McLeod Group blog by Lauchlan T. Munro, September 11, 2020
Following months of bad press, faced with multiple investigations, and having been dropped by several corporate donors, the Kielburger brothers have announced that they will “wind down [the] Canadian operations” of WE Charity. This move comes only weeks after WE Charity registered as a federal lobbyist and its founders assured a parliamentary committee that the organization was financially sound. While some will cry and others will cheer at this news, no one should think this story is over.
There are at least four outstanding issues:
First, the announcement specifies only that WE Charity will “wind down [its] Canadian operations” and sell its assets, including its controversial real estate holdings. It does not state categorically that WE Charity will be dissolved. An organization can suspend its operations, even for years at a time, without being dissolved. Does WE Charity plan to rise again, after the scandal passes? Attentive observers will want to watch this space closely. And check WE’s annual Registered Charity Information Returns filed with the Canada Revenue Agency.
Also worthy of note is the fact that WE Charity’s operations in the UK and the USA appear to be unaffected by this announcement. Their boards used to coordinate strategy with the Canadian board so that the three WEs would work as one. How will the winding down of Canadian operations affect the UK and American WEs?
Second, the Kielburgers’ announcement says that WE Charity will “sell all of [its] assets to establish an endowment fund to sustain the charity’s existing global humanitarian programs”. Never mind that WE Charity plays fast and loose with the proper definition of “humanitarian” in that sentence. The asset sale will “fund a new endowment”, but WE is less than precise about where this “new endowment” will be housed. Presumably, it will be in one of the many WE-associated organizations, but which one? Since WE Charity is a registered charity, the Income Tax Act allows it to transfer its assets to any other registered charity in Canada, including others associated with or controlled by WE. So, where will the money land? Again, watch this space.
Third, the Kielburgers assure us that the “new endowment that will be managed by an independent board”. But in making this announcement, WE Charity’s “founders” and “ambassadors” once gain undermined the authority of WE Charity’s Board of Directors, whose chair would normally be expected to make such a momentous announcement. Long-time WE watchers are used to such odd corporate governance, and the recent history of board independence in WE leaves something to be desired. The former WE Charity board chair told a parliamentary committee that she had to resign when her board was denied access to key financial information and to WE Charity’s Chief Financial Officer. Several media outlets report that the Kielburger brothers “plan to leave after the transition is finished”, but the announcement on the WE Charity home page is silent on that point. If the media reports are true, the Kielburgers will presumably stick around during the transition and likely play key roles in managing it. Moreover, leaving WE Charity, whether sooner or later, does not mean they will withdraw from the many other organizations in the WE empire. WE’s “complex” and “unusual” corporate structure and governance history are not a good fit with “an independent board”.
Fourth, the winding down of WE Charity’s Canadian operations does not mean the closure of ME to WE Social Enterprises Inc., the for-profit arm of the WE empire, or any of the other WE organizations. The main landing pages of ME to We’s website appear unaltered in light of the imminent winding down of its sister organization. In the past, ME to WE made sure that everyone knew that most of its profits went to WE Charity. So, if WE Charity winds down its Canadian operations, where will ME to WE’s profits go? To the “new endowment”? Perhaps to one of the other WE organizations that are registered charities? Since ME to WE is a privately held company, it is not legally obliged to publish audited financial statements, though it could, if its owners – the Kielburgers – chose to do so. Without such audited public financial statements, observers will have to rely on the assurance of ME to WE and the experts they hire concerning where the future profits go.
All’s well that ends well, Shakespeare told us centuries ago. But how the WE story will end is still a very open question. And I am neither betting that WE will end, nor that things will end well for all concerned. I am going to be watching this space.
Lauchlan T. Munro teaches at the University of Ottawa’s School of International Development and Global Studies. He has spent a large part of his career briefing and discussing strategy with the boards of two major organizations where he worked.