creates an unequal system whereby certain people can give more money to political campaigns than others. With a ban on corporate and union donations, business owners and executives will still be allowed to donate money, but as individuals rather than representatives of their companies.

Furthermore, because private companies do not need to publicly disclose their corporate ownership and organization, it is difficult to enforce maximum donation rules. Private companies could be (and probably are) making multiple donations over the limit through different corporate officers and subsidiary companies, but these abuses are very difficult to detect and track.

Reason 2: There are excessive levels of corporate donations, which create excessive spending in elections.

Under the Municipal Elections Act, candidates can’t spend more than a certain amount (an average of $31,251) on campaigning. Spending caps are set out for each ward based on its population size. At present, many candidates are raising far more money than they are actually allowed to spend under these ward expense limits, leaving huge surpluses behind for future elections. 32 of 44 councillors raised more money than their ward expense limits. 10 councillors raised enough to pay for 3 or more election campaigns.

While they are not allowed to spend more than their ward expense limits on campaigning, candidates are currently allowed unlimited expenses for fundraising expenses and thank-you parties. This has led to the proliferation of lavish fundraisers and thank-you parties. Prohibiting corporate and union donations would remove some of the expensive excesses that characterize many campaigns who have much more money than they are allowed to spend on campaigning. It would also encourage candidates to reach out more to their communities and constituents for individual donations, rather than focusing on the business community, thereby increasing contact with the people that they would represent.

Reason 3: Prohibiting corporate and union donations will save taxpayers’ money.

In order to encourage people to make donations to candidates, the City of Toronto offers a rebate programme whereby donors can receive rebates for up to 75% of their donation amount. So, for example, a donor who gives $100 can receive a cheque for $75 from the city after the election. However, with the increasing volume of money being donated to candidates, the city is paying out more and more money, often to large corporate donors who don’t need the incentive of rebates in order to be able to afford to donate. In 2000, rebates cost Toronto taxpayers $2.99 million, and it will be much more for the 2003 election.

Reason 4: Corporate donors tend to have vested interests at City Hall.

From VoteToronto’s compilation of donor lists in the 2000 and 2003 election, it’s clear that businesses are donating money for particular reasons. The types of companies that tend to donate most often are also the companies that are most directly affected by decisions made at City Hall. They are contractors and construction companies who get city contracts to repair the roads, developers who need approvals for new buildings, lobbyists who try to sway votes, media companies who install advertising billboards, and so on. In the 2000 election, businesses contributed 57.5% of total campaign funds. By comparison, unions only contributed 2.4% of overall donations to candidates. Individuals made up the remaining 40.2%.

For more detail on the ‘Big Money at City Hall’, see VoteToronto’s Top Donors page for the 2000 election.

Reason 5: Corporate donations can affect vote outcomes.

When businesses donate to candidates, there is often the suspicion - rightly or wrongly - that they might have particular interests for contributing money. Banning corporate donations would remove the implication or suspicion of business influence on councillors, and is a key piece of reform in the ‘clean up’ of City Hall.

Based on votes closely tied to business interests and lobbyists, there appears to be a tendency for councillors who receive more business donations to support business interests in their votes. For example, MFP, the company at the centre of the MFP Inquiry into the ballooning costs of computer leasing deals, was the subject of a February 2002 vote. The motion proposed to adopt the minutes of settlement with MFP, releasing the company from any further claim with the city. Based on campaign finance records, the councillors who voted FOR settling with MFP received a median of $28,519 from businesses, compared to $16,188 for those who voted against the settlement – a 76% difference. In this case, the councillors who voted for the business interests received disproportionately more business dollars than those who voted against the motion.

Another key vote associated with lobbyists and business interests is the Island Airport bridge. A June 2003 omnibus motion during the Lastman mayoralty proposed to provide the Toronto Port Authority with $48.6 million in cash and land as a lawsuit settlement, and provide approval for the fixed link and airport expansion. Councillors who voted FOR the fixed link and settlement with the TPA received a median of $28,463 from business donors, compared to $15,325 for those who voted against it – an 86% difference.

Will candidates still be able to raise enough money if they can’t get corporate and union donations?

Yes. Numerous candidates have proven that it is possible to win elections relying primarily or wholly on individual donors. Several candidates in the 2003 election won without accepting any money from businesses, including one new candidate who won a tight race as a relative unknown. David Miller won the mayoralty relying primarily on individual donations, mostly in the form of contributions less than $500.

Raising money from individuals require candidates to reach out to people in their communities, by meeting with community and ratepayer groups, talking to people while canvassing, and trying to get their support. Rather than large corporate fundraisers, candidates should organize smaller events with different communities, and reach out to the diverse groups in this city. Yes, they will probably raise less money than if business and union donors were permitted, but this will also reduce the number of lavish fundraisers and parties. We think that these moves will make for a stronger democracy, and bring municipal politics closer to its base, namely, people in the community.

Won’t banning corporate and union contributions just drive these donations ‘underground’?

If a ban on corporate and union contributions is instituted, businesses and union organizations will not be permitted to donate money, but their owners, employees, executives, and members will continue to be able to donate as individuals.

Some worry that new rules will lead businesses to start giving money to their employees to donate on their behalf. However, one of the reforms that will be voted upon would institute more stringent reporting practices, including mandatory electronic filing and the use of more detailed reporting forms. Greater transparency and enforcement of the Municipal Elections Act will serve as a deterrent for abuses of the system.

VoteToronto has also recommended that another way to prevent these types of abuses would be to require donors to provide more detailed information, such as their address, place of employment, and occupation. This is an established practice in the United States, used by the Federal Election Commission and the New York City electoral system, in order to deter companies from using their employees as channels for donations. For more detail about VoteToronto's recommendations, see a report prepared by Professor Robert MacDermid of York University.

Have any other jurisdictions instituted restrictions on corporate and union donations?

Yes. Bans on corporate and union contributions are already in place in numerous jurisdictions, and provide precedents for Toronto to follow. There has been a ban provincially in Quebec since 1977, and in Manitoba since 2000. The federal government instituted a ban on corporate and union contributions to political parties in January 2004, through Bill C-24. The American government bans corporate and union contributions to candidates for Congress or the Senate. The Ontario provincial government is also currently considering a ban on corporate and union donors.

Q&A; on Campaign Surpluses
Q&A; on Limiting Fundraising Expenses