To give or not to give? That is the question for business to ask on political donations

September 13, 2016 Alistair Nicholas 0 Comments

The current debate on political donations misses a key point on whether companies, foreign and domestic, get a return on their “investments” in our political parties. And, whether corporations really need to be making political donations at all.

The scandal surrounding donations and general largess of Chinese companies towards our major political parties and individual politicians, which claimed the scalp of Labor front bencher Senator Sam Dastyari last week, has brought the issue into sharp focus. It has rightly raised questions about the need for reform of the rules governing political donations in Australia.

Prime Minister Malcolm Turnbull has suggested that only Australian residents with the right to vote in elections should be allowed to donate to political parties. This would mean not only an end to donations by foreign companies and individuals, but also domestic businesses and the unions. (There is a question around the constitutionality of the Turnbull proposal, but let’s leave that aside.) And the Labor Party is calling for an end to anonymous political donations of more than $50 in value (the current threshold for anonymous donations is $1,000). If these proposals are implemented they will fundamentally change the way our political parties raise money and fund election campaigns.

Arguably business is only allowed to make political contributions because the unions are allowed to. If corporate donations are not allowed while donations by the unions continue the fear among the Liberal and National Coalition is that they would not be able to raise comparable funds as the Labor Party receives from the union movement. That is debatable because funding is likely to come from wealthy individuals who support the Coalition’s conservative policy platform. Note, for example, that mining magnate Gina Rinehart has made significant contributions to National Party leader and Agriculture Minister Barnaby Joyce’s election campaigns despite the fact that he continues to champion farming rights over the mining sector’s agenda. Rinehart likely supports his – and the Coalition’s – broader conservative agenda regardless.

Leaving reform of political donations aside, the question needs to be asked what do businesses get in return for their contributions? This question is particularly important as many companies tend to give almost equally to both sides of the political aisle. Yet it is difficult to actually influence policy outcomes through political donations. The chairman of Yuhu Group, Huang Xiangmo, recently complained in an opinion article in the Chinese-language edition of The Global Times, a Chinese Government-owned newspaper, that Australian politicians were treating Chinese businesses like a “cash cow” and “not delivering”. He said Chinese businesses needed to learn “how to have a more efficient combination between political requests and political donations.”

The article was ill-advised. Many Australian business people may feel the same way, but would never express it publicly – and certainly not in such stark terms.

The truth is Australian politicians cannot deliver policy outcomes to businesses in return for political donations. As flawed as our system is the transparency requirements mean any politician who delivered favourable policy or business outcomes to a company that had made a financial contribution to the politician’s party or to their personal political campaigns would be placed under considerable scrutiny. Indeed, Sam Dastyari did not break any laws by asking Chinese business interests to pay his travel bill. Dastyari had followed the rules and declared the payment of the $1,670 bill by Top Education Institute. However that declaration brought him under scrutiny that uncovered indiscreet comments at a Chinese community event where he appeared to give public support for Beijing’s territorial claims and actions in the South China Sea, comments which were in contradiction of his own party’s policy on the matter.

It seems unlikely any politicians would now make the same mistake as Senator Dastyari. Therefore a business’ chance of getting a specific outcome in return for its political donations is arguably diminished.

Going further, Powell Tate often advises our clients against making political donations when advocating for policy or legislative changes. Indeed, we warn our clients that it can backfire if they are successful as political donations are scrutinised by the Opposition and media. Indeed, recently, after a business competitor of one of our clients won a government contract, we conducted an audit of the registry of political donations to see if our client’s competitor had won the contract because of its contributions to the party in government.

Government ministers have a responsibility to consult with business on policy and legislative changes. If a business has a legitimate need to see a minister it is always possible to do so. Political donations are not necessary for political access if a company has a compelling strategy and narrative. Strategies and clear messaging are far more important tools for success in government advocacy  than are political donations.

If after reading this you still feel it is necessary for your company to make a donation to a political party you should be aware of the rules governing political giving. These vary between the Commonwealth and each of the states. For example, NSW has banned political donations by property developers. Feel free to contact us to find out what is allowed and what is not in the relevant jurisdiction for your business. But be warned, we will try to convince you to focus more on your strategy and messaging than financial largess. We firmly believe a good strategy, powerful messaging, and a compelling narrative, will yield better returns than a throw of the dice on political donations.

 

By Alistair Nicholas, Executive Vice President – Director, Special Projects.

Alistair can be contacted at anicholas@powelltate.com.

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