Governance Institute releases guidelines for making political donations

With a federal election looming and the inevitable campaigning that comes with it, Governance Institute of Australia has released much-needed guidelines outlining the issues companies need to consider if contemplating making political donations.

Not only do 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’, but they can also be a significant risk for the companies and organisations that make them.

In the past year alone, there has been no shortage of corruption inquiries publicly linking well-known companies, unions and other organisations to questionable political contributions.

According to Governance Institute chief executive Steven Burrell, 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,” Mr Burrell added.

Tips for companies include:

  • carefully articulating 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
  • incorporating 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
  • considering 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
  • outlining a process for ensuring that the company’s aggregate donations (if made) do not breach any legislated caps or limits
  • outlining 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
  • considering and outlining how the company discloses its political donations. 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.

Governance Institute also points out that the political donation regime is currently under review and potentially open to further changes and restriction. The guidelines suggest alternative ways companies may wish to engage in the political process, including the establishment of 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 at /media/853541/ggg_issues_consider_political_donations.pdf

For further information contact Viv Hardy on 02 9283 4113 or 0411 208 951, or Su Lin Ho on (02) 9283 4110 or 0421 616 617, or Steven Burrell on (02) 9223 5744 or 0407 708 485.

About Governance Institute of Australia

Governance Institute of Australia is the only independent professional association with a sole focus on whole-of-organisation governance. Our education, support and networking opportunities for directors, company secretaries, governance professionals and risk managers are second to none.

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