The Argument For Requiring Politicians To Adhere To The Same Standards of Disclosure As Directors of Companies

Recent comments regarding the rules that govern political declarations of financial interests has revealed how easily they can be circumvented as well as the sloppiness in the way they are enforced.

Senator Cory Bernardi was involved in a controversy over whether he properly disclosed a $1 million commercial property that he owns located in South Australia. The senator denies any wrongdoing, and claims that he was in compliance with the regulations.

There are differences in the policies that govern directors and politicians in public companies. The first deal with assets, whereas the latter are governed by transactions. However, they all serve the same purpose – ensuring that there is transparency and lessening the risk of conflicts of conflicts of interest.

Then why are the rules so loose for politicians?

Why MPs Aren’t Being Pursued?

Parliamentary regulations oblige that MPs declare a wide variety of interests. They are also required to disclose that in which they’re “aware” are held by their spouses and children.

Politicians file interest late – often only after exposure in the media. They often ignore the rules for the minor asset and ignore the rules concerning reporting spousal assets. The requirement for being aware of family assets gives them an effective defense.

But the main problem is the enforcement. The pertinent law states that events happening within the parliament, which constitute breaches of the rules governing financial disclosure can’t be considered by courts.

This is important as it ensures that debate is free. However, it means that the enforcement of rules within the parliamentary system dependent on political pressures instead of solely legal concerns. This is due to the way the internal workings of parliament function.

The first decision about whether a member has been in a manner that is in violation of the law such as, for instance, not declaring assets is taken by the appropriate house’s privileges committee.

The government is majority support in the House of Representatives committee, therefore there is a good likelihood that it will come up any of their own lawmakers. If the committee makes an unfavorable decision that is not a result, it’s just an advisory. It is the whole house (in which, once again the government holds an overwhelming majority) to take the final determination as to whether or not contempt was committed and, if it has, the appropriate punishment.

When an opposition member is in the spotlight and is deemed to be in contempt, it is most likely. However, the reason it is only a theoretical issue is that the party that has an overwhelming majority knows that it will be the moment where it will lose its majority. This is why it is unlikely to set a precedent that could later be applied against it.

It is therefore best for both major parties to not engage in a rash and arduous pursuit of contempt.

This was clearly illustrated in 2002 when former defense Minister Peter Reith refused to appear before the Senate committee that was investigating investigation into the “children overboard” affair. In its simplest terms, this could be considered to be a display of disrespect. Additionally the Coalition parties were not able to secure an Senate majority. However, Labor was hesitant to force Reith to testify or risk contempt charges.

The result is no guarantee that MPs will be punished for violating the rules on financial disclosure. What happens is they’re allowed to “correct the record” – this makes a disclosures that are not disclosed basically unaffected.

Directors of Companies Must Meet Stringent Standards

Compare this to the obligations for directors of public companies.

If there is a “related party” of an organization which includes directors, spouses or child, parent, or any other company which one of them controls is looking to make an agreement with the director’s business the shareholder’s consent is required prior to the transaction.

For instance for instance, if the director’s father would like to purchase a vehicle that was owned by the company for where she served as a director shareholders must be in agreement before the purchase was completed.

In addition, anyone who is liable for a violation of these rules is at risk of an civil fine that can be as high as A$200,000 in the event that the violation is not honest (that is when it’s not deliberate) or could face criminal prosecution, and an amount of fine up to $200,000 or the possibility of imprisonment up to 5 years in the event that the breach was deliberate.

The penalties for MPs who violate regulations on disclosure of financial information could be heightened by changing the applicable law. The consequences of breaches should be a matter of regular court proceedings rather than relying on the shady procedures of parliament. Also, there should be a sanction regime similar to the one that is applicable to directors of companies.

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