Rule Of Law Gets Lost In Commissions

Written by:
13 September 2019
Originally Appeared In

If you were to ask the average CEO of the average ASX 100 company to talk for 10 minutes about climate change or Indigenous recognition they would easily be able to do so. If you asked them to talk about ‘diversity’ those 10 minutes would likely stretch to 20 minutes or even half an hour.

That is of course unless you asked the CEO to talk about one particular type of diversity. Your average CEO might be less forthcoming discussing the opportunity their employees have to express views inside their company such as, for example, that all Australians should have the same democratic rights regardless of their race.

If your average CEO was asked to talk about the rule of law as it applied to their business, most likely they’d struggle to make five minutes. That’s a pity because the protections afforded by the rule of law to everyday citizens are increasingly being restricted and eliminated if you happen to be a company director. A person on trial for drug trafficking has more rights than a bank executive being cross-examined in a royal commission. Literally.

In an important speech earlier this week, barrister and company director Philip Crutchfield QC made this point, even if he didn’t exactly use those words.

As he said, “One of the problems with royal commissions for reputations is that the mere asking of a question, no matter how answered, is taken to suggest wrongdoing or the giving of false evidence. The mere making of an imprecise or misguided submission can also lead to immediate damage. The reporting the next day of a person’s name in association with the damaging question or submission can have lethal consequences.” In a criminal trial the accused gets a right of reply. A witness in a royal commission doesn’t.

The rule of law is not just the principle that rules apply to both the ruled and rulers. It also encompasses notions that laws should be understandable, consistent and predictable, and that they should be applied fairly, ie according to the rules of natural justice. The rule of law doesn’t only protect an individual’s legal rights. It also protects their reputation and, at least in theory, it should protect their ability to earn a livelihood.

It’s not just the growing number of royal commissions and parliamentary enquiries into corporate behaviour that are eroding directors’ rights under the rule of law. In response to the seemingly ever-increasing demand of the public for company wrongdoers to be named, shamed, and presumably eventually jailed, judges and regulators are holding directors responsible for actions over which they can’t reasonably have been expected to have any expertise in or knowledge of.

Again as Crutchfield said, “directors now have an obligation that is personal, and cannot be delegated, to understand aspects of the company’s business in ways which are simply unrealistic”. Some might argue that given some of the corporate misfeasance that has been uncovered in recent years the ‘top end of town’ deserves everything it gets. That view might be understandable, but eventually, the laws that at first appear as though they will only impact the large corporates, will impact every company, no matter how big or small. Eventually, the desire to avoid any sort of risk or mistake will chill all commercial activity. Arguably this is already starting to be seen as new business investment falls to Whitlam-era levels.

These are the sorts of things Australian corporate leaders should be talking about. Instead, as Ben Morton, the assistant minister to the PM and cabinet with responsibility for cutting red tape, told the Australian Chamber of Commerce and Industry yesterday “too often big businesses have been in the frontline on social issues, but missing in action when arguing for policies which would grow jobs and the economy”.

Morton is surely correct when he notes the tendency of Australian corporates to pander to “noisy, highly orchestrated campaigns of elites” instead of arguing for policies – like tax and industrial relations reform, like red tape reduction, and yes, even like the maintenance of the rule of law for company directors – that “make Australia more productive and create more employment.”

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