Controversial Charity Behemoth in Canada, Operated by Mastercard
In the Canadian charity scene, it's not World Vision or the Red Cross that rule the roost, but the Mastercard Foundation. This overlooked giant manages a jaw-dropping CAD 56 billion, making it the largest private charity in the country, with a significant impact abroad.
Over the past five years, the foundation has donated a staggering CAD 3.9 billion, with 87% going to foreign countries, mainly Africa. These numbers are impressive, considering that no other private Canadian charity comes close in terms of size or influence overseas.
The foundation's origins are tied to Mastercard Inc., an American credit card company, which donated a block of shares to the foundation back in 2006, at the time of its initial public offering. The value of this donation was estimated at USD 455 million. Even today, Mastercard Foundation remains the largest shareholder of the financial company, with 9.4% of the shares.
The value of these shares has grown an astounding 125 times over the past 19 years. Apart from the initial donation from Mastercard Inc., the foundation has not received any other contributions, according to its financial statements. And like other charities, it is exempt from all taxes.
Since its inception, questions have been raised about the foundation's charitable motives, given its marketing and legal impact on the financial institution that created it. Critics suggest that there might be hidden benefits for Mastercard Inc., rather than just charitable ends behind the foundation.
University of Quebec tax lawyer Brigitte Alepin wonders if the foundation's objectives are not more instrumental than altruistic. Law professor Victor Fleischer was equally critical at the foundation's inception, arguing that it was primarily created to allow Mastercard Inc. to reduce its exposure to lawsuits for monopolistic practices in the United States.
Today, the foundation supports various educational, social, and entrepreneurial activities in Africa, aiming to combat unemployment and promote women, particularly in entrepreneurship. However, a significant portion of the funds passes through large African companies and even a business lobby.
It's worth noting that Mastercard Inc. and the Mastercard Foundation are separate entities, but they continue to share the same name and marketing logo. The foundation declined to comment on whether they are free to abandon the Mastercard name, citing the confidentiality of the original agreement with Mastercard Inc.
The choice of Canada as the foundation's headquarters in 2006 was strategic, according to Victor Fleischer. At the time, Canada required charitable organizations to spend only 3.5% of their assets each year, compared to 5% in the United States. Additionally, Canada's less litigious environment could help Mastercard Inc. avoid U.S. tax authorities questioning the foundation's charitable purpose. Most importantly, Mastercard Inc. obtained an exceptional exemption from the Canada Revenue Agency (CRA). For 15 years, the foundation was not required to donate 3.5% of its assets, as indicated in its 2021 financial statements. The CRA allowed it to donate a smaller proportion, not specified in the financial statements.
A closer look at the foundation's compensation structure suggests American-style generosity. In 2023, the top five executives received a total compensation of CAD 5 million, including President Reeta Roy's CAD 1.7 million. This compensation is on par with large U.S. foundations, like the Bill & Melinda Gates Foundation, which paid its CEO a compensation equivalent to CAD 2.5 million in 2023.
In contrast, World Vision, the second-largest Canadian charity in terms of foreign donations, paid its CEO just CAD 325,000 in 2023, while its foreign donations totaled CAD 1.7 billion over five years, compared to CAD 3.4 billion for Mastercard Inc.
In the end, while Mastercard Inc. and the Mastercard Foundation are separate entities, their shared name and marketing logo make it easy to assume a closer relationship. However, it's important to remember that the foundation enjoys tax advantages as a Canadian charity, while Mastercard Inc. supports charitable causes through its philanthropic partnerships.
- The Mastercard Foundation, despite its origins being tied to a business, has predominantly channeled its donations towards environmental and social causes in Africa, aiming to combat unemployment and promote women in entrepreneurship, raising questions about the intersection of finance, business, and charity.
- In comparison to the compensation of top executives at the Mastercard Foundation, those at World Vision, the second-largest Canadian charity in terms of foreign donations, receive significantly less, hinting at different approaches to financial management and charity priorities within the sector.
