Political donations on the radar

The Australian Centre for Corporate Responsibility (ACCR) has withdrawn its plan to lodge a resolution on political donations at the AGM of National Australia Bank, following public clarification by the company that it ceased making political donations from May 2016. The proposed resolution sought to have the board either adopt a policy of no donations or disclose the use of funds for political purposes.

Governance Institute’s Good Governance Guide on political donations notes 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.

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. Companies also have no control over the allocations of donations, and so a donation at the federal level could put them in breach of the political donations legislation within a particular state.

Furthermore, it is not always clear whether or not a payment constitutes a political donation. There is some guidance on the Australian Electoral Commission website, but board members and senior management need to understand that donating to an affiliated entity of a political party, such as corporate memberships of related or associated bodies of political parties or dinners or public forums which raise funds for political campaigns or individuals, might be considered a political donation.

The ACCR proposed resolution defined corporate spending on political activities as including ‘direct and indirect: contributions (for example, donations, subscriptions, excess over catering cost payments to attend events, benefits in kind) paid or provided to politicians, political candidates, parties, or associate organisations; independent expenditures; election-related material; and lobbying costs and expenses’.

The Good Governance Guide: Issues to consider in relation to political donations states that it is good governance for a company to establish a policy or protocol in relation to political donations in Australia. Tips for companies include:

  • Carefully articulate what payments constitute a ‘political donation’ applicable to your organisation, bearing in mind the complex regulatory environment, and formulating a policy on political donations so everyone in the company is clear about whether donations are made or not.
  • Incorporate relevant regulatory restrictions and obligations into the company policy. 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.
  • Consider alternatives to making political donations, which would result in no political donations being made.
  • 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 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 (if 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.

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