Governance Institute launches Guide on political donations in 2016 election year

As the calendar ticks over to 2016, kicking off a federal election year and the inevitable campaigning that comes with it, it’s certain that the issue of political donations will remain squarely in the spotlight.

Donations pose a perennial reputation issue for politicians of all parties, raising questions about whether independence has been compromised and if favours have been ‘bought or sold’.

Yet donations can also be a significant risk for the companies and organisations that make them. In the past year alone, there was no shortage of corruption inquiries publicly linking well-known companies, unions and other organisations to questionable political contributions.

Complex regulatory regime

Companies often view donations as a tool to engage with political parties and see attending fundraising functions as a means to network and gain insight into policy directions that affect their business.

However, potential donors need to appreciate that this is an area subject to complex regulatory restrictions and heavy penalties, which vary from state to state and again at the national level. Shareholder bodies such as the Australian Shareholders’ Association are also increasingly holding companies to account for diverting company profits to political causes of any kind.

A decision to donate to a political party should in all cases be well considered and made with full knowledge of the company’s regulatory obligations.

Tips from the new Guide

To assist companies to establish a policy on political donations, Governance Institute has developed a new Good Governance Guide. In our view, a company policy on political donations should:

  • carefully articulate what payments constitute a ‘political donation’ applicable to your organisation, bearing in mind the complex regulatory environment. Some payments may fall into a ‘grey area’, so you should be across the relevant legislative requirements and also draw on guidance from the Australian Electoral Commission in shaping your definition
  • incorporate relevant regulatory restrictions and obligations. For instance, most states have cap and disclosure regimes on political donations, and prohibitions may apply to businesses operating in particular industries such as property development, tobacco, liquor and gambling
  • consider the reputational risk to the company and directors should the community perceive political donations (even if they are not prohibited under legislation) as constituting undue influence from business on government
  • outline a process for ensuring that the company’s aggregate donations (if made) do not breach any legislated caps or limits
  • outline a clear process for obtaining approval for donations if they are made to ensure they do not breach Australian or foreign laws where the company has overseas operations
  • consider and outline how the company discloses its political donations should they be made. Disclosure on the Australian Electoral Commission website is mandatory, but companies should also think about whether to make a disclosure in their annual report or governance statement.

Alternatives to political donations?

The political donation regime is currently under review and potentially open to further changes and restrictions. In light of the complexities and reputation risks involved, companies may wish to consider alternative ways of engaging in the political process. Options may include establishing a dedicated policy or government relations role focused on building proactive relationships with government or deepening the company’s involvement with key industry and professional associations which provide credible input to government.

You can download Governance Institute’s new Good Governance Guide: Issues to consider in relation to political donations. Let us know what you think of the Guide by contacting us on Facebook, Twitter and LinkedIn.

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