With the recent publicity surrounding political donations in both the State and Federal arena, the issue of corporate donations to political parties is in the spotlight. A clear understanding of how a corporation uses investor funds is an important element in investing ethically.
In Australia, the majority of political donations come in the form of donations from corporations that go towards funding the parties' election campaigns. The Australian Electoral Commission (AEC) monitors donations to political parties and publishes a yearly list of political donors. However, this does not provide a complete picture. Donors are only required to declare donations above AUD$12,800 and can sometimes hide their identities behind associated entities. In addition, payments not classified as donations by the recipient parties will not appear on the AEC’s database. This effectively hides millions of dollars in payments each election cycle.
Recent research commissioned by the Australian Greens under the ‘Democracy for Sale’ project revealed that over the past five years, major companies declared between AUD$7 million and AUD$8 million in donations that were not formally recorded as such by the recipient parties. The report also examined donations by industry sector and found that over AUD$2.9 million was from the Financial/Insurance sector, followed by AUD$1.28 million from Energy and Resource companies, and over AUD$580,000 from the Property sector.
As for how this relates to direct shareholding, investors may be interested in knowing to whom the companies they invest in are donating, and how much is being donated. The Australasian Centre for Corporate Responsibility (ACCR) is advocating for accountability and transparency by putting forward resolutions on corporate political expenditure at company annual general meetings. According to the ACCR, “Corporate political expenditure has the ready potential to corrupt Australian democracy to the detriment of both Australian citizens and shareholders in Australian companies”.
ACCR’s first target in its campaign was the National Australia Bank (NAB), which in the past three years has given over AUD$500,000 to Australian political parties. The campaign saw ACCR commence the process of putting together a resolution for consideration at the December 2016 NAB AGM, seeking to improve Board responsibility to shareholders on this issue. On 20 September 2016, a new policy was announced by the NAB board, which apparently took effect in May 2016, ending political donations. The move was followed by ANZ Bank’s announcement that it too was reviewing its policy on political donations.
ANZ and NAB aren’t the only companies that spend money on Australian politics. In June 2016, ACCR published research on 23 of the top Australian listed companies and their attitudes, transparency and oversight in regards to corporate political expenditure. ACCR’s research found that compared to the USA and UK there is less oversight of political donations by shareholders or the public in Australia, and the issue remains an important ethical consideration.