Following news of jobs obtained by two ex-Howard government ministers, debate has taken place recently about possible conflicts of interest and favourable treatment by government ministers about to leave Parliament.
The debate centres around the possibility or appearance of impropriety by ministers who obtain employment with business organisations or lobby groups with which they had dealings when they were members of the government.
In government, ministers are subject to a Code of Conduct which requires that they “do not by their conduct undermine public confidence in them or the government”. Amongst other things, ministers are required to resign directorships in public companies and to divest themselves of financial interests in businesses associated with their portfolio responsibilities.
The Code also says:
Ministers should perform their public duties uninfluenced by fear or favour – that is, by any expectation that they will benefit or suffer as a consequence… Ministers should not exercise the influence obtained from their public office, or use official information, to obtain any improper benefit for themselves or another.
What hasn’t received a lot of attention in recent years is the work undertaken by ministers and members of parliament after they leave politics. In part, the issue has now arisen because increasing numbers of politicians are leaving Parliament at a younger age and pursuing a “third career”.
Peter Reith’s Job With Tenix
It was reported earlier this month that the former Minister for Defence, Peter Reith, who retired from politics at the last election, has taken a position as a paid consultant on “government relations” with The Tenix Group. Reith reportedly signed on with Tenix the day after ceasing to be a minister in November 2001.
Tenix Group describes itself as Australia’s largest defence and technology contractor and the only Australian-owned major defence prime contractor.”
Tenix has assets of approximately $1 billion, annual earnings of almost $1 billion, and employs over 4,000 people.
Among other things, Tenix is part of The ANZAC Ship Project which undertakes the development and construction of ANZAC Class guided missile frigates for the Australian and New Zealand navies. The company is also involved with the Over The Horizon Radar, and other engineering and technology projects.
In employing Reith as a consultant, the company hopes to take advantage of Reith’s inside knowledge as a government minister for the past 6 years and Defence Minister for the last year. Similarly, Reith’s contacts with the company could be said to derive directly from his work as the minister.
Michael Wooldridge’s Job With Research Australia
The former Health Minister, Dr. Michael Wooldridge, is reported to have joined the board of Research Australia, a non-profit company which lobbies for more private and government funding of medical research. The organisation recevies almost $1 million of funding from large and multinational pharmaceutical companies, such as Bristol-Myers Squibb Australia, Eli Lilly Australia Pty Ltd, GlaxoSmithKline Pharmaceuticals, Merck Sharp & Dohme (Australia), Novartis Australia and Pfizer Australia.
Whilst Dr. Wooldridge’s position on the board is unpaid, concern has been expressed about the activities of Research Australia. According to a report in the Sydney Morning Herald in December 2001 “clinical pharmacologist Professor David Henry, who was removed from the Pharmaceutical Benefits Advisory Committee last December amid claims the Government had bowed to industry pressure, said he would want reassurance the industry was not using Research Australia to lobby for public funding that simply improved the marketability of its products.”
In another case in February 2002, The Age reported that “Wooldridge last year promised $5 million in taxpayers funds to the Royal Australian College of General Practitioners to set up an office in Canberra only months before he quit politics and joined the organisation as a consultant.”
According to the newspaper, “the deal was finalised on September 28 with a contract between the college and the Department of Health. The money is to help meet the costs of constructing and fitting out a building in Canberra… Dr Wooldridge signed off on the deal three weeks after announcing on September 7 that he would retire from politics at the federal election.
What’s The Problem?
In the words of Tony Walker, writing in the Australian Financial Review on February 8, 2002, “the fact that there is no real impediment to ministers shuttling into business on leaving office does not mean it is right or that there should not be a code of conduct that seeks to guard against the appearance of impropriety.”
Walker points out:
In the US, Reith’s lateral move from government to business would not be permitted under Chapter 11 of the US Code, which makes it a crime for an employee of the executive branch to be involved in attempts to lobby the government for two years after the termination of their employment.
In Britain, the issue is fuzzier, but it is doubtful that Reith would meet the standards laid down as guidance for the Advisory Committee on Business Appointments, an independent body that vets appointments of ministers for up to two years after they leave office.
“Although it is in the public interest that former ministers should be able to move into business or other areas of public life, it is equally important that there should be no cause for any suspicion of impropriety about a particular appointment,” say the UK rules.
“If, therefore, the Advisory Committee considers that an appointment could lead to public concern that the statements and decisions of the minister when in Government have been influenced by the hope and expectation of future employment with the firm or organisation concerned, or that an employer could make improper use of official information to which a former minister has had access, it may recommend a delay of up to two years before the appointment is taken up, or that for a similar period the former minister should stand aside from certain activities of the employer.
“…We are not suggesting the former defence minister intends breaching confidences gained while he was a minister in his communications with his new employer, but Tenix is not employing him, we assume, because it simply likes the cut of Reith’s jib.”
It believes he is in a position to help advance its interests at a critical moment when defence contracts such as that for building Anzac frigates at Tenix’s Williamstown dockyard are reaching their life’s end and a major consolidation of Australia’s naval shipbuilding sector is in prospect; not to mention continued implementation of recommendations of the defence White Paper on procurement.
As the former defence minister, Reith is clearly in a position to give Tenix useful advice, including lobbying assistance with his former Cabinet colleagues.
This sort of situation would benefit from the establishment of an independent Advisory Committee on Business Appointments for former ministers to guard against any appearance of impropriety.
Reforming the Ministerial Code Of Conduct
This week, the Opposition Leader, Simon Crean, called for modification of the Howard Ministerial Code Of Conduct to prevent former ministers using their knowledge and contacts to derive unfair advantage for their new employers.
The Australian Democrats have also taken up the call for some regulation of the opportunities for ex-ministers to exploit for private financial gain information obtained during their time as ministers.
In a media statement released by Senator Natasha Stott Despoja, Leader of the Australian Democrats, on February 18, 2002, she said:
The Australian Democrats will move to stop retired Government Ministers from taking up lucrative consultancies and jobs in areas where they have previously been Ministers of the Crown.
Leader of the Australian Democrats, Senator Natasha Stott Despoja, said it was a questionable practice for Government Ministers to leave office and walk straight into jobs that were related to their portfolio responsibilities.
“Both sides of politics have engaged in this practice without any restrictions,” said Senator Stott Despoja.
“The Democrats are preparing legislation to require newly retired or defeated Ministers to observe a cooling off period of at least two years before entering into private contracts in the area of their Ministerial responsibility.
“This legislation will be based on comparable legislation in the United States and the United Kingdom and will be made available for public feedback.
“Government Ministers are privy to sensitive information about the needs, capabilities and weaknesses of the Commonwealth. They should not be able to use that information in a commercial context for private financial benefit.
“We have the former Defence Minister Reith working as a consultant for defence company Tenix, former Finance Minister Fahey signing with investment bank JP Morgan, and former Health Minister Wooldridge joining the Royal Australian College of Practitioners as a consultant.
“The Democrats welcome the Opposition’s concerns about this and look forward to the ALP supporting our Bill.
“Ministers are rewarded for their services and receive generous superannuation on retirement, given this, there should be no complaint about legitimate restrictions on the areas in which they can work.
“The public interest requires that the private affairs of the Commonwealth as disclosed to a Minister of the Crown are not exploited for personal financial gain,” concluded Senator Stott Despoja.