This letter by Ken Coghill of ART, was published in the Age on 5th February 2022.

Citizens should be the only ones making donations

By authorising political donations, company directors place themselves in an impossible position: either they have misused resources of their business for purposes other than the best interests of the business as required by corporations law, or they have attempted to corruptly influence politicians to act to the benefit of the business rather than putting the public interest first. Donations should be made only by citizens, similar to what happens in Canada.
Professor Ken Coghill, department of management and marketing, Swinburne Business School

Citizens should be the only ones making donations

The question of whether only citizens should make donations springs from two related issues.

First, what do corporate donations say about the corporation donating?

Second, why should anyone, other than voters on the electoral roll, be allowed to donate to anyone standing for election or to political parties in general?

What do corporate donations say about the corporation donating?  

The first obligation of company directors is to acquit her or his legal duty to act in the best interests of the company.

If they have attempted to use their financial position to buy a favorable political result for themselves – soft regulation, land rezoning, or government contracts – that is corruption. If, on the other hand, such expenditure makes no difference because the political decision making system is incorruptible – then that is a sheer waste of shareholders money.  Company directors cannot have it both ways.

‘Acting in the best interest of the company’ surely includes not tarnishing its good name through shady deals, regulatory capture and regulation bending. One just has to look at recent cases such as Crown Casino.

Most directors do not see donations to political parties as consistent with directors’ duties and only a tiny minority of companies actually do donate.

The enormous economic power and resources of large corporations creates huge risks that their intervention in politics can distort democracy and undermine citizens’ faith in Australia’s governance.

Company Directors should consider whether funding a political party is to either abrogate their directors’ duties to share holders not to waste money, or is intended to corrupt Australian democracy.

Why should anyone other than voters on the electoral roll be allowed to donate?

Corporations are not people. They are aggregates of people. But they do have ‘legal personality’. They have the benefit of s 124(1) of the Corporations Act 2001 (Cth), which gives them ‘the legal capacity and powers of an individual. But a legal personality in Australia is not the same thing as a ‘human personality’.  It is much more circumscribed.  ‘Legal persons’ do not have human rights, such as the right to be politically represented.

Legal person-hood is defined differently in different jurisdictions, so in the USA, corporations have rights more closely approximating human rights.

In Canada. less so. That is why they could legislate to disallow them from making political donations.

In Canada, only people on the electoral roll can donate, and only to a maximum of CAD1,675  per year (adjusted periodically) aggregated to all parties, constituency associations and independent candidates (i.e., corporations, trade unions, associations and groups cannot make contributions).

In the words of the Quebec Court of Appeal, this ensures that citizens are central to the electoral process and prevents corporations from dominating political debate during election campaigns. There are also caps on campaign expenditure. There is public funding of a portion of campaign expenditure but at a rate effectively lower than already applies in Australia (estimated at almost four times as much).

Canada’s lower level of public funding does not seem to have harmed Canadian democracy! Indeed, the reforms decentralised fund-raising and hence control of political parties – something Australian rank and file party members would welcome.

The UK has no cap, but donations are limited to “permitted donors”, who must be registered voters or other entities registered in the UK, including companies, trade unions, building societies, friendly societies and partnerships. This too, has had a major impact on the number and size of corporate donations.

So let’s remember that donations conflict with MPs’ responsibility to act in the public interest, ahead of any other interests. Very large donations of the kind which only corporations can make, have the capacity to significantly distort and derail the public interest in favour of the private interests of a few rich corporations made politically powerful through their large donations.

ART’s recommendation is that;

Donations should be permitted only by citizens (natural persons) who are enrolled and entitled to vote in Australia.


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