Attack on Integrity Lacks Moral Standing

05 October 2006

By Hugh Morgan
Business Council of Australia

There is more than a hint of hypocrisy in the calls of state governments to remove the long-standing right of corporations to sue for defamation.

On the one hand, we have state governments wishing to ensure that corporations have a good corporate reputation.

On the other, they want to enable a legal free-for-all right to attack corporations without restraint by removing the very right of corporations to defend their reputations from false, dishonest or malicious campaigns by individuals or groups with their own agendas.

The federal government rightly rejected the states' proposal at a meeting recently of federal and state attorneys-general.

But the fact that it was raised as serious proposal represents an outrageous attack on the corporate sector and one that fundamentally breaches the rule of law that there should be equal access and equal standing before the law.

With politicians already privileged to defame without penalty in parliament, it seems a bit rich to have them propose that corporations be the unrestrained subject of abuse.

What the states also overlook is that in today's business world, the reputation and integrity of the brand of a company is integral to its core value.

Taking away the right of a company to use legal means to protect its reputation from unwarranted or false claims may have far-reaching impacts on a company's value.

The implications of such a scenario would not only impact directly on the company, but in the case of most large listed corporations, ordinary Australians who have invested in them through shares would also suffer.

The states' simplistic line also ignores the fact that not all corporations are large, national companies and that many of our small and medium businesses will also lose their rights to protection from defamation under the states' proposals.

For example, the South Australian Defamation Bill 2005, recently introduced into the state's parliament, removes the protection for all corporations unless they are not-for-profit based.

For smaller businesses, the harm caused by malicious or irresponsible publicity can be terminal, destroying the business, the jobs of its employees and the investments of shareholders.

The states' proposals also show a worrying failure to understand how business works.

We have previously seen statements in this newspaper by the Victorian attorney-general suggesting that removing this protection for corporations is without costs because corporations are big enough to look after themselves.

When a business incurs a cost, including through harm done to the business from false and malicious campaigns, it will try to pass that cost on to customers, shareholders or through cutting costs in other areas.

Defamation laws are used responsibly by Australian corporations, with corporations suing only in exceptional circumstances.

Australia's defamation laws do not prevent legitimate criticism and questioning of the activities and performance of companies.

On the other hand, they remain an important safeguard to ensure such criticism is founded in fact and truth.

The states' proposal is also a direct assault on the basic and fundamental legal right that all are equal before the law.

For sound reasons, society has accepted that corporations are separate legal entities.

In essence, they represent a bundle of contracts between individuals that allow them to own and sell assets, to limit the liability of their investors and to provide a stable vehicle for long-term investment, all of which underpin the success of modern economies.

The proposal by the states has and continues to have no moral standing and is an abuse of process.

If this is what the state governments want, what is the incentive for corporations to ensure a fine reputation one they are unable to protect at law and a law that appears to be so discriminating and politically motivated?

The proposal remains an abomination and for the sake of ensuring respect for the institutional structures of our executive and judicial system must be abandoned for all time.




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